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November 2, 2018

What you need to know about the 2,378-page Medicare Physician Fee Schedule final rule

Daily Briefing

    Read Advisory Board's take on the significant E/M, telehealth, Part B drug pricing, and imaging provisions of this rule

    CMS on Thursday finalized a 2,378-page rule that updates the Medicare Physician Fee Schedule (PFS) for calendar year 2019 to expand telehealth coverage and, beginning in 2021, overhaul Medicare billing codes for office visits.

    What changed—and what didn't—in the final rule

    CMS said the PFS final rule aims to streamline the PFS payment system and ease health care providers' administrative burdens.

    Payment changes

    Under the PFS final rule, all PFS payments for 2019 will increase by 0.25%—as required under MACRA—when compared with 2018. According to AHA News, the payment adjustment also accounts for the budget-neutrality adjustment required by law. As such, CMS set the 2019 PFS conversion factor at $36.04, up from $35.99 in 2018.

    The final rule contained no changes to site-neutral payments for services provided by "new" off-campus hospital outpatient provider-based departments which are not paid under the Hospital Outpatient Prospective Payment System (OPPS). For 2019, CMS said it will maintain the current PFS relativity adjuster for non-excepted items and services, under which CMS pays 40% of the outpatient prospective payment system amount.

    CMS streamlines PFS billing standards

    CMS in the final rule scaled back and delayed for two years proposed changes to overhaul Medicare billing practices that have been in place for routine office visits since 1995. Currently, most physicians bill Medicare using evaluation and management (E/M) visit codes, a generic set of codes that are broken into five levels of complexity.

    Beginning in CY 2021, CMS said it will collapse code levels 2 through 4 into one and will pay providers a single rate (one each for established and new patients), but it will maintain the level 5 code, which accounts for care provided to the most complex patients. CMS had originally proposed folding the level 5 code into the single rate—but the agency received more than 15,000 comments pushing back on that change's scope and timeline.

    In response, CMS Administrator Seema Verma told reporters on a call that the agency decided to amend and delay the code overhaul until 2021 to give the agency more time to work with providers on the issue. "We know this is going to have a tremendous impact on many physicians in America. We want to get it right," she said.

    According to Axios' "Vitals," under the rule doctors beginning in CY 2021 would get paid:

    • $130 for most new patient visits and $212 for new complex patients; and
    • $90 for returning patients and $149 for complex patients.

    Physicians also would have the option to receive higher rates with the creation of a new "extended visit" code to account for additional time spent with patients whose visits are coded at level 2 through 4. The agency also said, beginning CY 2021, it will allow clinicians to rely more on their own medical decision-making or the time spent with a patient to determine the level of a patient's care needs.

    But some changes to the E/M code standards intended to reduce physicians' administrative burdens will take effect next year. According to Modern Healthcare, providers have long complained that the process requires them to submit a comprehensive medical history with each claim, instead of simply documenting why the patient is receiving care.

    Beginning next year, providers will need only highlight changes since they last saw the patient. CMS will eliminate the requirement that providers justify the medical necessity of a home visit over an office visit, as well as requirements for physicians to re-document information added to a patient's records either by practice staff or the patient or during a previous visit.

    Read Advisory Board's take: CMS tries to reduce documentation burden with E/M changes

    CMS will expand telehealth reimbursements

    CMS in 2019 for the first time will allow providers to bill separately for virtual communications with patients, including those used to determine whether an in-person visit is necessary, as well as the time they spend reviewing patient-sent photos or videos.

    In addition, the agency said beginning July 1, 2019, it will increase access to telehealth services for opioid use disorder treatment by removing the originating site geographic requirements and allowing providers to be reimbursed for telehealth services originating in an individual's home for the treatment of a substance use disorder or a co-occurring mental health disorder.

