Merlino Healthcare Consulting Corp.

PHYSICIAN FEE SCHEDULE PAYMENT POLICIES
Effective January 1, 2007

Are you wondering why your 2007 actual Medicare payment rates do not seem to match the 2007 rates located on the CMS web sites? Well wonder no more, CMS had several very complicated payment polices to implement in 2007 for the Medicare physician fee schedule (MPFS) along with implementing the DRA for the Imaging CAP. CMS officials reported to Merlino Healthcare Consulting Corp., "it was intentional that CMS has kept the MPFS RVUs and payment rates separate from the DRA HOPPS CAP rates, and this was not to cause provider confusion." CMS did this because other payers use the RVUs, as well as providers want to be able to see the impact from the different 2007 changes. Keeping these separate will allow you to carve out the impact from different payment policy changes in 2007. It also will be important to know what you might be paid if the DRA is halted or reversed as efforts by societies are still underway.

Providers should look for the different CMS files. Understanding carriers are likely to post up to three different files for some nuclear medicine procedures. It is the provider responsibility to know which files are correct, up-to-date and if the codes are affected by the DRA.

The Three Potential CMS 2007 Rate Files:

First, if you use the CMS MPFS look up on the web site (or your carrier published Fee Schedule) you will find the MPFS rate that includes the impact from the Five Year Review, the Transitioned Practice Expense methodology changes and the reversal of the Conversion Factor -5% cut due to the Tax Relief and Health Care Act of 2006.
Second, if the procedure is carrier priced you will also find a published rate for those carrier priced codes like PET as if there were NO DRA in place (again, keeping consistent with CMS wanting to keep the impact of DRA separate from the traditional MPFS).
Third, look for a file with the words, OPPS CAP. Caution, some carriers have the 03 version posted on their web sites not the 04 version. If the date of publication is prior to January 17th 2007 the file is the 03 file not the 04 file. CMS has calculated all local payments for codes affected by the DRA and put the payment amounts in this file. (If you cannot find this on your local web site, you can locate the rates on the main CMS web site, see link below and download the folder titled RVU07a4.zip. In this file you will find one file titled 07LOCCO.xls, this file shows the locality number. You will need this for the second file. Then locate the OPPSCAP.xls file and use the edit, find feature to search by your locality number and then the codes you are interested in obtaining the 2007 rates.)

CMS released an update to the 2007 Medicare Physician Fee Schedule Relative Value Units (RVUs) January 17, 2007. Codes subject to the Deficit Reduction Act (DRA) imaging provisions were revised in order to closely match their payment amounts with the Hospital Outpatient Prospective Payment System (HOPPS) amount to which they are capped.

CMS Transmittal 1161, dated January 24, 2007, CR5498 instructs carriers to update the HOPPS CAP file with those posted in the RVU07A4 files (found online at: http://www.cms.hhs.gov/PhysicianFeeSched/PFSRVF/
itemdetail.aspfilterType=none&filterByDID=99&sortByDID=1&
sortOrder=ascending&itemID=CMS1192486&intNumPerPage=10).
These changes must be implemented by February 27, 2007. Carriers are not required to make any automatic or retroactive adjustments to claims, but, if notified by providers, they must adjustments payments. Contractors are required to re-publish fees for those codes subject to the DRA HOPPS CAP payments.

All national payment rates, can be found on the SNM Coding Corner at:
http://interactive.snm.org/index.cfm?PageID=1982&RPID=941

The MPFS Final Rule is now posted on the Federal Register website at: http://a257.g.akamaitech.net/7/257/2422/01jan20061800/
edocket.access.gpo.gov/2006/pdf/06-9086.pdf

Some other Interesting Information on the 2007 Medicare Physician Fee Schedule, Final Rule:

