Medicare E&M boost negated by 5% pay cut; specialists hit harder

Washington -- The Bush administration at the beginning of November put its final touches on the 2007 physician fee schedule, leaving it up to Congress to address a reimbursement situation that will have some doctors barely treading water and others inundated by deep payment cuts.

The final fee schedule rule includes a 5% across-the-board cut that will affect every physician. The figure is down slightly from the 5.1% that the Centers for Medicare & Medicaid Services estimated in a proposed rule earlier this year.

But that's not the only reimbursement change that will affect physicians. Based on recommendations from the Relative Value Update Committee, a panel convened by the American Medical Association, CMS also adopted rate changes that commit more money to evaluation and management services.

However, the AMA disapproves of the way the agency carried out the suggestions because it resulted in greater cuts for specialists.

"The rule we are announcing today will pay physicians more for the time they spend talking with their patients about their health care," said CMS Acting Administrator Leslie V. Norwalk about the E&M change. "We believe that this emphasis on personalized care will lead to better outcomes for patients and more efficient use of health care resources."

Primary care physicians and other doctors who regularly bill for E&M services will receive higher rates for this care as a result of the changes. Many of them, however, will not even notice, said Cecil B. Wilson, MD, chair of the AMA Board of Trustees.

"For the great majority of primary care physicians, the overall physician payment cut due to the flawed payment formula will negate any payment increases specific to physician office visit payments," he said. The Association says this is a "harsh reminder" of the need for Congress to reverse the cut before January 2007.

Family physicians, for instance, on average will receive a 5% boost in payments in 2007 because of the higher E&M rates and the beginning of a phased-in system to pay more accurately for practice expenses, CMS said. But when the across-the-board cut is put into effect, family doctors will receive no more for their services next year than they did in 2006. The agency lists only four specialties projected to receive any average increase starting in January: emergency medicine, endocrinology, infectious disease and pulmonary diseases.

For some medical specialties, the situation is much worse. Medicare statute requires the program to offset the added money going toward E&M services by reducing pay for other medical treatments and procedures. That means that specialists who are not in primary care or who otherwise don't conduct as much evaluation and management will see higher cuts.

Anesthesiologists, for instance, face a 7% cut from the E&M and practice expense changes even before the 5% across-the-board reduction takes effect.

When CMS takes into account reductions in medical imaging required by law and the expiration of temporary Medicare payment add-ons for underserved geographic areas, additional medical specialties are facing cuts that will go into the double digits. Starting next year, Medicare will limit reimbursement for the most prevalent types of scans to the lesser of the hospital outpatient rate or the physician fee schedule amount -- a move that is expected to hit many doctors' offices financially.

The AMA estimates that nearly half of Medicare's doctors will see reductions that range from 6% to 20% because of the combination of all the cuts and rate changes, Dr. Wilson said.

Radiologists in particular are set to fare worse on average than any other type of physician because they provide few E&M services and order a significant amount of medical imaging, in addition to being subject to the across-the-board cut. CMS projects that, because of all three adjustments, the specialty will experience an average pay reduction of 14% starting in January 2007, even before accounting for potential geographic reductions.

This triple threat facing radiology practices may force them to shift costs by focusing on more profitable procedures and patients in an attempt to keep their heads above water, said Arl V. Moore, MD, a radiologist in Charlotte, N.C., and the chair of the American College of Radiology's board of chancellors. But this tactic can take them only so far if they are hit on multiple sides, he said.

"Radiology is looking at what you might call the perfect storm -- these three different things that are coming together at one time," he said. "This could well mean restriction of services to Medicare patients or stopping of these services altogether."

Medical specialties that are slammed too hard may run into the same problems that are facing primary care, said Dirk M. Elston, MD, a practicing dermatologist in Danville, Pa., and a representative of the Alliance of Specialty Medicine.

"Rising costs and shrinking reimbursement are causing more and more good doctors to reconsider their participation in the Medicare program," he said. "As a result, the access of our nation's seniors to needed specialty care is at risk."

Although most of the reductions are required by Medicare statute, CMS faced criticism from physicians for not taking more administrative steps to lessen the blow to both primary care doctors and specialists.

Several physician organizations, including the AMA, again called on the agency to remove the cost of physician-administered drugs from the formula that helps determine doctor pay.

Physicians said that the move would have freed up billions of additional dollars to pay for patient services, but CMS continued to dispute whether it has the administrative power to make such a revision.

The administration also could have mitigated some of the large swings in reimbursement rates next year if it had altered the way in which it offset the extra dollars going toward E&M services, physician groups said. Instead of adjusting the conversion factor, which turns the relative values assigned to physician services into a dollar amount, CMS decided to alter the part of the relative value scale that accounts for the amount of work expended by doctors.

Dr. Moore said the AMA-led process operated fairly and considered the input of a broad range of specialties but that the CMS decision did not. Not only does the agency's method result in an inconsistent application of reductions across specialties, but it likely could result in lower reimbursements from private payers, he said. Because insurance companies often use the Medicare relative value scale in their reimbursement systems, any decrease in the work component set by the government could result in cuts on the private side as well.

Regardless of specialty, physicians were united in pressing Congress to reverse the 5% cut when it returned to Washington the week of Nov. 13. Doctors also are calling for legislation to impose a moratorium on imaging reductions.