What the 2012 Medicare Physician Fee Schedule tells us about the future

The final rule for the 2012 Medicare Physician Fee Schedule went on display this week. Of course it includes the all-too-familiar fee cut (27.4 percent) – the result of the Centers for Medicare & Medicaid Services' (CMS) flawed formula for calculating physician payment that Congress has been patching annually since 2002 but which needs a permanent fix. This year's fee schedule is notable for another reason as well. The PDF file is 1,235 pages long, and that's without the appendices that will be included when the final rule is published in the Federal Register later this month. The fact that it requires so many pages to describe one year's changes to one part of one government program is mind-boggling, but the additional bulk is partly because this year the rule also provides a forecast for how CMS plans to carry out government mandates for the program over the next five to 10 years. It is not a crystal ball, but the rule leaves no doubt that Medicare payment to physicians will be changing and that today's initiatives and incentives are intended as the basis for tomorrow's payment.

Examples of this are especially clear in the portion of the rule that speaks about a value-based payment modifier, which will actually modify payments under the Medicare Physician Fee Schedule based on Medicare's record of the quality of care you provide to patients compared with the cost of that care. Where will Medicare get this data? Primarily from the quality measures reported for programs like the Physician Quality Reporting System and the EHR Incentive Program and from claims data for your patients. Physicians who are found to deliver high quality for the cost of care will be paid more than other physicians. The program is budget neutral, so one physician's gain is another physician's loss.

CMS is still working out the details, such as how to attribute patients to physicians, adjust for risk and complexity, and make the measurements meaningful for all specialties. What is clear from the rule is that the process is underway to put the value-based modifier in place by 2015 for some physicians (based on claims and quality reporting in 2013) and by 2017 for all physicians (probably based on claims and quality reporting in 2015).

 CMS has this to say in the final rule:

"We strongly encourage physicians to participate in the Physician Quality Reporting System program and the EHR Incentive Program sooner rather than later and to choose to report quality of care measures that best reflect their practice and patient population. Although we have not yet proposed the value modifier methodology, our primary interest at this point is to increase the quality of care for Medicare beneficiaries. We note that we also plan to propose a value modifier in rule making during 2012, prior to the initial performance period. Thus, we believe it is reasonable to encourage physicians to report appropriate quality measures well in advance and irrespective of the exact value modifier methodology at this time."

The complexity and unknowns of this value based payment system are daunting.  However, this could be a good thing if physicians who know their patients and provide comprehensive, coordinated care are rewarded for their work. Sounds like family medicine to me.