ACS Views on Legislative, Regulatory, and Other Issues

Medicare Physician Fee Schedule for 2004—

staff contact: Jean Harris, jharris@facs.org, or Barbara Peck, bpeck@facs.org

ACS Comments to Acting Administrator, 3/8/04

ACS Comments to Acting Administrator, 11/22/03

Letter to Thomas A. Scully, 10/6/03

October 6, 2003

The Honorable Thomas A. Scully
Administrator
Centers for Medicare & Medicaid Services
Department of Health and Human Services
Attention: CMS-1476-P
Room 445-G
Hubert H. Humphrey Building
200 Independence Avenue, S.W.
Washington, D.C. 20201

RE: CMS-1476-P: Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2004

Dear Mr. Scully:

On behalf of the 62,000 Fellows of the American College of Surgeons, the following comments are submitted in response to the proposed rule on Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2004 published in the August 15, 2003 Federal Register. We will address the following issues: the proposed 2004 update; professional liability insurance and the Medicare Economic Index (MEI); practice expense proposals; and, coding proposals.

Calendar Year 2004 Physician Fee Schedule Conversion Factor and Update

In the proposed rule, the Centers for Medicare & Medicaid Services (CMS) estimates that the physician fee schedule update for CY 2004 will be reduced by 4.2 percent. This cut comes at a time when practice costs are rising 2.5 percent, as reflected in the revised MEI for this year. It is important to underscore that this proposed negative update to the fee schedule is not merely a slowing in the rate of increase in fees—it is a reduction in actual payments and, taking into account the estimated MEI for 2004, the total impact is a 6.7 percent decline in the value of Medicare physician payments.

At the outset, we must express our disappointment with the agency's continued failure to propose any steps to address the forecasted negative update to the conversion factor for the physician fee schedule. While we understand that the agency believes that it has no discretion in the determination of the update factor, we disagree and strongly recommend that you consider changes in the way you estimate spending increases under the Medicare fee schedule.

For example, we do not believe that drugs should be included in the definition of "physician services" as it relates to the calculation of the Sustainable Growth Rate (SGR). Our reasons for this position are two-fold and are described in greater detail in our comments on the proposed rule for Payment Reform for Part B Drugs published in the Federal Register on August 20, 2003. First, the College believes that CMS' inclusion of the growth of drug prices in the actual expenditures for physician services contradicts the Medicare statue. Second, we disagree with CMS' assumption that physicians are able to control utilization, and therefore spending, on drugs. The growth in Medicare spending on drugs is not driven primarily by physicians, but rather by the introduction of expensive new drugs to the Medicare population and extensive marketing, including direct-to-consumer advertising. Accordingly, the inclusion of the growth in drug prices is patently unfair because it is a factor for which physicians are penalized under the current SGR, but over which they have little control.

Another change that could be made in the way spending increases under the Medicare fee schedule are estimated relates to new technology. Although Congress has attempted to build allowances for technological improvements into other payment systems, CMS does not adjust the physician spending target for technological improvements. Instead, expenditure increases stemming from technological advances simply go into the pool with all other physician/practitioner expenditures, thereby increasing the possibility that the target will be exceeded and that payments will be cut as a result.

A third change that could be made relates to the movement of surgical and other procedures from the outpatient hospital setting to the physician office setting. To a significant degree, we believe this phenomenon is driven by the much higher practice expense relative value units (PE RVUs) assigned to office-based procedures. The result of this movement is an increase in actual services compared to the allowed services under the target. We recommend that CMS recognize this movement to the office setting and make appropriate adjustments to the target so that all physicians are not penalized by a change that is encouraged by the resource-based payment methodology.

If, as predicted these negative updates continue through 2005, the fee schedule conversion factor will be reduced to a level near that in place for 1993. Clearly, this cannot continue without significant adverse effects on beneficiary access to care. If the agency continues to believe that it has no discretion in the determination of the update factor, we urge you to support legislation that would replace the -4.2% cut for 2004 with an update of no less than 1.5 percent.

In the longer term, the fatally flawed update formula must be replaced. We strongly support the Medicare Payment Advisory Commission (MedPAC) recommendation to replace the SGR with an annual update system like those of other provider groups so that payment rates will better reflect actual increases in practice costs.

