CMS Announces Final Rule for 2012 Physician Fee Schedule

On November 1, 2011, the Centers for Medicare & Medicaid Services (“CMS”) announced a final rule with comment period for the 2012 Medicare Physician Fee Schedule (“MPFS”). The MPFS determines how physician and non-physician practitioner services rendered in 2012 are paid. Barring any unforeseen subsequent changes, these new changes will be effective January 1, 2012. The significant policy and payment changes announced by CMS are discussed below.

Professional Component Multiple Procedure Payment Reductions (“MPPR”):
Final Rule includes a 25% MPPR to the Professional Component of CT, MRI, and Ultrasound studies.

For calendar year 2012, CMS is applying a MPPR to the professional component (“PC”) of certain diagnostic imaging services (CT, MRI, ultrasound). The procedure with the highest PC and TC payments would be paid in full, the PC payment for each subsequent procedure furnished to the same patient, by the same physician or practice group, in the same session on the same day will be reduced by 25 percent (25%). The 25% reduction would apply to the less expensive procedure, but would cut across modalities. For example, if a patient receives an MRI of the brain and a CT of the chest on the same day, the reimbursement for the CT of the chest would be decreased by 25%.

Earlier this year, CMS had proposed a 50 percent (50%) MPPR. The Final Rule now establishes a 25% payment reduction to the PC payment. Additionally, CMS claims that this new MPPR policy reduces payments for these services by approximately $50 million, which would be redistributed to other services paid under the MPFS. The MPPR of 50% that is currently being applied to the technical portion of advanced imaging will not change with these new rulings.

ADVOCATE has conducted a financial modeling calculation to project the impact of the above ruling for radiologists in various settings. While the MPPR for the professional component is a Medicare policy, commercial payors may apply this same methodology to their fee schedule over time. All calculations below make the assumption that only CMS will adopt the new MPPR policy. The impact to your specific practice may vary. All ADVOCATE clients will be provided an analysis specific to their practice.

Estimated Impact of Professional Component Multiple Procedure Payment Reductions (“MPPR”) – Governmental Payors Only

1. A typical professional radiology practice with an average amount of trauma work will see their overall practice revenue decrease by about 1.0%.

2. A professional radiology practice with a high percentage of trauma work will see their overall practice revenue decrease by about 1.25%.

3. A global site (such as an IDTF) will see an overall revenue decrease of approximately 0.25%. The reductions on global services are not as severe because global imaging already absorbed the majority of the loss when the MPPR of 50% was implemented to the technical component in previous years.

Sustainable Growth Rate (“SGR”):

Under current law, providers will face steep across-the-board reductions in payment rates, based on a formula- the Sustainable Growth Rate (SGR), which was adopted in the Balanced Budget Act of 1997. Without a change in the law from Congress, Medicare payment rates will be reduced by 27.4 percent for services in 2012, less than the 29.5 percent reduction that CMS estimated would be required under the law earlier this year in March. The President’s budget and his fiscal framework call for averting these cuts and finding a permanent solution to this problem. While this cut would obviously be substantial, this will be the eleventh time that the SGR has called for a cut in physician reimbursement. And with the exception of the calendar year 2002, these cuts were always avoided by last minute intercessions by Congress.

Misvalued Code Initiative:

The Patient Protection and Affordable Care Act (“PPACA”) requires CMS to periodically review and identify potentially misvalued codes and make appropriate adjustments to the relative values of the services that may be misvalued. CMS has worked over the past several years to identify and revise potentially misvalued codes. The final rule adopts coding changes and revisions to values for about 300 services that have been identified as misvalued. CMS also identified additional categories of services that may be misvalued, including some of the highest expenditure codes in each specialty that have not been reviewed in the past five years.

Revisions to the Geographic Practice Cost Indices (“GPCI”):

CMS assigns separate geographic practice cost indices (“GPCI”) to the work, practice expenses (“PE”), and malpractice cost components of each of the more than 7,000 types of physician services. For 2012, CMS will use the Bureau of Labor Statistics Occupational Employment Statistics specific to the offices of physicians industry to calculate the PE employee GPCI. In addition, CMS is replacing the U.S Department of Housing and Urban Development rental data as the proxy for physician office rent with rent data from the 2006-2008 American Community Survey. Lastly, CMS is creating a purchased service index to account for the labor-related industries within the “all other services” and “other professional expenses” Medicare Economic Index (MEI) categories. These changes result in very little change to the GPCIs and indicate that the data CMS has used to adjust for geographic variation is consistent and accurate. However, the expiration of certain statutory provisions in PPACA and the Medicare and Medicaid Extension Act will result in some payment reductions in the areas that benefited from them in 2010 and 2011.

Physician Quality Reporting System (“PQRS”):

The Final Rule also modifies certain aspects of a various provider incentive programs including PQRS, the ePrescribing Incentive Program, and the Electronic Health Records (“EHR”) Incentive Program. ADVOCATE will provide complete detail on PQRS changes when they become available.

Links to CMS Proclamations:

CMS Press Release

CMS 2012 Fact Sheet

If you have any questions regarding the CMS 2012 MPFS Final Rule, please feel free to contact:
Andre Perrotta, Esq. – ADVOCATE Chief Compliance Officer at:
Wendy Driscoll, MBA – ADVOCATE Senior Practice Manager at:

ADVOCATE will continue to provide updates as they become available.

With kind regards,
Andre Perrotta, Esq.
Chief Compliance Officer

Wendy Driscoll, MBA
Senior Practice Manager