    Read Advisory Board's take: Prepare for broad expansion of telehealth coverage

    CMS cuts Medicare Part B payments

    CMS beginning Jan. 1, 2019, also will cut Medicare payments for new Part B drugs. Under the current payment system, Medicare Part B initially pays providers the wholesale acquisition cost (WAC) of newly released drugs plus 6%. Part B payments are adjusted after a calendar quarter to reflect the average sales price—which typically is lower than WAC—plus 6%.

    Under the rule, CMS will reduce the initial WAC add-on payment to 3% until the ASP pricing data are available.

    Read Advisory Board's take: Expect reduced revenues with changes to certain Part B drug payments

    CMS finalizes changes to the imaging Appropriate Use Criteria program 

    CMS finalized changes to the Appropriate Use Criteria (AUC) program that will more consistently allow the program to be applied to outpatient settings. For example, the agency said the program will now apply to independent diagnostic testing facilities (IDTFs). In addition, the agency will update the program's significant hardship criteria to include: insufficient internet access, EHR or clinical decision support mechanism vendor issues, and extreme or uncontrollable circumstances.

    Read Advisory Board's take: Be prepared for CMS moving forward on imaging Clinical Decision Support (CDS) requirements

    Other changes

    Beginning in 2019, CMS also will:

    • Eliminate functional status reporting requirements for outpatient therapy;
    • Revise physician supervision requirements to give radiologist assistants more flexibility in performing unsupervised diagnostic tests; and
    • Reduce the number of core quality measures accountable care organizations (ACOs) in the Medicare Shared Savings Program must report on and promote interoperability among ACO providers and suppliers by adding a new certified EHR threshold measure.

    Overall, CMS projected the changes will save clinicians $87 million in reduced administrative costs in 2019 and $843 million over the next decade.

    How CMS will change MACRA's QPP in 2019

    In addition, the rule finalizes updates to MACRA's Quality Payment Program for CY 2019, which will influence payment changes to providers for CY 2021. 

    CMS under the final rule will overhaul the Merit-based Incentive Payment System's (MIPS) promoting interoperability performance category to better align with those proposed for hospitals. As part of that effort, the agency will overhaul the scoring methodology and measures to place a greater emphasis on EHR interoperability.

    In addition, CMS will increase the weight of MIPS' cost category in 2019 by five percentage points to 15%. The agency will offset that change by reducing the weight of the quality category from 50% to 45%. Weights for the remaining two categories—promoting interoperability and improvement activities—would remain at their 2018 levels of 25% and 15%, respectively.

    Expanding QPP eligibility

    In addition, CMS will expand the number of providers who are eligible to participate in QPP with the introduction an opt-in process for certain low-volume providers and the addition of new provider types eligible for MIPS.

    Currently, to be eligible for the MIPS track, providers must treat at least 200 Medicare beneficiaries and submit at least $90,000 in Medicare Part B claims. For 2019, CMS is adding an additional eligibility threshold for providers who do not submit at least 200 claims for the covered professional services under the Physician Fee Schedule. CMS also said it will permit clinicians or groups who meet some but not all of these eligibility thresholds to opt into MIPS.

    The agency also will expand the types of clinicians eligible to participate in MIPS. These now include: physical therapists, occupational therapists, clinical psychologists, and registered dietitians or nutrition professionals.

    In addition, CMS will allow clinicians in a hospital setting to use facility-based scoring to reduce their reporting burden using the hospital's Value Based Purchasing performance to determine their Quality and Cost scores. (Finnegan, FierceHealthcare, 11/1; Romoser, Inside Health Policy, 11/1 [subscription required]; Dickson, Modern Healthcare, 11/1; Dooley Young, Medscape, 11/1; AHA News, 11/1; CMS fact sheet, 11/1 [1]; CMS fact sheet, 11/1 [2]; CMS release, 11/1 [1]; CMS release, 11/1 [2]; Baker, "Vitals," Axios, 11/2)

    Advisory Board's take: CMS tries to reduce documentation burden with E/M changes

    Hamza Hasan, Practice Manager, Medical Group Strategy Council

    The changes to E/M visit payment and documentation were easily among the most controversial in CMS' proposed rule, and it's clear that they received too much pushback to finalize it as proposed. However, the final rule is likely a welcome sight for providers, who will face reduce burdens in documentation in the short term. The more controversial changes, like those to payment structures, have been postponed until 2021 and CMS will continue to hear comments on them.

