What will 2012 hold for Medicare physician payment?

Given the confluence of several critical events, November 2011 is shaping up to be a pivotal month for the future of Medicare physician payment. Specifically, the political and regulatory forces in play – including the 2012 Medicare Physician Fee Schedule (MPFS) Final Rule, the continuing Sustainable Growth Rate (SGR) threat, as well as the impending congressional “Super Committee” proposal– are prompting providers to question likely outcome scenarios and what these developments might ultimately mean for future physician payment.

2012 Medicare Physician Fee Schedule Final Rule

Across its 1,200+ pages, the 2012 MPFS Final Rule contains numerous changes impacting future physician reimbursement and Medicare program participation. Key among these include:

  • Continuation of the four-year transition to new Practice Expense Relative Value Unit (PE RVU) values. The transition, which will conclude in CY 2013, has had a mixed impact on reimbursement for physician services and procedures. 
  • Continuation and consolidation of the RVU review and update processes, including revisions for several hundred “misvalued codes.”
  • Expansion of the Multiple Procedure Payment Reduction (MPPR) for the professional component of reimbursement for advanced imaging exams.
  • Changes to regional variation in reimbursement resulting in localized payment cuts ranging from one to six percent across most markets.
  • Updated requirements for annual wellness visits, and coverage inclusion for new telehealth services.
  • Finalized reporting rules and quality measures for the Physician Quality Reporting System (PQRS), Electronic Prescribing Incentive Program (ERx), and Medicare EHR Incentive Program for Eligible Professionals.

The ongoing SGR threat and the congressional “Super Committee”

Casting further uncertainty upon the future of Medicare physician payment is the fate of the Sustainable Growth Rate (SGR) formula which, barring what would be the thirteenth congressional intervention over the last decade, is currently written into the Final Rule with a physician payment reduction of 27.4% starting January 1, 2012. Both Republicans and Democrats, alongside scores of physician advocacy groups, agree that a permanent SGR “fix” is needed. However, the cost of overhauling the formula (approximately $300 billion) continues to represent a significant impediment to its replacement.

Not including the amount needed to offset the SGR, the congressional “Super Committee”— the bipartisan group of 12 members of Congress—is charged with proposing at least $1.2 trillion in federal budget savings to Congress. The Committee is scheduled to vote to propose its recommendation on Wednesday, November 23; however, at press time, all signs indicate that a deal was unlikely.

While any successful proposal is likely to include substantial cuts to Medicare spending, if the Committee fails to pass a recommendation and/or no proposal is voted into law by January 15, 2012, a predetermined set of automatic cuts (known as sequestrations) amounting to $1.2 trillion over ten years will be triggered. These sequestrations include a 2% Medicare cut to both physicians and hospital payments beginning in 2013. This delayed and relatively modest reduction has led many in the health care provider community to indicate a preference for a “Super Committee” failure, opting for an expected 2% cut over an unknown, potentially greater set of Medicare cuts that may be included in a successful “Super Committee” proposal.

While signs point to “Super Committee” failure, there is also uncertainty as to whether any potential package –provided there is a last minute proposal and it ends up passing –would include an overhaul of the SGR formula (in this case, the Committee would need to find $1.5 trillion in savings, as opposed to the $1.2 trillion from the debt deal, to offset the cost of the overhaul). Acknowledging the uncertain and rapidly evolving nature of these events, we at the Advisory Board will be actively monitoring the progress of developments here in Washington and look forward to sharing our continuing analysis of implications for future physician payment.

Register for the “2012 Medicare Physician Payment Update” webconference

Physician Practice Roundtable and Health Care Advisory Board may log in to register for a special webconference on December 1, 2011 from 3:00PM ET - 4:00PM ET, offering our latest analysis and examining the numerous and interconnected political and regulatory forces that will determine future Medicare physician payment.

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