Temporary Freeze on Medicare Physician Fee Schedule
On December 19 the President signed into law the Department of Defense Appropriations Act, 2010 (H.R. 3326), which included language temporarily freezing the Conversion Factor used in setting the Medicare Physician Fee Schedule (MPFS) at the 2009 rate. CMS had previously announced a 21% reduction in the Conversion Factor, which had been scheduled to take effect on January 1. This temporary measure will expire on March 1, at which point the previously scheduled 21% reduction will kick in unless Congress takes further action in the interim.
Please bear in mind that the Conversion Factor is just one of three components that drive the Medicare Physician Fee Schedule, so a “freeze” on the Conversion Factor does not equate to a “freeze” on the fee schedule. Unfortunately, changes to the Relative Value Units (RVUs) and Geographic Practice Cost Index (GPCI) are not affected by the “freeze”, and changes to these other two components may still result in fee schedule reductions in the 1% to 3% range.
CMS has previously announced plans to make changes to the way it calculates both the Practice Expense (PE) and Malpractice (MP) RVUs, both of which are bad news for Pathology. The new Practice Expense RVUs adopted by CMS are the result of a Physician Practice Information (PPI) survey of practice expenses conducted by the AMA in 2007, and these changes alone are expected to reduce the Medicare reimbursement for Pathology services by 3% over the next 4 years (the changes are being gradually phased in between 2010 and 2013). CMS also made changes to the way it calculates the Malpractice RVU component, and while this component represents a very small portion of the total RVU for pathology, this RVU component was reduced for some pathology services by 67% -75% (e.g., the MP RVU for 88305 was reduced from 0.07 to 0.02). The example below shows the RVU changes as resulting fee schedule impact for CPT code 88035 (national rates, unadjusted for locality):
CPT CODE 2009 RVU 2010 RVU 2009 MPFS 2010 MPFS Change
88305 2.88 2.82 103.87 101.76 -2.0%
88305-TC 1.85 1.80 66.72 64.95 -2.7%
88305-26 1.03 1.02 37.15 36.81 -0.9%
In addition to these RVU changes, there are changes to the GPCI (locality adjustment) that will also have a negative impact on many areas of the country. Congress has previously established a “floor” (lower limit) of 1.0 for the GPCI that is applied to the Work RVU, and in years past when Congress has intervened to “freeze” the Conversion Factor, they have also included language to extend the “floor” on the Work RVU GPCI such that geographic areas with a calculated GPCI of less than 1.0 would default to 1.0. However, the temporary “freeze” included in the Defense Appropriations Act did not address this GPCI issue. As a result, many areas of the country that do not have a large metropolitan base will see additional reductions of up to 1% in the Medicare allowable on top of the RVU changes addressed above.
This “freeze” on the Conversion Factor represents a temporary stop-gap measure intended to buy time for Congress to develop a longer term solution. While it is possible that whatever shape that longer term solution takes could include another modest (0.5%) increase n the Conversion Factor and/or re-institute the floor on the GPCI, the reduction in the RVUs for pathology services will not change; in fact, as noted above, the PE RVUs are already scheduled to continue to decline over the next 4 years.
Also, remember that CMS has instructed its contractors to delay adjudication of all claims for dates of service on or after January 1 for two weeks in order to allow time for the contractors to make these changes. As a result, Medicare carriers are not expected to begin processing claims for 2010 dates of service until Monday, January 18.