THE MARCH 2012 MED PAC REPORT TO CONGRESS

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1 May VOLUME 22 No. 5 THE MARCH 2012 MED PAC REPORT TO CONGRESS The Medicare Payment Advisory Commission (Med PAC) is an independent congressional agency established to advise the U.S. Congress on issues affecting the Medicare program. Two reports, issued in March and June each year, are the primary outlets for the Commissions recommendations. The annual March report is focused on provider payments and the recommendations are carefully considered by policy makers when implementing regulations that affect our practice. In 2010, Medicare spent about $62 billion under the physician fee schedule on physician and other health professional fee-for-service, accounting for 12 percent of total Medicare spending and 18 percent of Medicare s FFS spending. Approximately 900,000 health professionals billed Medicare for fee schedule services in Among them were 588,000 physicians and 335,000 other clinicians, such as podiatrists, chiropractors, nurse practitioners, physician assistants, and physical therapists. In the current report, the Med PAC Commissioners addressed the adequacy of physician payments, the SGR formula, the accuracy of the Resource Based Relative Value Scale (RBRVS) based fee schedule, and made a recommendation to equalize payment rates provided in hospital outpatient departments and physician offices. Current Physician Payment and Physician Supply Med PAC finds no shortage of physicians currently serving Medicare beneficiaries. The number of physicians and other health professionals billing Medicare grew by almost 4 percent in Additionally, the 2009 National Ambulatory Medical Care Survey found that among physicians with at least 10 percent of their practice revenue coming from Medicare, 90 percent accepted new Medicare patients. By specialty, 82 percent of primary care physicians and 96 percent of physicians in other specialties accepted new Medicare patients. To obtain the most current access measures possible, the Commission sponsors a telephone survey each year of a nationally representative, random sample of two groups of people: Medicare beneficiaries age 65 years or older and privately insured individuals age 50 to 64. The sample size is about 4,000 in each group. The analysis of payment adequacy for Medicare fee schedule services this past year found that most indicators are positive. Surveys have found that beneficiary access to physician services is good and generally similar to access reported by privately insured patients age 50 to 64. The WASHINGTON WATCHLINE is published monthly and provides timely information to NAMDRC members on pending legislative and regulatory issues that impact directly on the practice of pulmonary medicine NAMDRC s primary mission is to improve access to quality care for patients with respiratory disease by removing regulatory and legislative barriers to appropriate treatment. INSIDE THIS ISSUE About NAMDRC Member Profile Changes.4 NAMDRC Application NAMDRC Leadership....4 Product and Technology News th Annual Meeting and Educational Conference....4 NAMDRC 8618 Westwood Center Drive, Suite 210 Vienna, VA Phone: Fax: ExecOffice@namdrc.org "NAMDRC will directly affect your practice more than any other organization to which you belong."