The Medicare law includes a statutory formula that required CMS to implement a minus 5.0 percent update in payment rates for physician-related services. This was slightly less than the 5.1 percent reduction in the proposed rule. The Conversion Factor (CF) for 2007 was scheduled to be set at $35.9848, a -5% reduction from the 2006 CF. However, this statutorily mandated reduction was reversed by the Tax Relief and Health Care Act of 2006, which prevented the physician payment cuts in 2007. The CF will remain unchanged at $37.8975 in 2007.
CMS finalized the results of the Five Year Review (FYR). CMS accepted all nuclear medicine and nuclear cardiology American Medical Association (AMA) Relative Value Committee (RUC) work relative values. Seven high volume Nuclear Medicine codes were reviewed by the RUC (CPT 78306, 78315, 78465, 78478, 78480, 93015 and 93018.) The work RVUs remain unchanged with a few expectations as follows: Physician work RVUs were reduced for two nuclear cardiology add-on codes specifically CPT 78478 from 0.62 to 0.50; CPT 78480 from 0.62 to 0.30.
Additionally as a result of the FYR, the Final Rule increased significantly the work component for the RVUs for the face-to-face visits (evaluation and management or "E&M services"). This increases the physician payment for the time spent talking with patient's about their health care and the steps that can be taken to maintain or improve the patient's health. As required, CMS implemented a budget neutrality (BN) adjustor (0.8994), which is applied to the work relative value units (RVUs.) for all CPT codes. This means that CMS has implemented a negative adjustment (-10.1% to all CPT code work RVUs) in the formula to make the overall payments in this system budget neutral. However, don't expect to see this in the published RVUs in Addendum B of the federal register published Final Rule. This BN adjustor is part of the formula for payment and not part of the published RVUs. So be careful in your calculations of the payment rates for 2007.
The Final Rule adopted a new methodology for determining practice expense (PE) (such as office overhead) RVUs, and agreed to phase in changes over a four year period. For 2007, CMS will apply a 25% adjustment, then increasing the adjustment to 50% in 2008, 75% in 2009 and full implementation in 2010. This methodology will be more transparent than the existing methodology, allowing specialties and other stakeholders to predict the effects of proposals to improve accuracy of practice expense payments. Changes to nuclear medicine procedures result in a mix of increases and decreases with these PE methodology changes.
There are NO changes for radiopharmaceutical payment methodology in the physician office or IDTF setting for 2007.
Drugs and biologicals will continue to be paid at 106 percent of the average sales price (ASP+6). The rule also includes further guidance on how drug manufacturers should address particular issues related to their ASP reporting requirements. The rule finalizes manufacturers' reporting requirements and addresses a number of technical ASP issues such as the treatment of "bona-fide service fees" in the context of the ASP calculation and the definition of nominal sales. CMS clarifies they will use the Medicaid definition of nominal sales and did not finalize definitions for "bundled" priced concessions which they will address at a later time, possibly Spring 2007.
The rule also finalizes a policy of reducing by 25 percent the payment for the technical component of multiple imaging procedures on contiguous body parts. CMS will apply the multiple imaging reductions first, followed by the OPPS imaging cap, if applicable. Nuclear Cardiology is somewhat affected by this provision however PET will experience significant decreases.
CMS finalized Independent Diagnostic Testing Facility (IDTF) policies adopting supplier standards. These standards were viewed by the specialty societies as basic, i.e., needing a physical address that is NOT a post office box.
The Final Rule amends the reassignment of payment regulations to state that an individual supplier furnishing a service has unrestricted access to the billings submitted by the entity receiving Medicare payment for services furnished by that supplier, irrespective of whether the supplier is an employee or independent contractor.
The Final Rule does not finalize the proposal to amend the physician self-referral regulations to place restrictions on what types of space ownership or leasing arrangements will qualify for purposes of the in-office ancillary services exception or the physician services exception to the physician self-referral prohibition. CMS will issue final regulations on this proposal at a later time after further consideration, likely spring of 2007. However, the Final Rule did finalize the addition of nuclear medicine codes to the list of designated health services. Effective January 1, 2007 codes for diagnostic and therapeutic nuclear medicine services are added to the list of designated health service (DHS) that are subject to the physician self-referral ban.
The Tax Relief and Health Care Act of 2006 extended the Medicare Modernization Act (MMA) 1.0 floor on work Geographic Practice Cost Indices (GPCIs) through December 31, 2007. Practice expense GPCIs and malpractice GPCIs were not affected by this provision.

The Tax Relief and Health Care Act of 2006: http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_cong_bills&
docid=f:h6111enr.txt.pdf