Medicare 27.4% doctor pay cut set for 2012 unless Congress acts

CMS says its hands are tied on the pay formula but agrees to scale back additional pay reductions planned for interpreting imaging scans.

By Charles Fiegl — Posted Nov. 14, 2011

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The across-the-board Medicare physician pay reduction scheduled for 2012 shrank slightly from projections made earlier this year, but doctor organizations said the cut still would be catastrophically large.

A 27.4% reduction to doctor pay starting Jan. 1 would have devastating consequences on all physicians and the millions of patients who rely on the insurance program for coverage, patient advocacy associations and organized medicine groups have warned. Beneficiaries would suffer from not being able to see the doctors of their choice, and physicians would weigh leaving the program and perhaps closing their doors.

The Centers for Medicare & Medicaid Services published its 2012 Medicare physician fee schedule on Nov. 1. The fee schedule updates the payment rates for thousands of medical services and establishes other regulatory policy. Most finalized changes are effective Jan. 1.

The proposed fee schedule that was released earlier this year had projected a 29.5% cut in 2012 as mandated by a budgetary mechanism called the sustainable growth rate formula, but CMS revised the figure to 27.4% in the final rule. Despite the change, the fee schedule will serve as a stark reminder to Congress that there is a crisis in the Medicare program that only lawmakers can stop, said American Medical Association President Peter W. Carmel, MD.

"Many physicians are already struggling with inadequate Medicare payment rates and the ongoing threat of future cuts from this broken physician payment formula," Dr. Carmel said. "Payments for Medicare physician services have fallen so far below increases in medical practice costs that there is a 20% gap between Medicare payment updates and the cost of caring for seniors."

While noting that they have no control over the SGR cuts, Medicare officials pledged to work with Congress to avert the reductions. Congress has provided temporary relief from the SGR cuts since 2003, but a long-term solution is critical, said Health and Human Services Secretary Kathleen Sebelius in a statement. She called physicians "the backbone of our health care system" but noted that they still are facing another steep reduction because of a flawed statute that dates back to 1997.

"We have not and will not let deep cuts to doctors' payments occur," Sebelius said. "The Obama administration is 100% committed to fixing the flawed Medicare payment system and protecting Medicare beneficiaries' access to doctors."

President Obama's budget proposal included funding for a permanent solution to the SGR problem. His deficit reduction plan also called on Congress to prevent cuts to doctor pay, Sebelius said.

Smaller advanced imaging cuts

Some physicians will face additional pay cuts regardless of whether Congress acts on the across-the-board reduction. CMS will reduce payments to physicians interpreting multiple advanced diagnostic imaging scans, such as MRIs and CT scans, provided to the same patient on the same day. In doing so, the Medicare agency decided to expand its multiple procedure payment reduction policy beyond the health professionals who actually administer the screenings.

Under the final policy, Medicare would pay full price for interpretation of the first advanced imaging service but would pay a reduced rate for subsequent tests reviewed for the same patient on the same day. CMS had proposed a 50% reduction for the subsequent tests, but the agency decided to implement a 25% cut.

The change did little to assuage the concerns of physicians who interpret advanced imaging scans. There is no evidence to support a 25% reduction to pay for the services, the American College of Radiology said. A study in the September issue of the Journal of the American College of Radiology concluded that any efficiencies physicians were able to take advantage of by reviewing multiple procedures in the same setting were "highly variable and considerably less than previously estimated."

The new administrative pay policy will have a negative effect on access for Medicare patients who have severe trauma, strokes or widespread cancer -- conditions often requiring multiple diagnostic imaging scans, said John Patti, MD, chair of the college's board of chancellors.

American College of Cardiology CEO Jack Lewin, MD, said: "While we are glad to see the original cuts to advanced imaging services were decreased from their proposed 50%, the continued cuts to cardiovascular services, if the sustainable growth rate formula is not fixed, provide an even greater threat to patients' access to quality care."

More noncompliance penalties ahead

For physicians who don't meet Medicare requirements for electronic prescribing, CMS will be taking similar approaches to determine payment penalties in 2013 and 2014 as it has for 2012.

The Medicare program used e-prescribing activity from Jan. 1 to June 30 of this year to determine which physicians would face a noncompliance penalty in 2012. Those failing to report generating at least 10 e-prescriptions during the six-month window will see their Medicare pay reduced by 1% next year. The agency has offered hardship exemptions to some physicians who were unable to meet program requirements.

The Medicare agency also will use a six-month reporting period starting in January to determine if a physician will have his or her Medicare pay reduced by 1.5% in 2013, according to the final rule. In 2013, another six-month period will be used to assess who is subject to a 2% penalty in 2014.

Physicians earning an e-prescribing bonus for reporting paperless prescriptions in 2012 will not be subject to the 2014 pay penalty, just as those who qualified for bonuses in 2011 are not subject to the 2013 cut.

The Medicare agency said some commenters argued that 2013 and 2014 payment adjustments should be based on e-prescribing activity for those years, instead of on activity from the previous years. However, CMS said it has the discretion to define the reporting periods, and the agency concluded that it needs several months to conduct a full analysis of Medicare claims data to determine who receives bonuses or penalties.

In addition to authorizing e-prescribing penalties, Medicare statute requires CMS to levy a 1.5% penalty in 2015 on physicians who do not participate successfully in the program's physician quality reporting system. The agency is moving forward with plans to use 2013 PQRS activity to determine if a physician should be penalized in 2015.

The AMA and other organized medicine groups objected to this approach. CMS considered using PQRS reporting during 2014 or 2015, but it is not operationally feasible, officials said. "We will, however, continue to explore options for potentially using a reporting period closer to the time in which the payment adjustment is applied for future years of the payment adjustment," the final rule said.

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What SGR cut would look like

The sustainable growth rate formula would cause Medicare doctor payments to drop by 27.4% in 2012 unless Congress acts. Here's what the effect would be on some common physician services.

Service 2011 rate 2012 rate Change
New patient office visit $102.95 $76.23 -$26.72
Established patient office visit $68.97 $51.07 -$17.90
Chest x-ray $23.78 $17.27 -$6.51
Mammogram $81.20 $58.96 -$22.24
Rechanneling of artery $1,128.70 $806.25 -$322.45
Total hip arthroplasty $1,440.26 $1,047.79 -$392.47

Source: Centers for Medicare & Medicaid Services, 2012 fee schedule (link)

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Tale of the tape: 2012 Medicare physician fee schedule

  • Is 1,235 pages long.
  • Includes payment information for roughly 10,000 physician services.
  • Classifies 56 patient encounters as eligible for the electronic prescribing incentive program.
  • Identifies 120 advanced diagnostic imaging services as subject to the multiple procedure payment reduction policy.
  • Lists 240 individual reporting measures for the physician quality reporting system.

Sources: Centers for Medicare & Medicaid Services, 2012 fee schedule (link)

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External links

2012 Medicare fee schedule, Centers for Medicare & Medicaid Services (link)

"Professional Component Payment Reductions for Diagnostic Imaging Examinations When More Than One Service Is Rendered by the Same Provider in the Same Session: An Analysis of Relevant Payment Policy" Journal of the American College of Radiology, September (link)

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