July 26, 2007 1

Terrence Kay

Acting Director Hospital and Ambulatory Policy Group

Center for Medicare Management, CMS

July 26, 2007 2

Medicare Regulatory Update

• Physician payment including the annual update• Physician Quality Reporting Initiative (PQRI)• Ambulatory Surgical Center Payments for CY

2008• Outpatient Hospital payments for CY 2008• Inpatient Hospital payments for FY 2008• Other

July 26, 2007 3

Medicare Physician Fee Schedule

• Components of the fee schedule

• Process for revising policies/payments

• Sustainable Growth Rate (SGR)

• 2008 Physician Fee Schedule Issues

July 26, 2007 4

Components of the Fee Schedule• In 2007, estimated to pay over $60 billion to over 900,000

physicians and other health care professionals• Each of the over 7,500 services paid under the MPFS is

divided into 3 components:– physician work– practice expenses– malpractice insurance

• Relative value units (RVUs) must be established for each of the 3 components.

• The law requires that changes in RVUs must be done in a budget neutral manner.

July 26, 2007 5

Sustainable Growth Rate (SGR)The SGR is an annual growth rate that applies to physicians’ services

paid by MedicareIt is intended to control growth in aggregate Medicare expenditures for

physicians' services.The SGR formula is based on four factors:

o Estimated change in fees for physicians’ services

o Estimated change in average number of Medicare fee-for-service beneficiaries

o Estimated projected growth in real GDP per capita

o Estimated change in expenditures due to changes in law and regulation

When actual expenditures exceed target expenditures, the PAF can reduce the physician update. This is what has happened in the last several years. (Alternatively, when the target exceeds actual expenditures, the PAF will increase the update.)

July 26, 2007 6

SGR and the Physician Update• Since 2002, there have been negative physician updates. • Since 2003, Congress has averted physician fee cuts

– CY 2003: Consolidated Appropriations Resolution of 2003 (CAR) = allowed CMS to calculate a 1.6 percent increase

– CY 2004 and 2005: Medicare Modernization Act of 2003 (MMA) = set a minimum 1.5 percent increase each year

– Deficit Reduction Act of 2005 (DRA) = set the 2006 conversion factor the same as 2005

– Tax Relief and Health Care Act of 2006 (TRHCA) = set the 2007 conversion factor the same as 2006

July 26, 2007 7

SGR and Physician Update Issues• The SGR is cumulative. • TRHCA required the negative update to

be re-couped in 2007. This results in an estimated physician update of minus 9.9 percent for 2008.

• Fundamental changes to the SGR formula or the calculation of the physician update require legislation

July 26, 2007 8

Projected Physician Fee Schedule Updates Under Current Law

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0% -9.9% -5.0% -5.4% -5.3% -5.2% -5.1% -5.0% -5.0% -4.8%

July 26, 2007 9

Issues for CY 2008 NPRM

• CMS annually updates the physician fee schedule through proposed and final rules published in the Federal Register.

• The final rule must be published by November 1 and changes are effective January 1 of the following year.

• The 2008 proposed rule was released on July 2, 2007. Comments accepted until August 31.

• Major issues included are:– Update to the GPCIs, and discussion of revisions to certain localities– Year two of phase-in of new practice expense methodology– Completion of third five year review of work RVUs– Discussion/implementation requirements of Tax Relief and Health

Care Act of 2006. Includes establishment of quality reporting measures and the Implementation of Physician Assistance and Quality Initiative Fund for 2008.

– Self-referral rules

July 26, 2007 10

Additional PFS NPRM Issues

• The physician fee schedule rule is often used as a vehicle for other related issues.

July 26, 2007 11

Centers for Medicare & Medicaid Services

2007 Physician Quality Reporting Initiative (PQRI)

July 26, 2007 12

Overview

• Value-Based Purchasing and the PQRI

• PQRI Introduction: Information about PQRI

• PQRI Reporting: Understanding the Measures

• PQRI Support: Educational Tools and Resources

July 26, 2007 13

Value-Based Purchasing and PQRI

• Value-based purchasing is a key mechanism for transforming Medicare from a passive payer to an active purchaser.– Current Medicare Physician Fee Schedule is

based on quantity and resources consumed, NOT quality or value of services.

• Value = Quality / Cost– Incentives can encourage higher quality and

avoidance of unnecessary costs to enhance the value of care.

