The Centers for Medicare & Medicaid Services proposed major changes to its Physician Fee Schedule on July 1, which will not only clear the way for the reform of its current flawed payment formula, but the proposals offer a 6 to 8 percent pay boost to primary care physicians starting next year.

Medicare law requires payment rates to be based on the Sustainable Growth Rate (SGR), which was adopted in the Balanced Budget Act of 1997 in an attempt to match physician payment to economic growth. Since 2002, that formula has called for a pay cut for physicians, which have never been enacted. Since 2004, Congress has stepped in to avert those cuts. Based on current data, physician rates face a 21.5 percent reduction in 2010, which, by all accounts, will not happen.

To begin the process of eliminating the SGR and fix physician payment, CMS has proposed to remove physician-administered drugs from the definition of “physician services” next year in anticipation of enactment of legislation to provide fundamental reforms to Medicare physician payments, the agency reported.

While the change won't offer any immediate relief, CMS believes it will reduce future payment cuts. The American Medical Association celebrated the proposal.

“The removal of physician-administered drugs from the broken Medicare physician payment formula is a major victory for America’s seniors and their physicians,” says AMA President James Rohack, MD. “The AMA has been calling for this action since 2002 so that Congress can afford to repeal the flawed Medicare physician payment formula… Instead of yet another band-aid fix, today’s action paves the way for Congress to ensure stable payment rates that reflect increasing medical practice costs and preserve seniors’ access to care.”

More good news for primary care physicians:

• CMS is proposing to stop making payment for consultation codes, which are typically billed by specialists and are paid at a higher rate than equivalent E&M services. Practitioners will use existing E&M service codes when providing these services instead.  Resulting savings would be redistributed to increase payments for the existing E&M services, according to CMS.
• CMS is proposing to increase the payment rates for the Initial Preventive Physical Exam, also called the “Welcome to Medicare” visit to be more in line with payment rates for higher complexity services. 
• For 2010, CMS is proposing to include data about physicians’ practice costs from a new survey, the Physician Practice Information Survey (PPIS), designed and conducted by the American Medical Association.
• In addition, CMS is proposing to refine how Medicare recognizes the cost of professional liability insurance in its payment system, which it anticipates will promote payment equity by redirecting the portion of Medicare’s payment for professional liability insurance to those physicians that have the highest malpractice costs.

“Taken together,” reads the CMS statement, “refining the practice expenses, eliminating payment for the consultation codes and revising the treatment of malpractice premiums would increase payments to general practitioners, family physicians, internists, and geriatric specialists by between 6 and 8 percent (before taking into account the proposed update and other proposed changes to the fee schedule).”

For primary care practices that own, or have interest in, an imaging center with CT or MRI equipment, there is some mixed news. CMS is proposing to reduce payment for services that require the use of expensive such devices. However, the proceeds of those cuts will be redistributed “to increase payments for other services, including primary care services.” CMS also proposed requiring accreditation of mobile imaging units, physician offices that offer the services, and independent diagnostic testing facilities. The accreditation requirement, however, would not apply to the physicians who interpret the results.

CMS will accept comments on the proposed changes until August 31, and will respond to all comments in a final rule to be issued by November 1.  Unless otherwise specified, the new payment rates and policies will apply to services furnished to Medicare beneficiaries on or after January 1, 2010.

For more information on the proposed rule, click here.