Feature | December 11, 2013

CMS Releases Final Rule for 2014 Medicare Physician Fee Schedule

December 11, 2013 — The U.S. Centers for Medicare & Medicaid Services (CMS) finalized updates to payment policies and payment rates for services furnished under the Medicare Physician Fee Schedule (MPFS) on or after Jan. 1, 2014. In recognizing the importance of care that occurs outside of a face-to-face visit, CMS finalized policies that will allow separate payment to physicians for managing select Medicare patients’ care needs beginning in calendar year (CY) 2015.
 
The rule also finalizes changes to several of the quality reporting initiatives that are associated with MPFS payments — the Physician Quality Reporting System (PQRS), as well as changes to the physician compare tool on the Medicare.gov website.
 
Furthermore, the rule continues the phased-in implementation of the physician value-based payment modifier (value modifier), created by the Affordable Care Act, that will affect payments to certain physician groups based on the quality and cost of care they furnish to beneficiaries enrolled in the traditional Medicare fee-for-service program. Finally, the rule addresses changes to a handful of other programs, which are listed in the table of contents within the rule.
 
Overview
Since 1992, Medicare has paid for the services of physicians, non-physician practitioners (NPPs), and certain other suppliers under the Medicare Physician Fee Schedule (MPFS), a system that pays for covered physicians’ services furnished to a person with Medicare Part B. Under the MPFS, relative values are assigned to each of more than 7,000 services to reflect the amount of work, the direct and indirect (overhead) practice expenses, and the malpractice expenses typically involved in furnishing that service. Each of these three relative value components is multiplied by a geographic practice cost index to adjust the payment for variations in the costs of furnishing services in different localities. The resulting relative value units (RVUs) are summed for each service and then are multiplied by a fixed-dollar conversion factor to establish the payment amount for each service. The higher the number of RVUs assigned to a service, the higher the payment.
 
Sustainable Growth Rate (SGR) and MMPFS Conversion Factor for CY 2014
Under current law, physicians and non-physician practitioners (NPP) will face steep across-the-board reductions in payment rates, based on a formula — the Sustainable Growth Rate (SGR) methodology — that was adopted in the Balanced Budget Act of 1997. Without a change in the law, the conversion factor will be reduced by 20.1 percent for services in 2014. The president’s budget calls for averting these cuts and finding a permanent solution to this problem. The CY 2014 conversion factor is $27.2006, which reflects a smaller reduction in the conversion factor than the 24.4 percent reduction that CMS projected in March 2013. The smaller reduction is due in part to a 4.72 percent adjustment to the conversion factor to offset the decrease in Medicare physician payments that would otherwise have occurred due to the CY 2014 rescaling of the RVUs so that the proportions of total payments for the work, practice expenses (PE) and malpractice RVUs match the proportions in the final revised Medicare Economic Index (MEI) for CY 2014. This issue is discussed further below. The overall 2014 reduction in physician fee schedule payments required under the SGR methodology is unchanged by this rescaling.
 
Provisions Included in the CY 2014 MPFS Final Rule
Primary Care and Chronic Care Management: As part of CMS’s ongoing efforts to appropriately value primary care services, Medicare will begin making a separate payment for chronic care management services beginning in 2015. In last year’s final rule, CMS established separate payment for transitional care management services for a beneficiary making the transition from a facility to the community setting. In this final rule, CMS further emphasizes its support for advanced primary care by establishing policies to facilitate separate payment for non-face-to-face chronic care management services for Medicare beneficiaries who have multiple, significant chronic conditions. This reinforces the U.S. Department of Health and Human Services (HHS) efforts to support care management through payment reform and incentives and is consistent with HHS’ Strategic Framework on Multiple Chronic Conditions. Chronic care management services include the development, revision and implementation of a plan of care; communication with the patient, caregivers and other treating health professionals; and medication management. Medicare beneficiaries with multiple chronic conditions who wish to receive these services can choose a physician or other eligible practitioner from a qualified practice to furnish these services over 30-day periods.
 
The rule indicates that CMS intends to establish practice standards necessary to support payment for furnishing care management services through future notice-and-comment rulemaking.
 
Telehealth Services
CMS is modifying its regulations describing the geographic criteria for 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 will 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. CMS is also establishing a policy to determine geographic eligibility for an originating site on an annual basis, consistent with other telehealth payment policies. This will avoid mid-year changes to geographic designations (sometimes without advance notice to Medicare beneficiaries and providers) that could result in unexpected disruptions to established telehealth originating sites and avoid the need to make mid-year Medicare telehealth payment policy changes. In addition, CMS is updating the list of eligible Medicare telehealth services to include transitional care management services.
 
