CMS Proposes MD Fee Schedule Changes: Who are the New Winners and Losers?

The Centers for Medicare & Medicaid Services (CMS) has proposed changes in the relative value units (RVUs) affecting payment for physician services to Medicare beneficiaries. It also has put forth a revised method for calculating practice expenses. These changes are scheduled to take effect January 1, 2007.

The changes include a proposed increase in “evaluation and management” services reflecting time spent with patients. For example, the work component for RVUs associated with an intermediate office visit – the most commonly billed physician service – would increase by 37%.

The law requires a budget neutrality adjustment for Medicare if proposed changes exceed $20 million. The proposed work RVU changes alone would raise expenses by roughly $4 billion, according to CMS estimates. The agency therefore has suggested creating a budget neutrality adjuster applied to only the work RVUs. CMS has proposed a 4-year transition to the new practice expense RVUs.

What does this mean for physician practices? Practice Manager Insider board member Larry A. Oday explains, "the statutory constraint of budget neutrality puts CMS in a bind. Although CMS tries to be fair about the process, there are inevitably winners and losers. No other result is possible. If it is the right thing to do to increase payment for the E&M codes, why should other codes be cut to accommodate that?" Oday is also a partner in Vinson & Elkins LLP, a Washington-based law firm, and a former official at the Health Care Financing Administration.

How does oncology fare in this zero sum game? Oday analyzed the proposed rule for PMI readers. CMS projects that hematology/oncology that at full implementation of the changes in 2010, hem/onc’s reimbursement for work RVUs will rise by 3%. Its payment for practice expenses will fall by 1%. Overall, the combined impact of the proposed changes yields a net 2% increase, according to Oday.

Impact of work RVU changes for radiation oncology will result in a decrease of 2% but practice expense RVUs are expected to climb by 4%. This yields an estimated combined impact of +2%.

CMS is accepting comments about the proposals until August 21, 2006.

Comments

[Christian Downs]

Remember this is a two part rule with a second piece coming out later. I think increasing rvus for cognitive skills will benefit medonc down the road. The key challenge is the budget neutrality. In Washington parlance, "there is no new money here."

CGD