CMS Issues Final Rule On 5% Medicare Physician Rate Reduction, Will Delay Until 2009 Requirement That Hospitals Report Quality-of-Care Data

Main Category: Medicare / Medicaid / SCHIP
Also Included In: Primary Care / General Practice
Article Date: 06 Nov 2006 - 5:00 PDT

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Medicare payments to physicians will decrease an average of 5% in 2007, according to a final version of CMS rules made public on Wednesday, the AP/Seattle Post-Intelligencer reports (Freking, AP/Seattle Post-Intelligencer, 11/2). CMS in the draft version of the rules had projected a 5.1% reduction (Reichard, CQ HealthBeat, 11/1). Under the final version, payments to physicians will be cut by more than 5% for some services and by less than 5% for others (AP/Seattle Post-Intelligencer, 11/2). Acting CMS Deputy Administrator Herb Kuhn said payments will increase for most "evaluation and management" services, such as preventive care (Reichard, CQ HealthBeat, 11/1). For example, payments will increase by one-third for office visits, the most frequently billed physician service. Acting CMS Administrator Leslie Norwalk said the new rules "will encourage physicians to spend more time with their patients, assessing their health status and educating them about how to live longer, healthier lives." However, the American Medical Association -- which has lobbied Congress to intervene to stop the cuts -- said almost half of physicians will face payments cuts from 6% to 20%. Cecil Wilson, chair of the AMA board of trustees, said the overall reductions "will negate any payment increases specific to physician office visit payments" (AP/Seattle Post-Intelligencer, 11/2). The new payment rates are scheduled to take effect Jan. 1, 2007 (American Health Line, 9/28). The payment reduction is based on a formula that offsets increases in the volume of care provided to Medicare beneficiaries by physicians. Congress since 2003 has intervened to stop scheduled cuts (AP/Seattle Post-Intelligencer, 11/2). According to CQ HealthBeat, "Although Congress might act in the lame-duck session after the midterm elections to block the cut, some observers say the 5% reduction could take effect for a while if Democrats make big gains in the election and decide to deal only with appropriations bills in that session."

Hospital Reimbursements
The final rules also included changes for Medicare payments to hospitals. CMS said it will delay until 2009 changes that would require hospitals to report quality-of-care data to Medicare in order to receive increased payments for outpatient care. The delay will allow hospitals and CMS to reach an agreement on which quality-of-care measures should be reported for outpatient care, the agency said (Reichard, CQ HealthBeat, 11/1). In the meantime, Medicare payments for outpatient hospital care will increase 3% for 2007, CMS said (AP/Seattle Post-Intelligencer, 11/2). Had CMS finalized the proposed requirements for reporting quality-of-care data, hospitals that failed to report the information would have received only about a 1% increase. With the 3% increase, Medicare will make an estimated $32.5 billion in payments to hospitals for outpatient services in 2007. Kuhn said CMS has "great concern" about rising Medicare outpatient spending, which increased 12% in 2006 and is expected to increase 9.2% in 2007. Kuhn said reporting of quality-of-care data would create "transparency" and help increase competition among hospitals, but he did not indicate whether the changes would reduce spending growth. In addition, CMS said it will implement three rule changes for imaging services, including a provision that will reduce by 25% payments for more than one imaging procedure performed on contiguous body parts during the same session. The others would limit payments for technical services related to conducting imaging and revise payments to account for physician practice expenses.

Inpatient Care, Ambulatory Services
CMS also announced additional inpatient quality measures on which hospitals must report to receive the highest level of payment increases in 2007. The expanded reporting requirements call for hospitals to report data on beneficiaries' satisfaction with inpatient care. Hospitals also will be required to report data on outcomes of care -- such as death rates with 30 days of hospitalization for heart attack or rates of complication from surgery -- in order to receive higher payments. In addition, CMS said it will reduce payment rates for about 280 procedures performed at ambulatory service centers but would add 19 procedures to the list of services Medicare covers at the centers (Reichard, CQ HealthBeat, 11/1).

Home Health Services, Oxygen
CMS said it would increase Medicare payments to home health care providers by an average of 3.3% in 2007 (AP/Seattle Post-Intelligencer, 11/2). Rural home health care providers that report quality-of-care data will receive average payment increases of 3.6%, while urban home health providers will receive average increases of 3.3%. Providers that do not report data will receive 1.3% increases. In addition, CMS said it will begin reporting 10 quality measures on home health through its Home Health Compare Web site. The agency also said it would implement a rule in the budget reconciliation law that requires medical equipment suppliers to transfer the titles for oxygen equipment to the beneficiary after 36 months of rental payments or after 13 months for equipment with capped rental agreements. CMS said that once the title is transferred to the beneficiary, Medicare will continue to pay for certain services, such as the cost of the oxygen and certain equipment maintenance and repairs. Norwalk said, "There has been a great deal of misinformation about whether Medicare will continue to cover supplies and services for oxygen equipment. Be assured that beneficiaries will get the personalized support they need" (Carey, CQ HealthBeat, 11/1).

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