    In the short term, providers will continue to follow the 1995 or 1997 E/M documentation guidelines, but will not have to re-record information in medical records that was recorded in the last visit or which has already been entered by either other staff or the beneficiary. This should ease some of the frustration that practitioners have expressed about the repetitiveness of the current system.

    In the long term, CMS will move forward with their changes to the payment system, but they've softened some of the most controversial payment changes. Most notably, CMS is keeping level 5 payments separate from levels 2-4 (which will eventually be collapsed into a single code). They are also finalizing the primary care and medical specialty add-on codes and the "extended visit" code. CMS clearly made these changes in response to the criticism that providers wouldn't be adequately reimbursed for delivering care to the most complex patients (typically coded at a level 5) and that this may discourage providers from offering such care. With the new payment model, CMS agrees to pay more for these complex patients while still maintaining some of the level flattening they initially envisioned.

    Providers will also be able, with these later changes, to use medical decision-making or visit time instead of the current documentation requirements, which should also ease some documentation burden. They will also not face reduced payment when E/M visits are furnished on the same day as procedures—which was a key driver in the AMA's prediction that reimbursement would decrease in many specialties and therefore one of the most controversial parts of the proposal.

    Despite the fact that they've made some concessions, this final rule shows that CMS is strongly moving towards its "patients over paperwork" initiative to reduce the burden of clinical documentation. The delay (but not cancellation) of the payment changes also suggest that providers should expect continued downward pressure on physician payments.  Whether these changes will make things easier, or if they'll lead to more fraud or abuse in reimbursement, is yet to be seen. However the administration is clearly betting that simplification will work, and hopefully result in better care for patients.

    Advisory Board's take: Prepare for broad expansion of telehealth coverage

    Anna Yakovenko, Practice Manager, and Emily Johnson, Consultant, Service Line Strategy Advisor Telehealth Team

    This final rule appears to be a major step forward in Medicare's coverage of telehealth.

    Historically, Medicare has only covered live audio-visual visits—which are just one of three common telehealth modalities. Last year, CMS expanded coverage to a second modality, remote patient monitoring. With this final rule, CMS is expanding coverage to the third modality, known as 'store-and-forward' or 'asynchronous communication.' In store-and-forward applications, a patient submits a photo or video to a provider, who then reviews the communication and responds with a treatment recommendation.

    CMS also created a new code to cover a new type of service, which it's calling a "brief communication technology-based service," or a "virtual check-in." The stated purpose of this service is to allow patients to have a quick virtual communication with their regular provider to determine whether they need to come in for an in-person office visit. If the provider determines that the patient does need to come in, the virtual check-in is bundled into the in-person visit; if not, the provider is reimbursed for the virtual check-in. CMS is explicit that the goal of this new code is to reward provider activities that avoid unnecessary healthcare utilization.

    CMS is also finalizing policies to pay for virtual provider-to-provider consults—with four codes depending on the time required for the consult—and have eliminated geographic restrictions for telestroke services and dialysis patients' monthly check-ins. Finally, they've also removed the requirement that those in treatment for substance abuse must be located at a health care facility to seek care—adding the home of the patient as a permissible originating site.

    With this final rule, CMS makes it clear that it's interested in expanding Medicare telehealth coverage as much as possible within the constraints of current law, and, to that end, it's willing to get creative about its definition of services. For example, CMS is careful to specify that it does not consider either the new store-and-forward codes or the virtual check-in codes "telehealth." By doing so, it ensures that the new codes are not subject to the usual geographic restrictions on Medicare telehealth services.

