HCFA may revise proposed physician payment reductions - Health Care Financial Administration

Healthcare Financial Management, Oct, 1991

At "Updata" deadline, expectations were growing that HCFA would respond to physician groups, hospitals, and Congressman who are outraged over the Administration's proposed 16.5 percent reduction in physician fees. In its proposed resource-based relative value scale (RBRVS), published in June (see July "Updata"), HCFA reduced physician fees by 6 percent for budget neutrality and by 10.5 percent for expected volume increases. These reductions would cut physician fees between $6.9 billion and $15 billion over five years, according to HCFA and industry estimates.

In Congressional hearings, HCFA Administrator Gail R. Wilensky, PhD, called the 6 percent budget neutrality adjustment an unintentional side effect of the regulation that resulted from the way Congress wrote the statute. To achieve budget neutrality, physician fees must be reduced by 2 percent. But HCFA interpreted the statute to state that only fees actually on the fee schedule during the first years of the five-year transition could be reduced for budget neutrality. Because approximately one-third of the services actually would be on the fee schedule in the first year, the budget neutrality adjustment was tripled to the proposed 6 percent.

Many physician groups and members of Congress also questioned the behavioral offset. The Physician Payment Review Commission had suggested a 1 percent behavioral offset. Other groups stated that the existing Medicare Volume Performance Standards were put in place to control increases in physician services.

In the meantime, House Ways and Means Health Subcommittee Chairman Fortney (Pete) Stark (D-Calif.) and 60 co-sponsors introduced legislation that would require HCFA to change its method of calculating the budget neutrality adjustment and eliminate the behavioral offset. At press time, no action had occurred on the bill.