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Physician Payment Formula Cut Slightly Less Than Expected

By John Reichard, CQ HealthBeat Editor

November 1, 2011 -- Medicare payments to doctors will be reduced by 27.4 percent in 2012 under a final rule released by the Centers for Medicare and Medicaid Services. That's a slight decrease from the 29.5 percent reduction federal officials had predicted earlier this year.

CMS projects that it will pay out $80 billion in 2012 under the Medicare physician fee schedule, which establishes payment levels for more than one million Medicare health care providers, including doctors, podiatrists, nurse practitioners and physical therapists.

Even as they issued the rule, Secretary of Health and Human Services Kathleen Sebelius and Medicare chief Donald M. Berwick urged Congress to fix the physician payment formula, known as the "Sustainable Growth Rate."

"This payment rate cut would have dire consequences that should not be allowed to happen,'' Berwick said in a news release accompanying the final rule.

"Unfortunately, while Medicare remains strong, physicians are facing steep payment cuts as a result of a flawed 1997 law,'' Sebelius said in a statement issued soon after the final rule hit the Federal Register. "Almost every year for more than a decade, doctors have faced this annual threat and the Congress has in turn acted to temporarily prevent these deep reductions from taking effect. We have not and will not let deep cuts to doctors' payments occur. The Obama administration is 100 percent committed to fixing the flawed Medicare payment system and protecting Medicare beneficiaries' access to doctors."

Within five minutes of the final physician payment rule posting on the CMS website, the American Medicaid Association weighed in with a strong statement.

"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,'' said AMA President Peter Carmel. "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."

The physician payment rule includes changes in the data CMS uses to adjust reimbursement for geographic variations in the cost of providing care.

It incorporates a payment policy that "better recognizes efficiencies that are expected when multiple imaging services are furnished to the same physician or group practice, in the same session on the same day," the CMS news release said.

The payment rule also establishes criteria physicians are to use in making a "health risk assessment" in annual "wellness" visits to the doctor by Medicare enrollees to encourage them to adopt healthier behavior. The risk assessment is intended to provide the basis for a personalized prevention plan, CMS said. The agency said it's increasing Medicare payments slightly for the annual wellness visits to compensate for the added office staff time involved in administering the health risk assessment.

In addition, CMS said it is expanding the list of services that can be furnished through telehealth to include smoking cessation. Finally, the rule makes final the quality and cost measures to be used to adjust payments to doctors starting in 2015 based on the quality and efficiency of their care.

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