CMS Issues Medicare Physician Fee Schedule Final Rule

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On November 27, 2013, CMS released a 1,369 page display copy of the CY 2014 Medicare Physician Fee Schedule (PFS) final rule.  The final rule, which was delayed because of the government shut-down in October, is scheduled to be published in the Federal Register on December 10, 2013.  The rule updates current payment policies and payment rates for services furnished under the PFS beginning January 1, 2014.  CMS released a fact sheet summarizing its changes to certain PFS payment policies and payment rates.  The fact sheet is available by clicking here.  The full display copy of the final rule can be found here.

Among the many changes contained in the PFS final rule are the following:

  • Payment Rates:
    • CMS finalized conversion factor of $27.2006 for CY 2014, which CMS points out “reflects a smaller reduction in the conversion factor than the 24.4 percent reduction that we projected in March 2013.”   This conversion factor represents a decrease of 20.1% attributable to application of the Sustainable Growth Rate (SGR).  CMS expects, however, that Congress will intervene to repeal this reduction prior to the start of the 2014 CY.  Total payments under the PFS are projected to increase to $87 billion from $80 billion in 2012.  Under the 2014 fee schedule, mental health providers, such as psychiatrists (+6%), clinical psychologists (+8%) and clinical social workers (+8%), received some of the biggest increases in pay.
  • Primary Care and Complex Chronic Care Management:
    • CMS finalized its proposal “to pay for non-face-to-face complex chronic care management services for Medicare beneficiaries who have multiple, significant chronic conditions (two or more) . . . .”  These additional payments to physicians for managing Medicare patients’ chronic care needs will begin in CY 2015.  Care management includes the development and implementation of a care plan, patient and caregiver communication, and medication management.  CMS intends to establish practice standards necessary to support payment for furnishing care management services through future notice-and-comment rulemaking.  While CMS has called this change a “milestone,” some stakeholders have complained that the codes are administratively burdensome.
  • Telehealth Services:
    • CMS finalized its proposal “to modify its regulations describing eligible telehealth originating sites to include health professional shortage areas (HPSAs) located in rural census tracts of urban areas as determined by the Office of Rural Health Policy.”  This change is intended to “more appropriately allow sites located within HPSAs in MSAs that have rural characteristics to qualify as originating sites and improve access to telehealth services in shortage areas.”  In addition, geographic eligibility determination for an originating site will be made on an annual basis to “avoid the need to make mid-year Medicare telehealth payment policy changes.”
  • Medicare Economic Index (MEI):
    • CMS finalized its proposal to make “revisions to the calculation of the MEI, which is the price index used to update physician payments for inflation” consistent with recommendations by a Technical Advisory Panel that met during CY 2012.
  • Application of Therapy Caps to Critical Access Hospitals:
    • Consistent with the American Taxpayers Relief Act passed earlier this year, CMS finalized its proposal to apply the “per beneficiary limits to outpatient therapy services” to outpatient therapy services furnished in Critical Access Hospitals.
  • Misvalued Codes:
    • Consistent with amendments made by the Affordable Care Act, CMS has identified and reviewed potentially misvalued codes and finalized values for around 200 codes, and approximately 200 additional codes had their work relative value units changed on an interim basis for 2014.  Included in these revised codes are services for hip and knee replacements, mental health services and GI endoscopy services.  These revised rates are open for public comment until January 27, 2014.
  • Compliance with State Law for Incident To Services:
    • CMS finalized its proposal to require “as a condition of Medicare payment that ‘incident to’ services be furnished in compliance with applicable state law.” 
  • Physician Quality Reporting System (PQRS):
    • Besides retiring several claims-based measures and adding 58 new measures, CMS made several other changes to the PQRS including allowing participating physicians the option to report quality measures through qualified clinical data registries and aligning quality measures across all reporting programs so that a physician need only report a measure once for all programs.  Physician groups that reported PQRS measures for 2012 will have their results publicly reported on the Physician Compare website for 2014.
  • Physician Value-Based Payment Modifier:
    • In 2016, CMS will apply a Value-Based payment modifier to groups of 10 or more eligible professionals based on the group’s performance under the PQRS.  Only upward adjustments will apply to physician groups between 10 and 99.  Physician groups with 100 or more eligible professionals will have both upward and downward modifiers applied as appropriate. 
  • Polices Regarding the Clinical Laboratory Fee Schedule:  

    • CMS finalized its proposal to define technological changes as changes to the tools, machines, supplies, labor, instruments, skills, techniques, and devices by which laboratory tests are produced and used.   CMS will review certain codes on the CLFS each year to determine which codes should be proposed during the rulemaking cycle for a payment adjustment due to technological changes.
  • Medicare Coverage of Investigational Devices and Clinical Trials:
    • CMS proposed significant modifications to its regulations governing Medicare coverage of investigational devices and the routine items and services furnished to beneficiaries during the clinical studies or trials conducted under the FDA Investigational Device Exemption (IDE) regulations.  Those proposals included  requiring that the principal purpose of a clinical study be to evaluate whether the item or service can meaningfully improve health outcomes of patients who are represented by the Medicare-enrolled subjects, and creating a centralized review process as opposed to utilizing local Medicare contractors.  Although these proposals were largely adopted, CMS did make multiple minor modifications to its proposal including changes to certain definitions.  CMS provides a list of those modifications on pages 667-670 of the display copy of the final rule.
  • Limit Medicare Physician Fee Schedule to Hospital Outpatient and Ambulatory (NOT Finalized):
    • CMS did NOT, however, finalize its proposal to “to adjust relative values under the PFS to effectively cap the physician practice expense payment for procedures furnished in a non-facility setting at the total payment rate for the service when furnished in an ambulatory surgical center or hospital outpatient setting.”  Rather, CMS said that it “will take additional time to consider issues raised by the public commenters and plans to address this issue in future rulemaking.”

Reporter, Daniel J. Hettich, Washington, D.C., +1 202 626 9128, dhettich@kslaw.com