Final rule cuts medicare physician fees by 4.5 percent for 2004

Healthcare Financial Management, Dec, 2003

Physicians face a 4.5 percent Medicare fee reduction for 2004, according to a Final rule CMS announced October 30. The reduction is greater than was indicated in the proposed rule (4.2 percent), but CMS had cautioned at that time that the final rule would be based on the latest available data.

CMS administrator Tom Scully said in the announcement that CMS "has no option other than to base this final rule on the current law. If Congress does pass legislation improving payments to physicians, CMS will implement the new payment rates as quickly as possible." The House version of the Medicare drug benefit bill would provide for a minimum increase of 1.5 percent for 2004 and 2005, but as of press time, this legislation had not yet been passed.

Changes adopted for 2004 include:

* Rebasing and revising the Medicare economic index, which measures inflation in physician practice costs and general wage levels

* Adjusting for increased professional liability insurance costs

* Creating new codes to refine payment for dialysis services

CMS has not addressed reform to physician payment for drugs and drug administration, saying that Congress is considering this legislation (also as part of the Medicare drug benefit bill). "If Congress does not act in the coming weeks, CMS is prepared to quickly implement a final rule to address both AWP [average wholesale price] reform and appropriate physician practice expense adjustments," Scully said.

The final rule was published in the November 7 Federal Register and will become effective January 1, 2004.