Medicare takes AMA advice, proposes E&M pay boost

Washington -- Medicare has proposed paying physicians significantly more for some of the most common services they provide, relying heavily on advice from a group convened by the American Medical Association.

In proposed changes to the Medicare physician fee schedule issued late last month, the Centers for Medicare & Medicaid Services announced its intention, starting next year, to boost the amount paid to doctors for the evaluation and management of patients. By reimbursing more based on physicians' increased workload in this area, the agency hopes to better align the payment system with the changing face of modern health care, in which managing complex chronic conditions has become more time-consuming.

"It's time to increase Medicare's payment rates for physicians to spend time with their patients," said CMS Administrator Mark McClellan, MD, PhD. "We expect that improved payments for evaluation and management services will result in better outcomes because physicians will get financial support for giving patients the help they need to manage illnesses more effectively."

CMS proposed changing the rates for a number of services under the fee schedule by altering their physician work component, which is the largest of the three factors that determine what Medicare pays for each service. It covers a doctor's time, skill and training. The practice expense component covers all of the costs involved in running a physician's office, and a third component covers the costs of professional liability insurance. The physician work portion accounts for more than half of the average fee, practice expense makes up about 45%, and insurance constitutes the remainder.

In some cases, the increased reimbursements may be relatively dramatic. The work component of the rate paid by Medicare for the very prevalent E&M service known as the "intermediate physician office visit," for instance, would increase by 37% if the language in the proposed rule becomes final later this year. This would result in a final fee that is significantly higher than it is now.

With more than 400 rate changes outlined in the rule for E&M and non-E&M services, CMS estimates that more than $4 billion in reimbursements would be directed toward services that would not receive these dollars under the current system.

In drafting its proposed rule, CMS accepted many of the recommendations of the AMA-convened Relative Value Update Committee, or RUC. The panel, composed of both primary care physicians and representatives from medical specialties, recently completed a major review of the three weights CMS assigns to different physician services. Committee members meet every five years to advise such changes.

"The recently released CMS proposal to modify Medicare physician payment rates provides badly needed relief for some physicians by increasing payments for evaluation and management services and surgical postoperative care," said AMA Board of Trustees Chair Cecil B. Wilson, MD.

The proposed rule was lauded by several physician groups that largely represent primary care doctors, including the American College of Physicians and the American Academy of Family Physicians. Primary care is one of the areas in which physicians would fare the best under the regulation changes, which are the first proposed revisions to the work component of E&M services since 1997.

"There's no doubt that these ... increases are appropriate and necessary," said J. Leonard Lichtenfeld, MD, the ACP's representative to the RUC. "The physician work involved in furnishing these services has increased significantly in the last 10 years."

No new money

Because CMS cannot spend any extra money to implement the changes, the billions of additional dollars that would go toward evaluation and management services would need to be offset by reductions elsewhere in the physician fee schedule. This means that some doctors who don't prescribe many of these services may see overall reimbursements that are smaller than they would be under current law.

Average cuts to affected physicians would total roughly 5%, according to the AMA. This reduction underscores the need for more comprehensive reform of the entire payment system, which has all physicians in line for an estimated 4.7% cut on top of whatever fee schedule changes occur in January, the Association said.

"The CMS proposal reinforces the urgent need for Congress to act to stop the Medicare physician payment cuts and ensure that payments keep up with practice costs," the AMA's Dr. Wilson said.

A number of physician specialty groups said they would need to study further the 600-page regulation before deciding how to proceed. Initial estimates by the Medicare agency show that several types of doctors who offer fewer E&M services would experience substantial reductions.

Specialties that would see total cuts of 5% or more include anesthesiology, dermatology, interventional radiology, nuclear medicine, pathology and radiology. Groups of nonphysicians that would also see significant reductions include chiropractors, nurse anesthetists and physical therapists.

Some specialties would see further increases or reductions through a separate provision in the rule that would adjust the way CMS determines the practice expense component of the physician fee schedule.

The agency said those changes would make practice expense calculations more consistent by relying on cost data provided by specialties themselves and approved by the RUC. The revisions would be phased in over four years and would generally have a 1% to 2% positive or negative effect on medical specialties' reimbursements next year.

Conflict ahead?

CMS will accept comments from concerned physicians until Aug. 21. The agency then plans to issue a final rule on or about Nov. 1 that will lay out how the physician fee schedule will work next year.

But physicians hoping to convince Medicare officials to change their minds about the proposed E&M changes may find themselves in the minority. The RUC cannot approve advice to CMS without first obtaining the blessing of at least two-thirds of the committee's members, and the agency typically accepts the vast majority of the group's final recommendations.

Some physician groups who support the revisions appear to be gearing up for a possible challenge via the rule-making process.

The American College of Physicians "encourages CMS to hold the line on its proposal at the end of the 60-day public comment period," said ACP President Lynne M. Kirk, MD. She said that the move would start to correct inequities in the payment system that have driven so many Medicare dollars away from primary care that the field itself has been threatened.

"Inadequate and dysfunctional payment policies, including the undervaluation of E&M services, combined with high levels of medical student debt, are key drivers behind the impending collapse of primary care," Dr. Kirk said. "Medicare, as the single largest purchaser of health care in the United States, can lead by replacing policies that are antithetical to primary care with ones designed to encourage and support its importance and growth."