Unless Congress intervenes again this year, doctors will take a 5% cut in the reimbursement rate when they treat Medicare patients next year.

The reduction, which will become effective Jan. 1, is included in the Medicare Physician Fee Schedule final rule released last week by the Centers for Medicare & Medicaid Services (CMS). The agency expects to pay about $61.5 billion to more than 900,000 physicians and other healthcare professionals in 2007 as a result of the payment rates and policies adopted in the rule.

Another part of the rule, however, says Medicare will pay doctors more for the time they spend talking with Medicare patients about their healthcare and will pay for a broader range of preventive services.

“Medicare feels very strongly that supporting the physician-patient relationship is important,” Ellen Griffith, a CMS spokeswoman, told Medical Device Daily. “Doctors need to be able to spend time with patients. It’s that time when the doctor and patient talk; hopefully it’s the time when the doctor will, if the patient is eligible for preventative services, encourage the patient to take advantage of those services. It is that kind of time when the doctor and patient are communicating.”

Griffith stressed that the 5% rate reduction — which is clearly only slightly less than the 5.1% cut originally proposed — is based on a required formula in the Medicare law. The formula compares the actual rate of growth in spending to a target rate, which is based on such factors as the growth in number of Medicare fee-for-service beneficiaries and statutory or regulatory changes in benefits.

If the actual rate of spending growth exceeds the target rate, the update is decreased; if it is less, the update is increased, Griffith said.

But the American Medical Association (Chicago) has said it will be “relentless in the battle to replace the flawed Medicare physician payment formula.”

Cecil Wilson, MD, AMA board chair, said Medicare physician payments have not reflected annual increases in medical practice costs for the past five years and that current payments are about what they were in 2001.

“We agree that the increases in payments for physician office visits are important, but the overall physician payment cut due to the flawed payment formula will negate any overall payment increase for primary care physicians,” Wilson said. “The rule indicates that family physicians will have an average net payment charge of zero and internalists face a net cut of 1%.”

Since 2003 the formula has called for physicians to see their reimbursement rates cut, but Congress has stepped in each year to suspend the formula. Doctors are crossing their fingers that lawmakers will do the same this year.

“Congress must act during the upcoming lame-duck session to stop the cuts and provide payments that reflect practice costs, so seniors can continue to receive high quality health care,” Wilson said.

There is also concern that the cut could discourage doctors from accepting new Medicare patients next year, he said.

“Physicians are left with choices they do not want to make,” Wilson said, adding that the cuts “are also forcing physicians to make other hard decisions, like reducing staff and postponing investments in health information technology and medical equipment.”

Still, the final rule includes plenty of points the CMS is quick to tout, including a stronger emphasis on the physician-patient relationship.

The rule increases the work component for the RVUs for the face-to-face visits, during which physician and patient can discuss the patient’s health status and the steps that can be taken to maintain or improve the patient’s health.

For example, the work component for RVUs associated with an intermediate office visit — the most frequently billed physician’s service — is increasing by 37%.

The work component for RVUs for an office visit requiring moderately complex decision-making and for a hospital visit also requiring moderately complex decision-making are increasing by 29% and 31% respectively. Both of these services rank in the top 10 most frequently billed physician services out of more than 7,000 types of services paid under the physician fee schedule, CMS said.

“We believe this increase in the work component will encourage physicians to spend more time with their patients, assessing their health status, and educating them about how to live longer, healthier lives,” said Leslie Norwalk, CMS acting administrator.

Also beginning Jan. 1, Medicare will expand its preventive services benefits, as provided for in the Deficit Reduction Act of 2005 (DRA). Medicare will pay for preventive ultrasound screening for abdominal aortic aneurysms (AAA) for at-risk beneficiaries as part of the Welcome to Medicare physical. Caught early, AAA can be dealt with via a number of treatment options, CMS said, but if the AAA ruptures, it can be fatal.

The final rule also exempts the colorectal cancer screening benefit from the Part B deductible, eliminating a potential financial barrier to using the benefit.

“CMS believes that paying more for screening services to detect and treat health problems early will improve the quality of life for Medicare beneficiaries while saving money for both the beneficiaries and taxpayers,” Norwalk said.

The final rule does not finalize the proposals to (1) amend the reassignment regulations to clarify that any reassignment pursuant to the contractual arrangement exception is subject to program integrity safeguards that relate to the right to payment for diagnostic tests; and (2) amend the physician self-referral regulations to place restrictions on what types of space ownership or leasing arrangements will qualify for purposes of the in-office ancillary services exception or the physician services exception to the physician self-referral prohibition. CMS will issue final regulations on these proposals at a later time after further consideration, the agency said.

“CMS remains committed to addressing arrangements that may encourage over-utilization of diagnostic services,” Norwalk said. “However, we want to be careful that we do not interfere with legitimate group practice arrangements that enable Medicare beneficiaries to receive medical services at one location.”

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