Understand how we got here — and how to move forward.


November 3, 2017

What you need to know about the 1,250-page Medicare Physician Fee Schedule final rule

Daily Briefing

    By Julie Riley and Julia Connell

    On Thursday, CMS released its 2018 final rule on the Medicare Physician Fee Schedule (MPFS), which determines Medicare payment rates each year.

    Join us on Nov. 10 for our full analysis of the 2018 Outpatient Final rule

    Overall, CMS finalized the majority of proposals it laid out in this year's proposed rule—including implementation of the Medicare Diabetes Prevention Program—and is continuing to solicit comment on some of its more complex and far-reaching policy changes, such as revising E/M coding guidelines.

    Beyond these overarching themes, we've outlined our four key takeaways for provider organizations based on our analysis of the 1,250-page rule.

    1. CMS will cut off-campus hospital outpatient department rates by only 20% in 2018—backpedaling from a 50% proposed cut.

    Earlier this year, CMS began implementing the controversial site-neutral payment provision that became law under Section 603 of the 2015 Bipartisan Budget Act. As a result, newer off-campus hospital outpatient departments—specifically those that began furnishing services billable under the Hospital Outpatient Prospective Payment System (HOPPS) after November 1, 2015—are not reimbursed through HOPPS. Instead, they receive reimbursement at a site-specific MPFS rate, which in CY 2017 is equal to 50% of the HOPPS rate for each service.

    While CMS proposed to further cut this rate in half to only 25% of the HOPPS rate in 2018, this was not finalized. Instead, CMS will cut affected HOPDs rates to 40% of the HOPPS rate in CY 2018.

    2. Diagnostic testing facility payment will be hit hardest, as expected—and some additional specialties are also facing hits.

    Each year in the final rule, CMS estimates the total impact of its payment changes on specific types of clinicians and facilities. This year, diagnostic testing facilities will face the greatest possible payment cuts of an estimated 4% in their relative value units (RVUs). Notably, this is 2% less than estimated under the proposed rule, which predicted a 6% decrease.

    Further, CMS made a number of adjustments to the specialties “making gains” and “taking hits” in 2018. Specifically physical/occupational therapy shifted from a 1% increase to a 2% cut from the proposed to final rule. Similarly, anesthesiology, urology, and pathology are now expected to see 1% cuts. On the flip side, several specialties with proposed cuts this June, including radiology, cardiology, and cardiac surgery, will now see no change or modest gains under the final ruling.

    Behavioral health specialists, including clinical social workers and psychologists, are still expected to see the greatest gains as a result of this year's final rule.

    Find a summary of the changes to select specialties below.

    Estimated Impact of the 2018 Final Rule on Select Specialties, Sites of Care

    Estimated impact

    3. The 2018 conversion factor will be higher—barely.

    CMS finalized the 2018 conversion factor at $35.99, a mere 10 cents more than the 2017 conversion factor. As shown in the chart below, this year's conversion factor takes into account the 0.5% update factor as mandated under MACRA. However, in line with what we've seen in previous years, this update factor was cut short by cuts imposed under the Misvalued Codes Initiative.

    2018 conversion factor calculation

    4. The Imaging Appropriate Use Criteria (AUC) program will be delayed until 2020.

    In this year's final rule, CMS further delayed the Imaging AUC Program, which will require providers to consult AUC via a clinical decision support mechanism for all advanced imaging orders. Although the program originally was slated to take effect in January 2018, CMS is finalizing a start date of 2020. Even then, CMS has stated it will treat 2020 as a year for education and testing and will pay for claims in that year for advanced diagnostic imaging services that do not contain the correct documentation for required AUC consultation.

    Despite the delay, CMS remains committed to incentivizing the early use of advanced imaging appropriate use criteria. In 2018, providers will be able to report qualified clinical decision support as an Improvement Activity in the Merit-based Incentive Payment System.

    Next, learn about the 2018 Outpatient Final Rule

    To learn more about the Final Rule, including upcoming changes to hospital outpatient department and ambulatory surgical center reimbursement in CY 2018, register for our upcoming webconference on November 10.

    Register Now

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.