Physician Fee Schedule Carries Drastic Payment Cut

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A 27.4% reduction in Medicare payments to physicians has been stipulated in the final rule for the 2012 physician fee schedule released yesterday by the Centers for Medicare and Medicaid Services (CMS). The payment reduction, which is based on the sustainable growth rate (SGR) formula, was anticipated to have been a slightly higher 29.5%.

However, this is seemingly not the end of the story. In a statement released concurrently with the final rule, CMS Administrator Donald Berwick, MD, noted that Congress has bypassed the cuts in 10 out of 11 instances, and that the Obama administration is committed to fixing the SGR.

"This payment rate cut would have dire consequences that should not be allowed to happen," Berwick said. “We need a permanent SGR fix to solve this problem once and for all. That’s why the President’s budget and his Plan for Economic Growth and Deficit Reduction call for permanent, fiscally responsible reform and why we are committed to working with the Congress to achieve a permanent and sustainable fix.”

In a separate statement, CMS Secretary Kathleen Sebelius corroborated Berwick’s comments. “We have not and will not let deep cuts to doctors’ payments occur,” Sebelius asserted. “The Obama administration is 100% committed to fixing the flawed Medicare payment system and protecting Medicare beneficiaries’ access to doctors.”

Meanwhile, the American Medical Association (AMA) is calling for “swift” Congressional action to halt the cuts from taking effect on January 1. "The release of the Medicare physician fee schedule rule serves as a reminder to Congress that there is a looming crisis in the Medicare program only they can stop, and the clock is ticking,” AMA President Peter W. Carmel said in a statement.”Without swift action by Congress, on January 1 physicians who care for Medicare patients will be hit with a 27.4% cut caused by the broken Medicare physician payment formula.”

Carmel pointed out that not only are many physicians already struggling with inadequate Medicare payment rates and the ongoing threat of future cuts from “this broken physician payment formula”; payments for Medicare physician services have fallen so far below increases in medical practice costs that there exists a 20% gap between Medicare payment updates and the cost of caring for seniors citizens.

“The Joint Select Committee on Deficit Reduction must include repeal of the formula in their recommendation to Congress to protect access to care for seniors and stabilize the Medicare program,” Carmel asserted. He noted that the AMA will conduct a thorough review of the rule.

For its part, the American College of Physicians is entreating Congress to "go big" by permanently eliminating the SGR and thereby reforming how doctors are paid under Medicare. The cut would lead to "devastating access problems for patients" ACP President Virginia Hood, MBBS, said in a statement.

CMS has projected that payments under the physician fee schedule will total $80 billion in 2012. The total cost of repealing the SGR has been pegged at approximately $300 billion over 10 years.

Beyond the Medicare payment cuts, additional changes included in the final rule encompass adjustments to payments based on geographic variation in cost of practice and the expansion of the multiple procedure payment reduction policy to the professional interpretation of advance imaging services.

Among other changes are the adoption of criteria for a health risk assessment to be used with annual wellness visits; the inclusion of smoking cessation services in the list of services available through telehealth; and modifications to such incentive programs as the Physician Quality Reporting System, the ePrescribing Incentive Program , and the Electronic Health Records Incentive Program.

The final rule will be published in the Federal Register on November 28.

Read the press release.