Medicare Physician Fee Schedule

In April 2015, the President signed into law the Medicare Access and CHIP Reauthorization Act of 2015 (HR 2, also known as MACRA). This law:

  • Repeals the Sustainable Growth Rate (SGR) methodology for determining updates to the Medicare physician fee schedule.
  • Establishes annual positive or flat fee updates for 10 years and institutes a two-tracked fee update afterwards.
  • Establishes a Merit-Based Incentive Payment System that consolidates existing Medicare fee-for-service physician incentive programs.
  • Establishes a pathway for physicians to participate in alternative payment models, including the patient-centered medical home.
  • Makes other changes to existing Medicare physician payment statutes.

On October 30, the Centers for Medicare & Medicaid Services (CMS) released the 2016 Medicare Physician Fee Schedule. The regulation reflects the end to the often threatened double-digit cut in Medicare physician payments that resulted from the now repealed SGR formula and also points to the importance of moving health care delivery away from fee-for-service and toward value-based payment. Of note to family physicians, the 2016 final rule:

  • Establishes the 2016 conversion factor.  The projected 0.5% update was negated as a result of legislative provisions included in the Protecting Access to Medicare Act of 2014 that required the Centers for Medicare & Medicaid Services (CMS) to meet a 1% target for identifying and re-valuing mis-valued codes. CMS was only able to identify .23% of the mandated 1% target.  As a result, the projected 0.5% update, established by MACRA, was reduced by 0.77% - resulting in a .27% reduction in the 2016 conversion factor. The 2016 conversion factor will be $35.82 instead of $35.93 – a net reduction of 11 cents in the conversion factor. Although this affects all medical specialties, this has a particular impact on primary care physicians because primary care has consistently been under-valued. The AAFP has communicated its disappointment to CMS.
  • Begins Medicare payment for Advance Care Planning services for Medicare beneficiaries who choose to pursue it. The fee schedule includes several changes to the Physician Quality Reporting System (PQRS).
  • Establishes policies to transition from the Value Modifier to the Merit-Based Incentive Payment System (MIPS) including applying the Value Modifier to non-physicians (PAs, NPs, CNSs, CRNAs) in the 2018 payment adjustment period.
  • Applies quality-tiering methodology to all groups and solo practitioners that meet the criteria to avoid the downward adjustment under the PQRS.
  • Sets the maximum upward adjustment under the quality-tiering methodology for the 2018 Value Modifier
  • Sets the amount of payment at risk under the 2018 Value Modifier
  • Uses 2016 as the performance period for the 2018 Value Modifier and continues to apply the 2018 Value Modifier based on participation in the PQRS by groups and solo practitioners

Federal law requires that beginning in 2017, physicians and providers who order advanced diagnostic imaging services must consult with Appropriate Use Criteria (AUC) via a clinical decision support mechanism. However, for CMS to implement this requirement, the agency must specify AUC from among those developed or endorsed by national medical professional specialty societies and other provider-led entities. Citing the limitations of AUC, clinical decision support mechanisms, and EHRs, CMS delays enforcement of this program and will further develop these policies during 2017 and 2018 rulemaking cycles. Thus, CMS does not intend to require that ordering professionals meet this requirement by January 1, 2017.

CMS also includes provisions to implement MACRA changes to the Medicare Physician and Practitioner Opt-Out process.

The AAFP had commented on the proposed version of this regulation in an August 26, 2015 regulatory comment letter. As part of the final rule, CMS issued a press release(, a fact sheet(, and a fact sheet( specific to the PQRS. The AAFP recently posted an article on the Getting Paid blog and is examining portions of the final rule open for further comment and will respond to CMS before December 29, 2015.

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