Fee schedule highlights include implementation of Medicare prescription drug bill

MGMA Connexion, Sep 2004

On Aug. 5, the Centers for Medicare & Medicaid Services (CMS) published the proposed 2005 Medicare fee schedule for physician services in the Federal Register. The schedule includes proposed payment rates for covered services and changes to Medicare policy. The following are highlights from the Aug. 5 rule.

Payment update

The proposed fee schedule includes an estimated average 1.5 percent increase in Medicare physician reimbursement for 2005. This increase represents the minimum amount approved by Congress in last year's Medicare Prescription Drug, Improvement and Modernization Act (MMA) as a result of extensive advocacy by the Medical Group Management Association (MGMA) and others. Without this mandated minimum, physician practices would have faced a projected 3.7 percent cut.

While the average increase to physician payments is 1.5 percent, individual provider specialties will experience updates between 2 percent and 8 percent due to changes in relative value units (RVUs) for services attributed to the specialty. A chart is available on the MGMA Government Affairs Department Web page that illustrates the anticipated impact of the proposed changes by specialty.

After delaying the update of the geographic practice cost indices (GPCIs) for work and practice, the geographic adjustments for medical service expenses are included in the 2005 proposed payment system. The proposed rule includes calibration of the 89 localities, which CMS will implement over two years. Work GPCI values will be based on 2000 census wage data for highly educated professionals as a proxy for physician income, updated from 1990 census data. Practice-expense GPCIs comprise three subsets: employee wages, rent and equipment, and supplies and miscellaneous expenses.

Employee wages will be determined from 2000 census wage data, while the rent index is derived frm 2004 residential apartment rental data collected by the U.S. Department of Housing and Urban Development (HUD). Previously, the government calculated employee wages from 1990 census data and obtained rental rates from the 1994 HUD survey.

Medical equipment, supplies and miscellaneous expenses exist in a national market and have the same value for all areas. Medicare updated the malpractice GPCIs last year, basing them on data for 1999-2003. Medicare will achieve full implementation of the work and practice-expense values in 2006; it will reach malpractice values in 2005.

RVU updates

In the proposed rule, CMS put forth the update of malpractice inputs for Medicare reimbursement rates. The malpractice inputs include a recalibration of all specialties relative to their surgical and nonsurgical risk factors. Risk factors come from a national index that directly reflects relative professional liability risk assigned to an individual specialty. The factors are calculated by dividing the national average premium for each specialty by the national average premium for the specialty with the lowest average premium (nephrology).

CMS used 2001 and 2002 malpractice premium data, projected 2003 premium data and 2002 Medicare payment data on allowed services and charges to establish the updated risk factors. Several specialties adversely affected by rapid increases in professional liability coverage benefited from the update, including neurosurgery, obstetrics/gynecology and orthopedic surgery.

Rural improvements

Two provisions of the MMA will enhance provider payments in rural areas. The rule includes definitions for bonus payments of 5 percent for physicians in primary care and specialty care scarcity areas available in 2005-2007. Physicians caring for 20 percent of Medicare beneficiaries with the lowest primary care- or specialty physician-to-beneficiary ratios will be eligible for the bonus payments starting Jan. 1. CMS will identify geographic areas defined as scarcity areas in the final rule this fall.

Additionally, providers rendering Medicare services in health professional shortage areas are eligible for a 10 percent bonus payment. Although this bonus has been available for several years, many practitioners do not receive the payment because they are not aware that they are eligible. Beginning next year, providers in many rural areas will automatically receive the 10 percent bonus through the Medicare payment system as mandated by the MMA.

Coverage of new screening services

The proposed rule also includes new preventive benefits for patients approved in the MMA, including a one-time physical for new Medicare enrollees and diabetes and cardiovascular screening blood tests. MGMA will continue working with Congress and CMS to ensure that the full impact of these changes is reflected in the Medicare physician reimbursement formula and clear coverage guidelines are distributed to the provider community.

New Medicare beneficiaries enrolled on or after Jan. I, 2005, will be eligible for a screening physical during the first six months of their enrollment. Previously, Medicare covered no physicals. Under the new benefit, enrollees may receive a physical examination, including measurements of height, weight, blood pressure, visual acuity and an electrocardiogram, but excluding clinical laboratory tests. The exam should have the goal of health promotion, disease detection and education, and counseling or referring patients for certain other appropriate screening and preventive services. The services will be billed under a new code: GOXX2, Initial preventive physical examination.