Proposed Medicare rule cuts physician payments

A proposed rule released yesterday by the Centers for Medicare & Medicaid Services (CMS) would implement a 9.9 percent cut in physician payments in 2008. The cuts are required by the sustainable growth rate formula specified in the Medicare statute.
The rule also includes the addition of certain ophthalmologic imaging procedures to the list of procedures that would be subject to the Deficit Reduction Act of 2005 (DRA) provision, that caps payment for the technical component of imaging procedures at the payment amount under the hospital outpatient prospective payment system. The rule modifies several physician self-referral provisions to close loopholes that have made the Medicare program vulnerable to abuse and modifies enrollment standards for Independent Diagnostic Testing Facilities (IDTFs).

Not surprisingly, the proposed rule is not welcome by the medical community. "Today's release of the proposed 2008 Medicare physician payment rule serves as yet another reminder of the need for congressional action to stop scheduled payment cuts to physicians,” according to Cecil B. Wilson, MD, American Medical Association Board Member in a statement on the AMA’s website. “Next year alone, Medicare will cut payments to physicians by 10 percent. Over nine years the cuts swell to 40 percent, while medical practice costs increase 20 percent. The numbers just don't add up.”

Congress set aside $1.35 billion last year that Wilson says could be used to reduce the scheduled 2008 pay cut. “The AMA and 85 other physician and health professional organizations sent a letter strongly urging the Administration to use this money to help Medicare physician payments keep pace with increases in practice costs. The Medicare Payment Advisory Commission (MedPAC) made a similar recommendation," said Wilson. "In today's rule, CMS has chosen to spend all of the money to provide just 1.5 percent to 2 percent to physicians who report on certain quality measures.”

"The AMA is extremely disappointed in this short-sighted decision. Today, Medicare pays doctors the same as it did in 2001. More than 60 percent of doctors say they will be forced to limit the number of new Medicare patients they can treat when the cut goes through. Seniors' access to health care is in jeopardy," he said.

If 9.9 percent payment cut goes into effect, “it will have a huge negative impact for radiology,” said Angela Choe, economics director for the American College of Radiology. The high utilization rate of imaging procedures has been under focus for the past couple years, she said so the ACR is looking at the issue. "We are looking at specific CPT codes and the impact on radiologists at the CPT code level," she said. Studies need to be conducted that look at who is ordering all the exams and which are appropriate and which are not. The ACR is looking at the self referral provisions and the IDTF more closely to see what CMS is proposing,” said Choe. “Those are the big issues for us. I’m sure the ACR will be working with other medical specialties to see what we can do about that cut for next year.”

The 2008 proposed rule includes: existing quality measures (pay for performance) from the AQA Starter Set, other measures from the National Quality Forum (NQF) Ambulatory measure set, and new quality measures currently being developed with input from American Medical Association (AMA) Physician Consortium for Performance Improvement (physician measures), of which ACR is a participant. This rule also proposes to retain the 2007 Physician Quality Reporting Initiative (PQRI) measures to the extent that they have been NQF-endorsed.

“This proposed rule builds on the changes the Centers for Medicare & Medicaid Services made last year to pay more appropriately for practice expenses and to transform Medicare into an active purchaser of higher quality services, rather than just paying for procedures,” said acting CMS Administrator Leslie V. Norwalk, Esq., in a press release.  “It also includes an important new initiative to encourage the use of electronic prescribing to improve the speed and accuracy of care furnished to beneficiaries, as well as proposals for additional quality measures for use in the Physician Quality Reporting Initiative in 2008.”
Norwalk said that Congress has intervened for the past five years to prevent physician pay cuts. “CMS will continue working with Congress as well as physician groups to identify payment methods that help improve the quality and efficiency of care in a way that is cognizant of the costs to taxpayers and to Medicare and its beneficiaries. The Medicare program needs to compensate physicians appropriately for the services they provide to people with Medicare. But how the program pays also matters. We think the early work on the PQRI program is one of those reforms that could help lead us to a point where we can promote better quality care and more efficient care.”

  • Other provisions in the proposed rule include:
  • Updating the Geographic Practice Cost Indices (GPCI) to reflect more recent data.
  • Revising certain physician payment localities according to one of three proposed options.
Using the PAQI, created by Tax Reform and Health Care Act of 2006 that provides $1.35 billion for physician payment and quality improvement initiatives, to extend voluntary quality reporting bonus payments into 2008.

Comments will be accepted on the proposed rule until August 31, 2007, and a final rule will be published later in the fall. The final rule will be effective for services on or after January 1, 2008.

The proposed rule (CMS-1385-P) can be viewed on the CMS website at: