Tim Wolters

The Centers for Medicare & Medicaid Services (CMS) has finalized the calendar year 2010 outpatient and physician final rules, published in the November 20, 2009, and November 25, 2009, Federal Registers, respectively. While the outpatient rule is likely to go into effect as finalized, the physician rule establishes rates that Congress will likely change in the near future.

Outpatient Final Rule

Outpatient prospective payment rates will increase by 2.1% for most hospitals effective January 1, 2010, and 0.1% for those hospitals not reporting quality measures. Ambulatory surgery center rates will increase 1.2%. CMS also is revising its payment methodology for separately payable drugs and biologicals administered in hospital outpatient departments, reimbursing them at the manufacturer’s average sales price plus 4%.

CMS finalized several policy changes related to direct physician supervision of hospital outpatient services. First, CMS will allow certain nonphysician practitioners, including physician assistants and nurse practitioners, to supervise all hospital outpatient therapeutic services they are authorized to personally perform according to their state scope of practice rules and hospital-granted privileges. Second, for on-campus services, CMS defines direct supervision to mean physicians or nonphysician practitioners can be present anywhere on the hospital campus as long as they are immediately available to furnish assistance and direction throughout performance of the procedure. Thus, they could not separately be performing a procedure that could not be interrupted. Third, for off-campus services, the physician or nonphysician practitioner must be present in the off-campus provider-based department and immediately available to furnish assistance and direction throughout performance of the procedure.

Physician Final Rule

CMS plans to implement a 21.2% cut in the physician fee schedule (PFS) on January 1, 2010, absent legislation to avert the cut. This is because of the sustainable growth rate provision in current legislation that requires CMS to establish PFS rates such that aggregate physician expenditures grow at an established rate. Because of the aging Medicare population, actual physician expenditures routinely grow at a faster rate, requiring Congress to step in on an annual basis to avoid a large cut in the PFS. Health reform legislation currently under debate would prevent the cut for 2010 but does not offer a more permanent fix to avoid future cuts. Many experts believe that even if health reform legislation is not passed, separate legislation to avert the 2010 cut will be passed early next year, retroactive to January 1, 2010.

CMS does plan to implement several provisions that will redistribute funds from specialists to primary care services. First, CMS will stop making payment for consultations codes other than G codes used to bill for telehealth consultations. Other consultations must be billed with evaluation and management codes, the relative values for which are being increased using the savings from the consultation codes that are being discontinued.

In paying for the equipment portion of diagnostic services, CMS has assumed a 50% utilization rate for such equipment. For equipment priced over $1 million, CMS plans to increase this assumed utilization rate to 90%, phased in over a four-year period. This increase in assumed utilization results in a reduced payment per procedure for affected diagnostic services.

Combining these two provisions and other changes CMS is implementing, but excluding the impact of the 21.2% across-the-board cut, CMS estimates cardiologists will experience an 8% cut in 2010 payments and a 13% cut when the equipment utilization rate is fully implemented, with radiologists experiencing a 5% cut in 2010 and 16% cut with full implementation and diagnostic testing facilities experiencing a 12% cut in 2010 and 34% cut with full implementation. Conversely, family practice physicians will experience a 4% increase in 2010 and 7% increase over the next four years, with internal medicine physicians experiencing a 2% increase in 2010 and 5% increase over the next four years. Again, all of these impact percentages are before the 21.2% across-the-board cut scheduled for January 1, 2010.

Because of the changes in the relative value units (RVUs) used to pay for physician services, primary care RVUs will generally increase January 1, 2010. Hospital-based and freestanding physician practices that predominantly provide primary care services should ensure their charge structures are appropriately adjusted to exceed the Medicare fee schedule so their reimbursement is not limited by their actual charge. They should also ensure that other third parties that pay based on Medicare RVUs implement the increased RVU weights on January 1, 2010, so there is no delay in receiving this potential increase in reimbursement.

There are numerous other provisions in these rules that will affect Medicare billing and payment for outpatient, ambulatory surgery center and physician services. Contact your BKD Health Care Group advisor for more information on these rules.