MIPPA becomes law:  big changes are ahead in payments to physicians & providers

by Tim Wolters,

On July 15, 2008, Congress passed the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) overriding the president’s veto.  While the act contains numerous provisions related to Medicare and Medicaid, this article focuses on some of the key provisions related to payments to physicians and providers.

Physician payment provisions

The primary reason for the legislation was to avoid the 10.6 percent reduction in physician fees the Centers for Medicare and Medicaid Services (CMS) planned to implement July 1, 2008.  As we’ve seen repeatedly, Congress prevented CMS from implementing the reduction.  The 0.5 percent increase that began January 1, 2008, will continue through December 31, 2008, with a 1.1 percent fee increase effective during 2009.

The physician fee schedule is divided into three components:  a work component representing the physician’s personal effort, a practice expense component reflecting other staff and office costs and a malpractice component.  Each component includes a geographic adjustment for different urban and rural areas in the country.  Since 2004, a 1.0 floor has been in effect when computing the geographic adjustment to the work component of the physician fee schedule.  This floor was to expire June 30, 2008, but MIPPA extended it through December 31, 2009.  This prevents what would have been a fee schedule cut for most rural and many urban areas in the country.

MIPPA extends the physician quality reporting initiative (PQRI) through 2010.  Payments for reporting under PQRI are also increased from 1.5 percent in 2007 and 2008 to 2.0 percent in 2009 and 2010.  A new initiative may provide an incentive payment of up to 2.0 percent in 2009 and 2010 for electronic prescribing.

In a move aimed to ensure quality at freestanding imaging centers, all such centers must be accredited by an approved organization to be eligible to receive Medicare payment beginning in 2012.

Hospital payment provisions

Several significant hospital provisions were included in MIPPA.  First, sole community hospitals (SCHs) are allowed to use a cost reporting period beginning between October 1, 2005, and September 30, 2006, to determine their inpatient hospital-specific payment rate.  That rate will be effective during the first cost reporting period beginning on or after January 1, 2009.

Second, all rural hospitals and all rural or urban SCHs with up to 100 beds are eligible to receive outpatient hold harmless payments during 2009, at 85 percent of the “normal” amount paid using the pre-established payment-to-cost ratio for the hospital.  Hold-harmless payments had expired for SCHs December 31, 2005, and were scheduled to expire for other rural hospitals December 31, 2008.

Third, Section 508 wage index reclassifications established under the Medicare Modernization Act of 2003 were extended once again, this time through September 30, 2009.

Finally, effective July 1, 2009, laboratory services provided by critical access hospitals (CAH) will be eligible for cost reimbursement without regard to whether the patient was present at the CAH “or in a skilled nursing facility or a clinic (including a rural health clinic) that is operated by a critical access hospital, at the time the specimen is collected.”  It remains to be seen how CMS interprets this provision and which tests conducted for patients outside the CAH will be cost reimbursed.

Other provisions

The exceptions process for Medicare Part B therapy caps that was to expire June 30, 2008, is extended through December 31, 2009.

Ambulance fee schedule payments are increased by 3 percent for rural services and 2 percent for urban services provided between July 1, 2008, and December 31, 2009.

Effective January 1, 2010, the cost limit for federally qualified health center (FQHC) services will be increased by $5 per visit, inflated forward thereafter.  Also, by October 15, 2009, the Comptroller General of the United States is to conduct a study on the adequacy of FQHC payments for services rendered to Medicare beneficiaries.

There are numerous other provisions contained in MIPPA.  Contact your BKD health care advisor for more information on how the law could affect your operations.