July 26, 2007 14

Quality and PQRI• PQRI reporting will focus attention on

quality of care.– Foundation is evidence-based measures

developed by professionals.– Reporting data for quality measurement is

rewarded with financial incentive.– Measurement enables improvements in care.– Reporting is the first step toward pay for

performance.

July 26, 2007 15

PQRI Introduction:

• Tax Relief and Healthcare Act (TRHCA) Division B, Title I, Section 101 provides statutory authority for PQRI and defines:– Eligible professionals– Quality measures– Form and manner of reporting– Determination of satisfactory reporting– Bonus payment calculation– Validation– Appeals

July 26, 2007 16

PQRI Introduction: Eligible Professionals

• Physicians– MD/DO– Podiatrist– Optometrist– Oral Surgeon– Dentist– Chiropractor

• Therapists– Physical Therapist– Occupational Therapist– Qualified Speech-

Language Pathologist

• Practitioners– Physician Assistant– Nurse Practitioner– Clinical Nurse– Specialist– Certified Registered Nurse– Anesthetist– Certified Nurse Midwife– Clinical Social Worker– Clinical Psychologist– Nutrition Professional– Registered Dietician

July 26, 2007 17

PQRI Introduction: The Quality Measures

• Final list of 74 quality measure statements, descriptions, and detailed specifications now posted at: www.cms.hhs.gov/PQRI.

July 26, 2007 18

PQRI Introduction: The Bonus Payment

• Professionals that report successfully are eligible for a 1.5 percent bonus payment, subject to a cap.

• Potential bonus payment is calculated using total allowed charges for covered professional services furnished during the reporting period and paid under the Physician Fee Schedule.

• A cap on the bonus may apply.

July 26, 2007 19

PQRI Introduction: Key Information

• Reporting period: Dates of Service between July 1, 2007 through December 31, 2007

• No need to register: just begin reporting.

• Must be an enrolled Medicare provider (but need not have signed a Medicare participation agreement).

• Need to use individual National Provider Identifier (NPI).

July 26, 2007 20

PQRI Introduction: The Tools

• Gather information and educational materials from the PQRI website (www.cms.hhs.gov/pqri).

July 26, 2007 21

• The individual NPI of the participating professional must be properly used on the claim.

• Multiple Eligible Professionals with their NPIs may be reported on the same claim with each quality data code line item corresponding to the services rendered by the professional for that encounter.

• All claims must reach the NCH file by February 29, 2008 to be included in the bonus calculation.

PQRI Reporting: Data Submission

July 26, 2007 22

Ambulatory Surgical Centers

• HHS released a final rule on July 16, 2007 that will implement a revised payment system for Ambulatory Surgical Centers (ASCs).

• The rule outlines the final policies for the revised ASC payment system to be implemented January 1, 2008.

• Proposed ASC payments for 2008 are included in the proposed rule for Outpatient Hospital PPS.

July 26, 2007 23

ASC background

• There are currently about 4,600 ASCs enrolled in Medicare.

• Total Medicare expenditures for CY 2006 Medicare payments to ASCs are estimated at about $2.5 billion.

July 26, 2007 24

Current ASC payment system

• The current “ASC list” of approved procedures for which Medicare pays participating ASCs a facility fee consists of more than 2,500 surgical procedures. 

• Each procedure on the current ASC list is assigned to one of nine prospectively determined ASC payment rates, ranging from $333 to $1339. 

• ASC rates were last rebased in March 1990 using cost, charge, and utilization data from a 1986 survey of ASC costs.

July 26, 2007 25

New ASC Payment System

• The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) requires CMS to revise the ASC payment system no later than January 1, 2008.

• The new ASC system is based on the Outpatient Hospital Ambulatory Payment Groups (APCs).

July 26, 2007 26

ASC New Payment System

• The statute requires a zero percent ASC update through CY 2009.

• As required by the MMA, the revised ASC payment system is budget neutral.

July 26, 2007 27

Proposals for Outpatient Hospital PPS and ASCs

• Annual proposals released on July 16

• Published in the Federal Register--August 2

• Proposes a 3.3% annual update for OPPS

• Proposes expanding bundling of payments for OPPS

• Proposes ASC payments at 65% of the OPPS rate

July 26, 2007 28

Inpatient Hospital PPS

• Final rule announced August 1 and effective on October 1, 2007.