Revisions to the Practice Expense Geographic Adjustment
As required by the Medicare law, CMS adjusts payments under the MPFS to reflect the local cost of operating a medical practice as compared to the national average. CMS calculates separate geographic practice cost indices (GPCIs) to adjust the work, PE and malpractice cost components of each payment. The law requires that it reviews the GPCIs every three years and adjusts them as appropriate with a two-year phase-in of the new GPCIs. CMS is finalizing new GPCIs using updated data. The updated GPCIs will be phased in over CY 2014 and CY 2015. Additionally, CMS will apply the statutorily mandated 1.5 work GPCI floor in Alaska and the 1 PE GPCI floor for frontier states (Montana, Nevada, North Dakota, South Dakota and Wyoming), which have no expiration date. There is separate statutory 1 work GPCI floor that is scheduled to expire under current law on Dec. 31, 2013. Therefore, the finalized GPCIs reflect the expiration of the 1 work GPCI floor.
 
Medicare Economic Index
CMS is finalizing proposed revisions to the calculation of the MEI, which is the price index used to update physician payments for inflation. The changes are in response to recommendations by a Technical Advisory Panel that met during CY 2012. Application of the MEI along with the SGR determines the conversion factor that is used to determine payments made each year under the MPFS. The final rule includes changes in the MPFS RVU and GPCI weights assigned to the work and practice expense categories so that the weights used in the MPFS payment calculation will continue to mirror those in the MEI. As a result, some payment is being redistributed to work from practice expense. In addition, CMS is updating the GPCI cost share weights consistent with the revised 2006-based MEI cost share weights.
 
Misvalued Codes
Consistent with amendments made by the Affordable Care Act, CMS has been engaged in a vigorous effort over the past several years to identify and review potentially misvalued codes and make adjustments where appropriate. CMS is continuing to make strides as the values for around 200 codes were finalized and approximately 200 additional codes had their work relative value units changed on an interim basis for 2014. Included in these are services for hip and knee replacements, mental health services and GI endoscopy services. These rates are open for public comment until Jan. 27, 2014.
 
CMS is not finalizing its proposal to adjust relative values under the MPFS 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. Instead, CMS will take additional time to consider issues raised by the public commenters and plans to address this issue in future rulemaking. In addition, for CY 2014, CMS is finalizing 18 codes that it identified and proposed as potentially misvalued services in consultation with contractor medical directors.
 
Revisions to the Clinical Laboratory Fee Schedule (CLFS)
Under current law, payments on the CLFS remain static and are not revised once a test code has been added to the CLFS and its payment rate has been established. At this point, the CLFS is approximately 30 years old with payment rates that are outdated and potentially excessive. This rule indicates that CMS intends to explore an existing statutory provision that allows updates to the CLFS based on changes in technology. As a result, for the first time, CMS will conduct regular reviews and updates to the payments on the CLFS in order to ensure greater payment accuracy.
 
Application of Therapy Caps to Critical Access Hospitals
The law applies annual limitations (“therapy caps”) on per beneficiary incurred expenses for outpatient therapy services — one for physical therapy and speech-language pathology services combined and another for occupational therapy services. Before the American Taxpayers Relief Act of 2012 directed CMS to count critical access hospitals (CAH) services towards the caps, the caps were not applied to therapy services furnished in CAH. CMS is finalizing its proposal to apply the therapy caps and related policies to outpatient therapy services furnished by a CAH beginning Jan. 1, 2014 in order to properly apply the law that established the therapy caps.
 
Compliance With State Law for 'Incident to' services
CMS is requiring as a condition of Medicare payment that “incident to” services be furnished in compliance with applicable state law. This policy strengthens program integrity by allowing Medicare to deny or recoup payments when services are furnished not in compliance with state law. CMS also eliminated redundant regulations for each type of practitioner by consolidating the “incident to” requirements for all practitioners that are permitted to bill Medicare directly for their services, reducing the regulatory burden and making it less difficult for practitioners to determine what is required in order to bill Medicare for “incident to” services.
 
The final rule with comment period and final rules will appear in the Dec. 10, 2013 Federal Register. The due date for comments is Jan. 27, 2014.
 
A PDF of a payment rates comparison chart, titled “Final RVUs and Allowables 3Q 2013 Compared to CY 2014 Final Medicare Physician Fee Schedule (MPFS) — Nuclear Cardiology, Radiopharmaceuticals and Drugs” can be found here.
 

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