2 May 2012 VOLUME 22 NO 5 PAGE 2 In a survey conducted in the fall of 2011, among beneficiaries who needed a routine care appointment in the preceding year, 74 percent reported that they never had to wait longer than they wanted to get an appointment; percentages were even better for illness or injury appointments. Among the beneficiaries looking for a new physician, most could find one without major problems; however, finding a new primary care physician continues to be more difficult than finding a new specialist The Sustainable Growth Rate System Med PAC first recommended repeal of the SGR system in In its March 2011 meeting the Commission again addressed its position and the lack of movement in Congress, in the ensuing decade, to repeal the SGR. The Commissioners agreed to take a more aggressive approach and began considering alternative mechanisms for calculating physician payments. After extensive staff research, a meeting was held on September 15, 2011 to formulate specific recommendations. These recommendations and the rationale behind them were provided to Congress in a letter on October 14, The letter underscored the increasing urgency to resolve the problems created by the SGR system. The Commissioners again recommended immediate repeal of the SGR and replacing it with specified updates that would no longer be based on an expenditure-control formula. In the current report to Congress, Med PAC reproduced the Commission s October 2011 letter to the Congress. Specifically, they have recommended a freeze in current payment levels for primary care and, for all other services, annual payment reductions of 5.9 percent for three years followed by a freeze. The current conversion factor for all physician services is about $34. It would remain at that level for primary care physicians, as defined by Med PAC, while for specialists it would go down to about $28 over a period of 3 years and stay at that level for the remaining 7 years of the budget window. Therefore, two physicians billing the same E&M code would receive a different payment if one of the physicians qualified for the primary care designation. For example, a cardiologist providing an E&M service would be paid less for that service than an internist who meets the primary care test. At year 10, after the completion of this schedule the primary care conversion factor would be about 20 percent higher than all other specialties for the same E&M service. Resource Based Relative Value Scale Issues of the accuracy of RBRVS fee schedule based payments have been longstanding concerns for the Commission. While the accuracy of the RBRVS has been the responsibility of the AMA RUC and CMS, the Med PAC Commissioners believe that the current relative values are not accurate, and as a result do not distribute the payments appropriately. The RBRVS relies heavily on time estimates for each service. About 80 percent or more of fee schedule payments are either directly or indirectly influenced by the time estimates. The estimates themselves are derived from surveys conducted by specialty societies. There is recognition that those societies have a financial stake in the results, and that this could introduce bias in the estimates. As pointed out by the Vice Chair of the Commission, Dr. Robert Berenson, We are currently spending something like $65 billion on the physician fee schedule and we're still basing those payments on, ultimately, what 30 specialists tell us is the time. The specialty groups with the highest compensation were the nonsurgical procedural group and radiology. Their actual levels of compensation were about $445,000 and $460,000, respectively. Compensation at these levels was more than double that of the $207,000 average for primary care specialties. For example, the current time allotted to a colonoscopy with polyp removal is 115 minutes and yet in some studies researchers have found procedures scheduled every 30 minutes. In a study for the Commission documenting trends in the services furnished to Medicare beneficiaries by cardiologists from 1999 to 2008, physician researchers found that the bulk of the growth occurred in two established technologies: echocardiograms and stress tests with nuclear imaging. They conclude that it is unlikely that these services were underutilized in 1999 and express doubt that there was a clinical justification for a threefold increase in nuclear stress testing and a twofold increase in echocardiography. In the fall of 2011, the Med PAC staff was requested to develop a proposal that would accelerate the revaluation of services within the physician fee schedule. Med PAC met April 5 and 6 to discuss how to collect data to improve the accuracy of payments under the RBRVS based physician fee schedule. The Commission proposed refinements to the accuracy of Medicare s physician fee schedule through targeted data collection by independent consultants and based on those findings quickly reducing payments for overpriced services. Equalization of Payment Rates for Office Visits Provided in Hospital Outpatient Departments and Physician Offices The Med PAC proposal to cut Medicare payments in the hospital outpatient settings stemmed from concerns that these services are increasing too quickly. Outpatient volume has continued to grow at a robust pace, while per beneficiary inpatient admissions continued to decline. Inpatient admissions per beneficiary declined 1 percent per year from 2004 to 2010 and 1.3 percent from 2009 to The volume of hospital outpatient services per Medicare beneficiary grew on average by 4.2 percent per year from 2004 to Part of the growth was due to a shift of services from the inpatient to the outpatient setting; however, twenty percent of all outpatient

3 May 2012 VOLUME 22 NO 5 PAGE 3 volume growth was due to a shift in physician office visits from freestanding physician offices to hospital-owned physician offices. Hospital-based outpatient physician office visits grew by 6.7 percent from 2009 to In 2011, Medicare paid about 80 percent more for a 15-minute office visit in an OPD than in a freestanding physician office. The Commission maintains that Medicare should seek to pay similar amounts for similar services, taking into account differences in the definitions of services and differences in patient severity. The Commissions position is that setting the payment rate equal to the rate in the more efficient sector would save money for the Medicare program, lower cost sharing for beneficiaries, and reduce the incentive to provide services in the higher paid sector. New Payment Policies In this recent report, the Commission again stressed that Medicare must ultimately implement payment policies that shift providers away from fee for service and toward payment approaches that support delivery models that reward improvements in quality, efficiency, and care coordination. Accordingly, the Commission recommended additional incentives in Medicare s accountable care organization program to accelerate this shift. It is the Commissioners belief that these new payment models have greater potential to slow volume growth while also improving care quality. Similarly, they recommend additional incentives for physicians and health professionals to participate in the newly established Medicare bundling pilot projects. The Future of Med PAC and the Independent Payment Advisory Board The Medicare Payment Advisory Commission, established by the Balanced Budget Act of 1997, replaced two organizations, the Prospective Payment Assessment Commission and the Physician Payment Review Commission. Historically, Med PAC recommendations have had more of a frame the argument impact than a real implementation objective. However, as noted above, the Commissioners are becoming much more proactive and specific in their recommendations. Prior to the passage of the Affordable Care Act, President Obama suggested in a speech that Med PAC should be given a more authoritative role in setting Medicare payment structure. In fact, in 2009, Senator Jay Rockefeller introduced legislation that would have made Med PAC an independent executive agency, one that would be for the health-care system what the Federal Reserve Board is to the banking system with the power to implement policy. Under this approach, Med Pac s recommendations on cost reductions would be adopted unless opposed by a joint resolution of the Congress. One of the most controversial provisions of the Affordable Care Act was the establishment of an Independent Payment Advisory Board (IPAB) whose mandate would overshadow and probably replace Med PAC. If the Supreme Court upholds the Affordable Care Act and the Independent Payment Advisory Board is populated in 2013, there may be no need for Med PAC to continue its activities and it may go the way of the organizations it replaced. As things stand currently, the major differences between the two entities appear to be the establishment of the membership and the authority to make change without legislative action. The Commission s 17 members are appointed to three-year terms, subject to renewal, by the Comptroller General, Government Accountability Office. The Affordable Care Act established the IPAB as a 15- member board. The board members are to include: The secretary HHS, the administrator of CMS, and the administrator of the Health Resources and Services Administration (all of whom will serve ex officio as nonvoting members of the Board) and fifteen members appointed by the President. The President is required to consult with: 1. the majority leader of the Senate concerning the appointment of three members; 2. the speaker of the House of Representatives concerning the appointment of three members; 3. the minority leader of the Senate concerning the appointment of three members; and 4. the minority leader of the House of Representatives concerning the appointment of three members If the Affordable Care Act is voided by the Supreme Court, the Rockefeller bill could be resurrected. If the Affordable Care Act is upheld, a bill was introduced in July 2011, H.R. 2694, that would defund many of the provisions in the legislation including the Independent Payment Advisory Board. A second bill, the Protecting Access to Healthcare Act, H.R. 5, passed the House of Representatives on March 22. This bill would repeal the IPAB altogether. Whichever way the Supreme Court goes, all the evidence suggests there will be significant system revision as opposed to just rate reductions in physician compensation. CMS is prone to be exceptionally slow at devising payment systems and of course, equally inept at getting the infrastructure to work properly. The Congress does not appear to have the political will to take on a revision of physician compensation. Either the IPAB will take over or Med PAC will be given the authority embodied in the Rockefeller bill. The future of the Affordable Care Act will impact this process as elements of reform shift the landscape for all providers. We expect the Supreme Court decision by late June.