Professional Liability Insurance (PLI)

Premiums for professional liability insurance (PLI) are skyrocketing. For some surgical specialties, they exceed $200,000 a year or more. Surgeons are being forced to limit services, retire early, or move to other states where liability premiums are more stable. Emergency departments are losing staff and scaling back certain services such as trauma units. Many obstetricians have stopped delivering babies, and some high-risk procedures (such as neurosurgery) are being postponed because surgeons cannot find or afford insurance. All of these changes seriously threaten access to high quality health care services.

To address this crisis, Congress must pass effective liability reform. It is clear that patient access to care is suffering and that it will worsen if Congress fails to act. In the interim, we believe that CMS should be taking a more pro-active role in assuring that the relative resource costs of PLI are appropriately recognized under the physician fee schedule.

We were extremely disappointed by the lack of any meaningful discussion of this issue in the proposed rule. In the proposed rule, there are only two proposals related to PLI and their impact on payments are either unknown or of little consequence.

First, CMS proposes to revise the malpractice Geographical Practice Cost Indexes (GPCIs) based on actual 2001 and 2002 malpractice premium data and projected 2003 malpractice premium data by January 1, 2004. While this proposal seems reasonable, we note that the revised malpractice GPCIs are not available for review at this time. However, there is a change in the current methodology for calculating the malpractice GPCIs that could be done in the final rule and we urge CMS to make the change.

At this time, CMS calculates weighted averages of multiple years of PLI data. Because recent PLI premiums have increased so greatly, it is unfair to dilute these increases with data from earlier years, which are no longer reflective of today's costs. We believe a more equitable and accurate methodology would be to predict 2004 premium data based on the rate of growth in the PLI premium data from 2001 to 2003. CMS then should utilize this predicted 2004 data only and not weight average these data with data from previous years. We look forward to their publication in this year's final physician fee schedule regulation and will provide additional comments at that time.

Second, CMS proposes to rebase and revise the MEI. The result is a change in the proportion of total RVUs attributable to work, practice expense and malpractice, as shown in the following table:

CMS believes that by giving more weight to malpractice and less weight to physician work and practice expenses, Medicare's payments will better reflect each component of physician practice expenses. We agree and support the proposed rebasing and revising of the MEI. We also recommend the use of projected 2004 PLI premiums in place of weight-averaged premium data as we suggested for the malpractice GPCIs described above.

Unfortunately, CMS believes that if the work, practice expense and malpractice RVUs are adjusted to match the new MEI weights, they are required to ensure that the adjustments do not increase or decrease Medicare expenditures by more than $20 million. Although the total RVUs for some codes will increase slightly and the total RVUs for others will decrease slightly, the adjustment of the RVUs for budget neutrality means that the total payments after revising and rebasing the RVUs will be no different in 2004 than in 2003. Thus, any suggestion that rebasing and revising the MEI will be an important means of addressing the PLI crisis is simply not true. Unless Medicare payments are increased to offset the increased costs of PLI, the crisis will remain and worsen over time.

We urge CMS to review section 1848(c)(4) of the Social Security Act to determine whether this section of the law would provide CMS the statutory authority keep the proposed PLI RVUs in place without reducing the work and PE RVUs. This section of the law is referred to as "Ancillary Policies." It states: "The Secretary may establish ancillary policies (with respect to the use of modifiers, local codes, and other matters) as may be necessary to implement this section." If that is not possible, then we support making the necessary budget neutrality adjustments through the conversion factor, rather than the RVUs.

The College and the major surgical subspecialties have met repeatedly with CMS staff over the past several years and offered suggestions for improving the current system. Under the physician fee schedule, it is essential that the PLI RVUs be resource-based and that the relative relationship across all services be correct. With that in mind, it is important to note that the crisis in PLI does not affect all specialties and codes to the same degree. The current CMS methodology for calculating PLI RVUs tends to reduce the PLI RVUs performed by those specialties faced with dramatic PLI premium increases by averaging the PLI premiums of all the other specialties that perform a given service. We believe a more appropriate method for calculating PLI RVUs would be to use the PLI premium of the specialty that performs the procedure most commonly.

This "dominant specialty" approach should result in higher PLI RVUs for specialties with higher premiums and establish a more appropriate relative relationship across all the services paid under the fee schedule. Consequently, payments would increase for the specialties most in need of assistance and would partially offset the rising costs of PLI. We have asked CMS to calculate PLI RVUs under this approach for the past several years and we have been given assurances that this method would be modeled and the results made known. Unfortunately, this has never occurred.