    In sum, CMS is signaling that it is interested in working with providers to expand telehealth coverage to the best of its ability. And with Medicare regulators clearly warming to telehealth, lawmakers may not be far behind.

    Advisory Board's take: Expect reduced revenues with changes to certain Part B drug payments

    Lindsay Conway, Managing Director, Pharmacy Executive Forum

    CMS has formalized their decision to cut reimbursement for a subset of Part B drugs, specifically, those drugs reimbursed based on their wholesale acquisition cost (WAC). Most Part B drugs are reimbursed based on their average sales price or ASP. Therefore, while WAC drugs represent a relatively small number of provider administered drugs, they are usually new drugs and tend to be higher cost. As a result, they make up a larger portion of Medicare drug spending and provider revenues.

    CMS' rationale is that the reimbursement cut will reduce the incentive for physicians to prescribe more expensive drugs and reduce Medicare beneficiaries' out of pocket costs. They note that the percentage mark-up on Part B drugs is understood to cover the storage, handling, and acquisition costs associated with a drug, but that the percentage-based reimbursement formula is flawed because these costs do not correlate with the drug's price.

    Due to the budget sequestration cuts enacted in 2013, Medicare reimbursement for Part B drugs was reduced from ASP + 6% to ASP + 4.3% and remains so today (CMS continues to express reimbursement as ASP + 6%, as the rate was set by statutory authority.) Despite vigorous lobbying by physician groups, they have been unable to reverse the cut. Presumably, the sequester will also apply to the newly reduced reimbursement for drugs paid based on their WAC price.

    We predict three possible implications from this decision:

    1. It will likely reduce physician revenue, as these drugs are among the highest cost and therefore even this 3% cut in reimbursement is likely to significantly decrease overall reimbursement;
    2. There's a potential for increased hospital acquisitions of physician practices, as this reduced reimbursement may put financial strains on private practices; and
    3. Drug manufacturers may raise list prices to offset physician revenue loss.

    We'll continue to analyze these changes as well as the changes to drug pricing in the HOPPS final rule. Stay tuned for more information.

    Advisory Board's take: Be prepared for CMS moving forward on imaging Clinical Decision Support (CDS) requirements

    Lea Halim, Senior Consultant, Erin Lane, Consultant, and Ty Aderhold, Analyst, Imaging Performance Partnership

    For radiology, the biggest news from the finalized PFS is that CMS has not backed off any of its proposed provisions regarding the Appropriate Use Criteria (AUC) program, otherwise known as Clinical Decision Support (CDS). These four key provisions included:

    • No more delays. As proposed, implementation of the mandate is set to begin in 2020, with reimbursement penalties for imaging starting in 2021.
    • IDTFs and physician offices are, without question, subject to CDS. There has been confusion for some time as to whether Independent Diagnostic Testing Facilities (IDTFs) and imaging services provided in physician offices are subject to the AUC requirement, sowing concerns among hospital-based providers that the extra workflow required by CDS will cause providers to redirect referrals. However, the final rule makes clear that these settings will be subject to penalties for CDS non-compliance, along with all other outpatient imaging providers.
    • Only ordering provider's practice staff can use CDS. CMS finalized that only auxiliary staff "working under the direction of the ordering professional" can consult CDS. They held firm against commenters who suggested allowing radiologists to do so on behalf of referrers.

    What does this all mean for imaging providers? We see two clear implications.

    1. First, if you haven't started implementing CDS yet, there is no justification for further delays— CMS is moving forward, and so should you.
    2. Second, it has now become critical to put strong order check systems in place as soon as possible, alongside supporting your health system in placing and training referring physicians on a CDS software. With this final rule, CMS has made it clear that radiology practices will not be able to consult CDS on behalf of ordering providers. So if you don't have a smooth process to make sure the referring provider did their part—before conducting the exam—you'll miss out on revenue.

    The final rule offered a few other important updates for imaging providers, which our team will be commenting on shortly. Stay tuned!

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