4 May 2012 VOLUME 22 NO 5 PAGE 4 MARK YOUR CALENDARS NOW!! NAMDRC S 36th ANNUAL MEETING AND EDUCATIONAL CONFERENCE EXECUTIVE COMMITTEE AND BOARD OF DIRECTORS OFFICERS Lynn T. Tanoue, MD President TO BE HELD AT THE US GRANT HOTEL SAN DIEGO, CA MARCH 21 23, 2013 Dennis E. Doherty, MD President-Elect Timothy A. Morris, MD Secretary/Treasurer Steve G. Peters, MD Past President BOARD OF DIRECTORS Charles W. Atwood, MD Peter C. Gay, MD Nicholas S. Hill, MD James P. Lamberti, MD Thomas M. Siler, MD Maida V. Soghikian, MD PRESIDENT S COUNCIL George G. Burton, MD John Lore, MD Louis W. Burgher, MD, Ph.D. Alan L. Plummer, MD E. Neil Schachter, MD Joel M. Seidman, MD Frederick A. Oldenburg, Jr., MD Paul A. Selecky, MD Neil R. MacIntyre, MD Steven M. Zimmet, MD Joseph W. Sokolowski, MD Peter C. Gay, MD Steve G. Peters, MD EXECUTIVE DIRECTOR Phillip Porte ASSOCIATE EXECUTIVE DIRECTOR Karen Lui, RN, MS DIRECTOR MEMBER SERVICES Vickie Parshall *********************************************************** Just a reminder. If your mailing address, telephone number, OR address change, don t forget to update your NAMDRC member profile. Changes may be sent anytime to: vickie@namdrc.org

5 May 2012 VOLUME 22 NO 5 PAGE 5 PRODUCT AND TECHNOLOGY NEWS! NAMDRC is providing this space to our benefactors and patrons who provide us with information about new products and innovations related to pulmonary medicine. NAMDRC reserves the right to edit this copy as appropriate. NAMDRC MEMBERSHIP BENEFITS AT A GLANCE... Monthly publication of the Washington Watchline, providing timely information for practicing physicians; Publication of Current Controversies focusing on one specific Pulmonary/Critical Care Issue in each publication; Regulatory updates; Discounted Annual Meeting registration fees; The Executive Office Staff as a resource on a wide range of clinical and management issues; and The knowledge that NAMDRC is an advocate for you and your profession. One of NAMDRC s primary reasons for existence is to provide both clinicians and patients with the most up-to-date information regarding pulmonary medicine. Bookmark this page! The complexity of our nation s health care system in general, and Medicare in particular, create a true challenge for physicians and their office staffs. One of NAMDRC s key strengths is to offer assistance on a myriad of coding, coverage and payment issues. In fact, NAMDRC members indicate that their #1 reason for belonging to and continuing membership in the Association is its voice before regulatory agencies and legislators. That effective voice is translated into providing members with timely information, identifying important Federal Register announcements, pertinent statements and notices by the Centers for Medicare and Medicaid Services, the Durable Medical Equipment Regional Carriers, and local medical review policies. ABOUT NAMDRC: Established over three decades ago, the National Association for Medical Direction of Respiratory Care (NAMDRC) is a national organization of physicians whose mission is to educate its members and address regulatory, legislative and payment issues that relate to the delivery of healthcare to patients with respiratory disorders. NAMDRC members, all physicians, work in close to 2,000 hospitals nationwide, primarily in respiratory care departments and critical/intensive care units. They also have responsibilities for sleep labs, management of blood gas laboratories, pulmonary rehabilitation services, and other respiratory related services.

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