[author: John S. Linehan]

On November 1, 2012, CMS released two final rules that included a series of Medicare and Medicaid payment policies and rates for physicians and other health professionals. Among other things, the rules contain payment reforms aimed at strengthening primary care reimbursement as part of CMS’s goal to increase participation by primary care physicians. In addition, the Medicare rule implements an important component of the value-based payment system for physicians to promote higher quality and lower costs in health care delivery. The Medicare and Medicaid rules will take effect on January 1, 2013.

Medicaid Program Final Rule

The Medicaid final rule [PDF]  ensures that Medicaid payments for primary care services furnished by primary care physicians (e.g., physicians with specialty designations of family medicine, general internal medicine, or pediatric medicine) in 2013 and 2014 will not be less than the Medicare rates. If the Medicaid rates are higher than the Medicare rates, then the governing rate will be calculated under the 2009 Medicare physician fee schedule conversion factor. Furthermore, the final rule mandates a 100 percent federal match for any payment increase above the amounts due for such services under the applicable Medicaid state plan rate as of July 1, 2009. As a result, unless a state has reduced its Medicaid rates since 2009, it will receive full reimbursement from the federal government for any increased payments.

Medicare Program Final CY 2013 Physician Fee Schedule Rule with Comment Period

The Medicare final CY 2013 physician fee schedule rule with comment period [PDF] includes a range of program-related updates and initiatives. Most notably, it promulgates a new policy to forward payments to physicians who coordinate a patient’s care in the 30 days following a hospital or skilled nursing facility stay. Designed to promote the continuity of care and reduce readmissions, this policy is expected to produce a seven percent payment increase for family practitioners and an increase of between three and five percent for other primary care practitioners.

In addition, the Medicare final rule implements a physician value-based payment modifier in accordance with the Affordable Care Act. The value modifier will provide differential Medicare payments to physicians based on comparison of the quality and cost of care provided to beneficiaries. Starting in 2015, the modifier will apply to medical groups of 100 or more practitioners, a change from the proposed rule, which would have set the group size at 25 or more professionals. The rule provides an option for these physician groups to choose how the value modifier is calculated based on whether they participate in the Physician Qualify Reporting System (“PQRS”), a voluntary program that permits health care professionals to report quality of care information to Medicare that relates to a range of prescribed metrics.

The final rule also includes a statutorily-mandated 26.5 percent across-the-board reduction to Medicare payment rates that will impact more than 1 million physicians and non-physician practitioners under the Balanced Budget Act of 1997’s Sustainable Growth Rate (“SRG”) methodology. Congress has overridden this reduction in every year since 2003; however, no such action has yet been taken in the current year. The comment period for this rule will close on December 31, 2012.

Ober|Kaler’s Comments

The Medicare and Medicaid final rules offer a wide range of reforms that will impact reimbursement for health care services. The rules reveal CMS’s commitment to promoting primary care and value-based reimbursement as critical aspects of health care reform. Providers should remain cognizant of periodic updates to these programs, as they will continue to be implemented and modified on a graduated basis. Likewise, close attention should be paid to related legislative developments, as any action (or inaction) by Congress will impact the implementation of these and related health care payment initiatives.