We have made other requests to which CMS has not responded. In the final rule for 2000 published in the November 2, 1999, Federal Register, CMS discussed a detailed PLI methodology submitted by the neurosurgeons that they suggested might be used as an alternative to the current methodology. The CMS response included the following statement: "We are examining the alternative methodology suggested by the neurosurgeons and will consider it along with other alternatives during future refinement of malpractice RVUs." Again, it appears that no action has been taken.

We urge CMS to address these PLI issues and to announce the start of the five-year review of PLI RVUs in the final rule. In the past, we have recommended that CMS begin the five-year review of PLI RVUs sufficiently in advance of the required date of implementation to permit a meaningful review. The resource-based PLI RVUs were implemented on January 1, 2000. Therefore, by statute, refined PLI RVUs must be implemented on January 1, 2005. However, the process of review has not begun.

This is in stark contrast to the previous five-year reviews of work RVUs that were implemented in 1997 and 2002. CMS began the process for the 1997 five-year review in the December 1994 final rule with a description of the agency's plans for refinement and a request for comments. For the 2002 five-year review, the process began in the November 1999 final rule. Based on this timetable, CMS should have begun the five-year review of PLI RVUs with a request for comment in the final rule for the 2003 fee schedule. We request that this important issue be given a higher priority than it has been given to date.

Practice Expense Proposals: Non-Physician Work Pool

The non-physician work pool was created as an interim measure until CMS could further analyze the effect of the top-down practice expense methodology on the Medicare payment for services that do not have physician work RVUs. Decisions regarding the non-physician work pool have the greatest effect on vascular surgery because most non-invasive vascular diagnostic studies are in the non-physician work pool.

In the proposed rule, CMS indicates that a final resolution on how to best address this issue has not been reached and that studies of various alternatives are continuing. The College supports ongoing studies of this complex issue and appreciates CMS' statement that "any modifications to the non-physician work pool would be published in proposed rulemaking."

Practice Expense Proposals: Supplemental Practice Expense Survey Data

CMS has required supplementary survey data to be submitted by August 1 to be considered for computing PE RVUs for the following year. In this rule, CMS proposes to change the required submission date to March 1. This would allow the agency to publish its decisions regarding survey data in a proposed rule and would provide an opportunity for public comment on survey results.

In addition, CMS proposes to extend for an additional two years the period for accepting survey data that meet the criteria set forth in the December 31, 2002, final rule. This will provide specialties the maximum opportunity to submit supplementary practice expense data. The College supports these proposals and appreciates the agency's recognition of the difficulties associated with completing these complex practice expense surveys in a timely fashion.

Practice Expense Proposals: Practice Expense Advisory Committee (PEAC) Recommendations on Clinical Practice Expert Panel (CPEP) Inputs for 2004

In the past, CMS decisions on Practice Expense Advisory Committee (PEAC) recommendations have been incorporated into the physician fee schedule final rule and have been used as interim values for services provided in the following calendar year. CMS accepts comments on these refinements and addresses them in rulemaking the following year. For 2004, the PEAC recommendations are included in the proposed rule, which allows specialty societies to assess the impact of these changes on their services and make comments on the recommendations before the final rule. We support this proposal.

We wish to express our appreciation for the acceptance of all the PEAC recommendations for this year, including the decision to permit exceptions to the standard pre-service times for some procedures performed by neurosurgeons, spine surgeons, thoracic surgeons, and colorectal surgeons. CMS staff must be congratulated for their tireless efforts to complete this complex and massive undertaking.

Practice Expense Proposals: Repricing of Clinical Practice Expense Inputs—Supplies

The College supports CMS' development of a new price list for medical supplies used to develop practice expense RVUs. We appreciate the effort CMS has undertaken to update prices for supplies and improve the accuracy of the direct practice expense data. We also agree that the creation of supply categories and the standardization of item and unit descriptions will promote consistency and help to facilitate future practice expense refinement.

