The Centers for Medicare and Medicaid Services (CMS) released proposed rules on July 1, 2011, that would update Medicare payment rates and policies under the 2012 Physician Fee Schedule (PFS), significantly expand the potentially misvalued services initiative, and impact various physician incentive programs.  This newsletter highlights several of the proposed changes to Medicare payment policies under the 2012 PFS that may affect physicians and hospitals.

Payment Reduction Policy for Multiple Advanced Imaging Procedures

CMS proposes extending the multiple procedure payment reduction policy to also include the professional component (PC) of certain advanced imaging services.  CMS believes this extension reflects efficiencies in physician work, particularly in pre- and post-service periods when a physician provides a patient with more than one imaging service in the same day.  Accordingly, under the proposed rule, full payment would be made for the PC of the highest-paid procedure, but a 50 percent payment reduction would attach to both the technical component and the PC of additional advanced imaging services furnished in the same session to the same patient on the same day.

Medicare Telehealth Services

CMS proposes two changes to Medicare telehealth services.  First, CMS proposes adding smoking cessation counseling to the list of Medicare telehealth services for the 2012 PFS.  Second, CMS proposes modifying the current process for adding services to the Medicare telehealth list.

Payment for the Technical Component of Physician Pathology Services

When a hospital uses an independent lab for physician pathology services furnished to inpatients, Medicare currently pays both the hospital, through bundled payments, and the lab for the technical component (TC) of the service.  Although CMS attempted to revise this payment method twice by issuing final rules that only paid hospitals for the TC, each time Congress responded with legislation that continued payment to both hospitals and independent labs.   Accordingly, subject to Congressional action, CMS proposes that an independent lab may not bill Medicare for the TC of physician pathology services furnished to hospital inpatients or outpatients on or after January 1, 2012.

Medicare Payment for Annual Wellness Visits

The Affordable Care Act expands Part B coverage to include payment under the PFS for Annual Wellness Visits (AWV) that provide personalized prevention plan services.  Under the Act, the newly-covered AWV must include a health risk assessment (HRA), which the Act describes as an evaluation tool used to establish a patient’s personalized prevention plan.  Although Medicare coverage for qualified AWV became effective on January 1, 2011, the Act provided additional time for the Secretary to establish guidelines for HRAs.  CMS has now proposed a definition for an HRA.

CMS proposes defining an HRA as an evaluation tool that meets several administrative and substantive requirements.  Administratively, a beneficiary or health professional must be able to complete an HRA prior to or as part of an AWV in no more than twenty minutes and an HRA must take into account special communication needs, including limited English proficiency.  Substantively, an HRA must collect self-reported information about the beneficiary and address, at minimum, the following topics:

•  Demographic data, including age, gender, race, and ethnicity;
• Self-assessment of health status, frailty, and physical functioning;
• Psychological risks, including depression/life satisfaction, stress, anger, loneliness/social isolation, pain, and fatigue;
• Activities of daily living, including dressing, feeding, toileting, grooming, bathing, and physical ambulation, which includes balance/risk of falls; and
• Instrumental activities of daily living, including shopping, food preparation, using the telephone, housekeeping, laundry, mode of transportation, responsibility for personal medications, and the ability to handle finances.

To incorporate the use of HRAs, CMS proposes using a completed HRA as the foundation for completing a beneficiary’s AWV.  Thus, beginning in 2012, the results of a beneficiary’s HRA would be reviewed and taken into account during the beneficiary’s AWV.  Additionally, CMS would require that any written screening schedule established during the AWV include and take into account the beneficiary’s HRA.

The 3-Day Payment Window Policy

The three-day window payment policy or three-day policy provides that services furnished to Medicare beneficiaries by a hospital during the three days preceding an inpatient admission should be considered operating costs of inpatient hospital services and should be included in the hospital’s payment under the Hospital Inpatient Prospect Payment System (IPPS).  Specifically, the three-day policy covers all diagnostic services and admission-related non-diagnostic services provided by a hospital or any entity, including physician practices, wholly owned or operated by a hospital.

CMS proposes to make payment only to a hospital under the IPPS for the technical aspects of diagnostic and/or admission-related nondiagnostic services provided during the three-day window by a physician practice wholly owned or operated by the hospital.  Accordingly, such a physician practice would only receive payment under the 2012 PFS for the professional component of covered services with CPT/HCPCS codes that have a technical component/physical component split.  For covered services without a split, the physician practice would receive payment under the 2012 PFS at the facility rate, a lower payment rate that takes into account payment for the technical aspects of the service made directly to the hospital under the IPPS.  Furthermore, CMS proposes applying the same changes to preadmission diagnostic and admission-related nondiagnostic services provided as part of a global surgical package if the date of the actual surgical procedure falls within the three-day window.

Under the proposed rule, the hospital would be responsible for notifying the physician practice of related inpatient admissions for beneficiaries served by the practice, but the physician practice would be responsible for ensuring its billing complies with the three-day policy.

CMS will issue final changes by Nov. 1, 2011. Additional information, including CMS issued fact sheets addressing the proposed expansion of the potentially misvalued services initiative and changes to physician incentive programs, can be found online at www.cms.gov

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