CMS Releases Proposed Updates 2017 Medicare Physician Fee Schedule

In early July, the Centers for Medicare and Medicaid Services (CMS) published the 2017 Medicare Physician Fee Schedule Proposed Rule (NPRM) for public review and comment. This annual regulation is CMS’s opportunity to propose adjustments to Medicare reimbursement rates for services paid under the Physician Fee Schedule (PFS) as well as other payment policy changes required by Congress. According to CMS, there are over 1 million physicians, other practitioners, and medical suppliers that receive Medicare payment under the PFS.

To calculate how much money CMS will reimburse health professionals for Medicare Part B services, CMS assigns each medical service a Relative Value Units (RVU) which is then multiplied by a conversion factor (CF) to calculate the service’s dollar value. RVUs are comprised of three components: physician work, practice expense and malpractice. An American Medical Association (AMA) run committee (The Relative Value Unit Committee or RUC) makes recommendations to CMS on RVU values but CMS makes the final determination in updates to RVUs. Additionally, Congress requires CMS to identify misvalued codes that must be revalued. The PFS is where CMS formally proposes changes to RVUs and the CF for the coming year.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which repealed and replaced the Medicare Sustainable Growth Rate Formula (SGR) applies a 0.5 percent update to the CF in 2017, and for several more years, until a provider’s participation in the new Meritbased Incentive Payment System (MIPS) or Alternative Payment Models (APM) determine their payment update.

Although Congress mandated a 0.5 percent update to the CF in Calendar Year 2017, that update is negated by other payment adjustments also mandated by Congress. As a result, the CF for 2017 will actually go down by -0.08 percent. In dollar terms, this results in a CF for 2017 of $35.7751. The CF for 2016 was $35.8043 which equates to a $0.03 reduction per RVU from 2016’s CF.

This decrease occurs as a result of a combination of formula changes and other Congressionally mandated adjustments that require CMS to identify savings through identification of misvalued codes and a change to the Multiple Procedure Payment Reductions (MPPR) initiative.

Calculation of the Proposed CY 2017 PFS Conversion Factor

Conversion factor in effect in CY 2016                                                                                 35.8043
Update Factor                                                                                  0.50% (1.0050)
CY 2017 RVU Budget Neutrality Adjustment                                  -0.51% (.9949
CY 2017 Target Recapture Amount                                                0.0% (1.000)
CY 2017 Imaging MPPR Adjustment                                             -0.07% (0.9993)
CY 2017 Conversion Factor                                                                                                  35.7751

The 2017 PFS also refines several proposals from last year’s PFS such as delaying by at least a year the date for when an ordering professional will be required to consult a Qualified Clinical Decision Support Mechanism (CDSM) for advanced diagnostic imaging (diagnostic magnetic resonance imaging, computed tomography, and nuclear medicine, including positron emission tomography).

CMS originally proposed that ordering professionals would be required to consult CDSM by January 1, 2017 however CMS is delaying that date until January 1, 2018. CMS is also proposing to establish a new modifier code to document the Congressionally-passed technical component payment reduction for film x-rays that will take effect on January 1, 2017.

CMS also reduced the reporting period for all 2016 EHR Meaningful Use (MU) participants (hospitals and physicians) from a full year to a 90-day reporting period. This is welcome news to the provider community which generally was never in favor of a full year reporting period.

Although the industry has largely been focusing on the Merit-based Incentive Payment System (MIPS) and Alternative Payment Models (APM) brought on by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), providers will still have to participate in the existing Medicare quality programs such as MU until MACRA reporting begins in 2017 for the 2019 reimbursement year.

As always, ADVOCATE will keep you up to date on this and all issues impacting radiology as they become available.

Best regards,
Kirk Reinitz, CPA