Practice Expense Proposals: Items Needing Specialty Input for Pricing and Proposed Deletions (Table 1)

The College and the American Society of Colon and Rectal Surgeons (ASCRS) presented direct practice expense inputs for CPT 45910 and 45905 at the January 2003 PEAC meeting. In Table 1 of the proposed rule, CMS lists achalasia balloon as an item that needs specialty input for pricing and identifies 45910 and 45905 as the procedures that require this supply in the office setting. ACS/ASCRS did not submit recommendations for the office setting for these two codes, nor did the PEAC approve office inputs. We believe CMS may have failed to delete the office inputs, as they are shown as "CPEP" inputs in the CMS practice expense file. These two codes should be priced in the facility setting only and utilize the inputs approved for non-facility at the January 2003 PEAC meeting. The PEAC final recommendations are attached.

Practice Expense Proposals: Practice Expense Corrections

The College appreciates the opportunity to review the direct practice expense inputs for the codes that have been reviewed and approved by the Practice Expense Advisory Committee (PEAC). Although the majority CMS' data on clinical staff time, supply and equipment corresponds with the final recommendations of the PEAC, we have identified several code families that appear to contain errors. We list below these possible errors and have attached the final PEAC-approved spreadsheets that contain the correct inputs.

Coding Proposals: Payment Policy for Current Procedural Terminology (CPT) Tracking Codes

Currently, carriers have discretion for coverage and payment of services described by CPT tracking codes, also known as CPT Category III codes, unless CMS has made a national coverage determination (NCD). Carriers do not need to establish a payment amount for a tracking code until they receive a claim for the code. CMS has received several requests to create national payment amounts for some CPT tracking codes even if there has been no NCD with respect to the services.

CMS proposes to create national payment policy and determine national payment amounts for CPT tracking codes when there is "a significant programmatic need" for them to do so. Such a need could arise, for example, if they receive requests from carrier medical directors that CMS establish a national payment amount because of carrier inability to do so. This policy change would not change the contractor's discretion over coverage for the CPT tracking codes, but would establish a payment level if the contractor finds that coverage is warranted.

The College opposes this proposal for several reasons. First, because emerging technologies are in their early stages of development and widespread adoption into clinical practice has not occurred, it will be very difficult for CMS to determine the appropriate RVUs with a reasonable degree of accuracy. Second, the chance for error is high and once RVUs are published they will become a source of bias under any future surveys. Third, the potential for harm associated with the adoption of inappropriate RVUs by other payers is very high and should be avoided.

Coding Proposals: Excision of Benign and Malignant Lesions

In the CPT 2003 book, the definitions for excision of benign lesions (CPT codes 11400 through 11446 inclusive) and excision of malignant lesions (CPT codes 11600 through 11646 inclusive) were substantively changed. Starting in 2003, these codes are to be reported based on the excised diameter (actual skin removed) rather than on the size of the lesion.

CMS has reviewed the new code descriptors and proposes to make the work RVUs the same for removal of all skin lesions with the same excised diameters that are from the same area of the body, whether the lesions are benign or malignant. For example, the work RVUs for the removal of benign skin lesions from the trunk, arms or legs with excised diameter 1.1-2.0 cm (CPT code 11402) would be the same as the work RVUs for CPT code 11602, which is the removal of malignant skin lesions from trunk, arms or legs with excised diameter of 1.1-2.0 cm. To retain budget neutrality within each code pair, the total work RVUs associated with each code pair will be constant both before and after the work adjustment. We oppose this proposal and urge CMS to withdraw it in the final rule.

We object to both the process and substance of the proposal. In the final rule for the 2003 fee schedule that was published on December 31, 2002, CMS described its review of the work RVU recommendations for approximately 249 new and revised CPT codes from the American Medical Association/Specialty Society RVS Update Committee (RUC). Included in that review were the 36 excision codes that are the subject of this proposal. Clearly stated in table 6 of last December's rule is the statement that CMS agrees with every single recommendation for these codes.

CMS representatives participated in the development of the codes and observed the deliberations of the RUC. Subsequently, CMS accepted the RUC recommendations in the final rule for this year. Further, these codes were considered interim during 2003 and subject to public comment. To our knowledge, CMS did not receive a single written comment objecting to its acceptance of the RUC recommendations. Given this history of CMS review and approval, the proposal to revise all the work RVUs makes no sense.

