ACS Views on Legislative, Regulatory, and Other Issues

Medicare Physician Fee Schedule for 2006—

ACS Comments to Mark McClellan, MD, PhD, 8/21/06 (540K PDF)

ACS Comments to Mark McClellan, MD, PhD, 9/30/05

September 30, 2005

The Honorable Mark McClellan, MD, PhD
Administrator
Centers for Medicare and Medicaid Services
Department of Health and Human Services
Attention: CMS–1502-P
PO Box 8017
Baltimore, MD 21244–8017

RE: CMS-1502-P Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule for Calendar Year 2006; Submitted electronically at http://www.cms.hhs.gov/regulations/ecomments

Dear Dr. McClellan:

On behalf of the 66,000 Fellows of the American College of Surgeons, I am pleased to submit the following comments on the Proposed Rule published in the Federal Register on August 8, 2005. We will address the issues of practice expense (PE) relative value units (RVUs), professional liability insurance, multiple procedure reductions for diagnostic imaging, the oncology demonstration project, and the proposed negative fee schedule update for 2006.

PE Proposals for CY 2006

The College recommends a delay in the implementation of the practice expense proposals in 2006 until enough data and information are provided to allow us to adequately review and assess the validity of the new methodology. The only component of the proposed methodology that should be implemented in 2006 is the practice expense per hour (PE/HR) data submitted by American Urological Association. The need for an exception is described in the following section. Our comments on specific proposals are provided below.

1. Supplemental PE Surveys

In accordance with section 212 of the Balanced Budget Refinement Act (BBRA), the Centers for Medicare and Medicaid Services (CMS) established criteria to evaluate survey data collected by organizations to supplement the Socioeconomic Monitoring System (SMS) survey data normally used in the calculation of the PE component of the physician fee schedule. To continue to ensure the maximum opportunity for specialties to submit supplemental PE data, CMS extended until 2005 the period in which it would accept survey data meeting the criteria set forth in the November 2000 fee schedule final rule.

The following table compares the PE/HR figures that were in place at the time the resource based practice expense methodology was implemented in 1999 to the proposed PE/HR figures listed in a September 1, 2005, Federal Register correction notice.

This table shows the dramatic changes in PE/HR that have been associated with recent supplemental surveys. We believe that PE/HR figures in excess of $200/HR are so much higher than other specialties that they raise questions about the validity of the results. The proposed system appears inequitable with a high probability that significant distortions in the relativity of practice expense payments across specialties will be created. We urge a delay in the implementation of the proposed PE/HR figures until such time as a multi-specialty practice expense survey, similar to the AMA's SMS survey, can be conducted.

The only exception relates to the PE/HR data for urology. Section 303(a)(1) of the, Medicare Prescription Drug, Improvement, and Modernization Act (MMA), requires CMS to use survey data submitted by a specialty group where at least 40 percent of the specialty's payments for Part B services are attributable to the administration of drugs in 2002. The statute also provides an exemption from budget neutrality for any additional expenditures resulting from the use of this survey. Urology meets the 40 percent threshold. We recommend that CMS use the urology PE/HR data as required by the MMA.

2. Revisions to the PE Methodology

In addition to the proposed use of supplemental PE survey data, CMS also proposes to:

• use a bottom-up methodology to calculate direct PE costs;
• eliminate the nonphysician work pool;
• utilize the current indirect PE RVUs, except for those services affected by the accepted supplementary survey data; and,
• transition the resulting revised PE RVUs over a four-year period.

The proposed rule includes a very detailed description of the current "top-down" methodology but a very brief description of the proposed methodology. CMS describes the new methodology as "simple." We find it quite difficult to understand and we have identified numerous aberrant PE RVUs that raise serious questions about the reliability and validity of the proposed methodology. The following table includes specific examples of our concerns.

Our concerns fall into several broad categories:

• Closely related procedures have proposed RVUs that are inconsistent with their actual costs. For example, debridement of skin receives 19 percent increase while debridement of muscle receives a 7 percent decrease.

• Services that contribute significantly to the increases in volume and intensity noted by CMS and MedPAC all receive significant increases. These include minor procedures, imaging procedures, and therapy services.

• High volume major surgical procedures with 90 day global periods in general are slated for significant reductions. However, some exceptions are noted. For example, pacemaker insertions (code 33208) increase by 18 percent. We believe this is a reflection of the higher PE/HR data for cardiology.

• Within specialties that should benefit from the dramatically higher PE/HR in their surveys, there are increases and decreases that cannot be explained. For example, CT of the abdomen (code 74170) increases by 36 percent while MRI of the abdomen (code 74183) decreases by 32 percent. Traditional external beam radiation therapy (code 77416) increases by 176 percent while Intensity Modulated Radiation Therapy (code 77418) decreases by 30 percent. Immunotherapy injections (code 95117) decrease by 44 percent while antigen therapy services (code 95165) increase by 26 percent.

• Evaluation and management (E/M) services will be increased in the office setting but decreased in the hospital setting. The continued bias toward office based practice under the CMS methodology is apparent. Specialties that have received significant increases in the past receive additional increases under the proposed methodology. Other specialties that have received significant decreases in the past receive additional decreases under the proposed methodology. The negative impact is most pronounced on surgical specialties.

Before the new methodology is implemented, we believe it is incumbent on CMS to provide sufficient details so that the medical community can understand the system and provide the agency meaningful and constructive comments. This cannot be done in the short period of time between now and January 1, 2006. Therefore, we recommend that CMS withdraw the proposal for this year and re-publish it in a future Federal Register notice that includes a description of the methodology that is at least as detailed as the description of the current methodology provided in this proposed rule.

Professional Liability Insurance (PLI) RVUs

CMS focuses its proposals related to PLI RVUs on four issues.

1. Five Percent Specialty Threshold. CMS proposes to exclude data for any specialty that performs less than 5 percent of a particular service or procedure from the malpractice RVU calculation for that service or procedure. CMS assumes that the infrequent instances in their data represent aberrant occurrences and that removing the data will improve the accuracy and stability of the RVUs. E/M services were excluded from the analysis because E/M codes are performed by virtually all physician specialties.

Both the College and the AMA/Specialty Society Relative Value Scale Update Committee (RUC) have consistently argued that the dominant specialty should be utilized to determine which risk factor to apply to a CPT code. We continue to believe the use of the dominant specialty approach would lead to more appropriate and acceptable PLI RVUs. Nonetheless, we appreciate that CMS has proposed a step that represents an improvement over the current methodology. We support the 5 percent threshold approach but recommend that it be applied to all services, including E/M.

2. Specialty Crosswalk Issues. We support the CMS proposal to set the risk factors for the following professions at 1.00:

We also support the CMS proposal to exclude the following health professions from the determination of PLI relative values:

• Certified clinical nurse specialist
• Clinical laboratory
• Nurse practitioner
• Multi-specialty clinic or group practice
• Physician assistant
• Physiological laboratory (independent)

We oppose the CMS proposal to crosswalk certified registered nurse anesthetists (CRNAs) from the "all physicians" category (currently 3.04). Clearly, a cross-walk to anesthesiology (currently 2.84), is more logical. It makes no sense for CMS to assume that the risk factors for CRNAs exceed the risk factors for anesthesiologists.

There are three surgical specialties that are adversely affected by faulty crosswalks. They are described below.

• For reasons that are not provided, CMS proposes to continue the improper use of non-surgical and surgical risk factors of 4.08 for colorectal surgery. As we have stated in past comments, we recommend that CMS crosswalk colorectal surgeons to general surgery with the non-surgical and surgical risk factors of 6.13.

• CMS proposes a nonsurgical risk factor of 2.15 and a surgical risk factor of 5.63 for the specialty of obstetrics and gynecology. Again, no rationale is provided. We recommend that CMS crosswalk obstetrics and gynecology to surgical oncology with the non-surgical and surgical risk factors of 6.13.

• Hand surgery has a nonsurgical risk factor of 2.15 and a surgical risk factor of 5.63. We recommend that CMS crosswalk hand surgery to orthopedic surgery (without spine) with the non-surgical and surgical risk factors of 8.06.

3. Cardiac Catheterization and Angioplasty Exception. CMS applies surgical risk factors to the following cardiology catheterization and angioplasty codes: 92980 to 92998, and 93501 to 93536. This exception was established because these procedures are more akin to surgical than nonsurgical procedures. CMS proposes that the following CPT codes be added to the existing list of codes under the exception: 92975; 92980 to 92998; and 93617 to 93641. We do not oppose this proposal.

4. Dominant Specialty for Low-Volume Codes. After an extensive and time-consuming review, the RUC's PLI Workgroup recommended using the dominant specialty approach for services or procedures with fewer than 100 occurrences and supplied a list of 1,844 services for CMS review. In the proposed rule, CMS rejects this recommendation.