In terms of the substance of the proposal, we are disappointed that it was put forward without a single word of explanation. This lack of information makes it very difficult to respond to the proposal's substance. We do not even know if CMS believes the excisions of benign lesions are undervalued, or if the excision of malignant lesions are overvalued, or both. Certainly, there is no evidence that the proposed RVUs are correct. If CMS had received a public comment such as this during the five-year review, it would have been rejected for lack of justification.

On the other hand, the record of support for the current values is clear and well documented. The codes were surveyed, the results were reviewed, and the RUC recommendations were accepted. Until CMS provides us with a rationale for this proposal, we will stand by the information already submitted as evidence that the current values are correct.

Another important reason this proposal must be withdrawn is that it subverts the established process for reviewing and refining work RVUs and it undermines the relationship between CMS and the RUC. If CMS believes that the excision codes are misvalued then the agency should follow its own longstanding policies. Specifically, the codes should be referred to the RUC during the next five-year review and the rationale for examining the codes should be provided.

Coding Proposals: Create G codes for Monitoring Heart Rhythms

CMS is creating several Healthcare Common Procedure Coding System (HCPCS) G codes to describe electrocardiographic monitoring in the home with 24-hour attended monitoring. In addition, CMS is proposing RVUs for the new codes. We strongly oppose the creation of new G codes and the assignment of RVUs because CMS did not follow the established process for creating codes and assigning RVUs. Experience has clearly shown that the current process of involving the medical profession in coding and RVU development works well and results in more appropriate codes and more accurate relative values. This point has been made by others and us in many previous comments. We urge CMS to withdraw this proposal.

Coding Proposals: Create G Codes for Dialysis Patient

CMS has reviewed its current payment policy for the monthly dialysis capitation CPT codes 90918 through 90921. These physician services include the establishment of a dialyzing cycle, outpatient evaluation and management of the dialysis visits, telephone calls, and patient management, provided during a full month. CMS proposes to make CPT codes 90918, 90919, 90920, 90921 invalid for Medicare.

CMS proposes to create three new G codes in place of each CPT code, with higher payments associated with providing more visits within each month to an ESRD patient. Under this proposal, there will be separate codes when the physician provides one visit per month, two-to-three visits per month and four or more visits per month. The code for one visit per month will have the lowest payment while progressively higher payments will be provided for the other codes.

The College objects to this proposal on the principle that it violates the existing process for obtaining new codes and developing RVUs. However, unlike the excision codes whose RVUs are based on RUC surveys, the RVUs for the monthly dialysis capitation codes are based on the recommendations of a CMS refinement during the first five-year review. Because they have not been reviewed by the RUC, there is reason to believe they may be misvalued. Therefore, we recommend that CMS refer the codes to the RUC for consideration during the coming year. In the interim, we recommend that CMS withdraw the proposal for new G codes and maintain the current RVUs.

Conclusion

Our major concerns relate to the proposed reduction in the conversion factor for 2004 and the lack of meaningful proposals to address the professional liability crisis affecting surgical specialties. We have provided specific recommendations for changes in the SGR methodology and reiterated previous requests for improvements in the calculation of PLI RVUs.

We have expressed our support for several practice expense proposals and our opposition to the development of RVUs by CMS for category III codes and to several coding proposals. Specifically, we object to the proposal to revalue benign and malignant skin lesion excision codes whose RVUs were accepted by the agency less than one year ago. We also are opposed to the proposals that involve the creation of new G codes because such proposals undermine the CPT and RUC processes.

Finally, we wish to express our concerns about the late publication of this proposed rule. We understand that delays may be beyond the control of CMS staff, but we must point out that they create significant problems. The issues involved with the physician fee schedule are extremely complex and require careful consideration. Requests to "Get your comments in early if you want them to be considered" are contrary to the spirit of the Administrative Procedures Act. More importantly, we are concerned that the agency has been left with insufficient time to evaluate the public comments, seek clarification where necessary, and develop sound final decisions. We ask that you make our concerns known to all involved in the clearance process for proposed rules so that they will understand the need to publish the proposed rule in the Spring or early Summer.

If you have any questions, please do not hesitate to contact me or Cindy Brown, Director of Advocacy and Health Policy in our Washington office at 202-337-2701.

Sincerely,

Thomas R. Russell, MD, FACS
Executive Director

ACS Views on Legislative, Regulatory, and Other Issues

Advocacy and Health Policy