We fail to understand the agency's objections to this common-sense approach. By their nature, low volume services will show year-to-year variability in the mix of specialties submitting claims. Under the CMS approach, this variability causes the PLI RVUs to change from one year to the next. This is inconsistent with one of the goals of RBRVS, which is to make payments more predictable. We urge CMS to accept the collective judgment of the RUC and use the identified specialty as the dominant specialty for the 1,844 codes that have been reviewed and submitted to CMS.

Multiple Procedure Reductions for Diagnostic Imaging

CMS proposes a new multiple procedure reduction for the technical component (TC) of certain radiology services (and the technical components of related global services). For this purpose, CMS has identified 11 families of imaging procedures by imaging modality (ultrasound, CT and computed tomographic angiography, MRI and magnetic resonance angiography) and by contiguous body area (for example, CT and CTA of Chest/Thorax/Abdomen/Pelvis). When multiple procedures within the same family (not across families) are performed in the same session, Medicare would make full payment for the TC of the highest priced procedure and pay 50 percent of the TC for each additional procedure. This mirrors the policy recently proposed under the Medicare hospital outpatient prospective payment system.

We strongly support this proposal. The concept of reducing payments for second surgical procedures on the basis of efficiencies has been in place for more than 30 years. It is about time that the concept is applied to other services. We encourage CMS to finalize the imaging proposal and identify for next year's proposed rule other imaging and diagnostic services where similar efficiencies are readily apparent.

Oncology Demonstration Project

On August 1, 2005, the CMS Office of External Affairs released a summary of the 2006 proposed rule. The summary included a brief discussion of the 2005 oncology demonstration project that pays physicians who administer chemotherapy in their office an additional $130 per encounter to assess selected patient comfort assessment factors (nausea and/or vomiting; pain; and fatigue).

As described by the CMS Office of External Affairs in its summary, "CMS also discusses the 2005 demonstration measuring quality of care for cancer patients undergoing chemotherapy, and seeks input on the merits of the program and opportunities to evolve the program in order to not only better capture data on the clinical care of patients with cancer, but also to provide support for improvement in the provision of that care."

We oppose continuation of this demonstration as inconsistent with current efforts to build evidence-based medicine into the delivery of high-quality care to Medicare patients. While this particular demonstration has successfully increased Medicare payments to oncologists, it does not appear to have produced clinical data that will have any meaningful impact on the care of cancer patients. Furthermore, beneficiaries are responsible for a 20 percent co-payment for these "services," adding to the financial burden their treatment entails.

Table 42 of the 2005 final rule published on November 15, 2004, showed that the specialties of hematology/oncology would experience a 15 percent increase in total payments as a result of this demonstration. It also showed that the total Medicare allowed charges for these specialties was $1.747 billion. Based on this information, we estimate the cost of this demonstration in 2005 to be more than $260 million. It is not a prudent use of scarce Medicare funds to continue this project in 2006.

Sustainable Growth Rate (SGR)

CMS estimates that the physician fee schedule update for CY 2006 will be reduced by 4.4 percent. This cut comes at a time when practice costs are rising 3.1 percent, as reflected in the revised Medicare Economic Index (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 2005, the total impact is a 7.4 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. We believe that the agency does, in fact, have some discretion in the determination of the update factor, and we 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 SGR. Our reasons for this position are two-fold. As 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, the College believes that CMS' inclusion of the growth of drug prices in the allowed and actual expenditures for physician services contradicts the Medicare statue.

Second, we disagree with CMS's 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 fee schedule spending increases 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, where the assigned PE RVUs are significantly higher. The result of this movement is an increase in actual expenditures compared to the allowed spending growth 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 produced by the resource-based payment methodology.

The Medicare Trustees project that physicians and other health professionals face steep pay cuts (about 26 percent) from 2006 through 2011. If these cuts begin, on January 1, 2006, average physician payment rates will be less in 2006 than they were in 2001, despite substantial practice cost inflation. These reductions are not cuts in the rate of increase, but are actual cuts in the amount paid for each service. Physicians simply cannot absorb these draconian payment cuts and, unless Congress acts, physicians may be forced to avoid, discontinue, or limit the services they provide to Medicare patients. 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 -4.4% cut for 2006 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's 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.

Conclusion

Our comments have focused on the issues of PE RVUs, professional liability insurance, multiple procedure reductions for diagnostic imaging, the oncology demonstration project, and the proposed negative update for 2006. Thank you for the opportunity to comment on these important issues. We look forward to working with you on them during the coming year.

Sincerely,

Thomas R. Russell, MD, FACS
Executive Director

Revised August 22, 2006

ACS Views on Legislative, Regulatory, and Other Issues

Advocacy and Health Policy