Congress passes another temporary payment fix

Last night, Congress passed legislation staving off the 21 percent Medicare cuts until June 1 — another temporary fix to the SGR-based payment formula.

This vote was the latest of several moves to push back the cuts. Twice this year, CMS has had to step in and tell contractors to hold claims for 10 business days until Congress can pass a fix. The most recent period ended this week.

And once that temporary fix expires again, Congress can pass another short-term solution. Or perhaps it is really time to change the flawed SGR formula once and for all?

Trendspotter: Health Reform Will Be Mixed Bag for Physicians

By Ken Terry

The historic reform bill that Congress passed on Sunday will immediately affect physicians, but the impact will be much greater in the long term.

First, some expansion of coverage will occur within six months of President Obama’s signature on the bill—whether or not the Senate adopts an accompanying measure that would add House-sponsored changes. The bill will immediately allow parents to cover their young adult children and will prohibit children from being denied insurance because of their health status. Adults can’t have their coverage dropped when they get sick, and people who can’t get coverage because of their health condition will be eligible for beefed-up high risk insurance pools. All of these measures, coupled with small business tax credits for buying insurance, should reduce the number of patients who can’t pay their bills by the end of this year.

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The really major impact, however, will come in 2014, when the big Medicaid expansion and the individual mandate to purchase insurance kick in. By 2019, these provisions will expand coverage to an estimated 32 million people, providing physicians with many more insured patients.

The health insurance exchanges for uninsured individuals and small businesses will also be launched in 2014. Health plans that participate in those exchanges will be required to offer a minimum level of benefits, and catastrophic plans will be available only to those under 30 and those who are exempt from the mandate to buy coverage. Moreover, people who have skimpy plans at work and/or who pay more than 10 percent of their income for it will be able to buy insurance through the exchanges. The plans offered in these government-sponsored markets will also have fairly low out of pocket maximums. All of these provisions, again, will increase the number of patients who are insured and will therefore be able to afford your services—assuming you take Medicaid.

On the other hand, the expansion of coverage will lead to a massive increase in consumer demand that physicians will be expected to handle a few years from now. The legislation does include provisions to increase the supply of primary care, and recent increases in primary-care reimbursement by Medicare—albeit at the expense of specialists—should begin to attract more doctors to the primary-care fields. But much more needs to be done. For one thing, the debt burden of new residency graduates must be reduced if we expect more of them to become, say, internists rather than endocrinologists.

There are also cost control provisions in the bill—mainly pilots of new Medicare payment approaches--that could lead to lower reimbursement for physicians. Whether it’s accountable care organizations, payment bundling, or value-based purchasing, the days of unrestricted fee for service are drawing to a close. Many physicians will be unhappy about this. They don’t want to take financial risk, either alone or in tandem with other physicians and hospitals. But some kind of quality-based or budget-based approach to reimbursement, both by government and private payers, is inevitable, because the current level of cost growth is unsustainable. This will probably mean that more physicians will go to work for hospitals, and that small private practices will become less viable. But market forces are already pushing health care in both of those directions.

Meanwhile, Congressional leaders have promised the AMA that they will enact some kind of “fix” to prevent physician Medicare payments from being cut 21 percent this year and more later on. Presumably, they will find some savings in the overall national budget to cover the $200 billion plus cost of that fix over 10 years. But that is isn’t part of the reform legislation that just passed or the reconciliation bill that is now before the Senate.

Obviously, the payment method that has Medicare has used to reimburse physicians for the past decade is not viable and must be replaced. Congress’s last-minute passage of bills to prevent pay cuts to doctors, year after year, is ample proof of that. But there’s no chance that Congress will simply decide to give physicians what they want under fee-for-service Medicare. So get ready for changes in how you’re paid by both Medicare and private payers. This is no longer going to be your father’s healthcare system.

More on Medicare payment shenanigans

In case you missed the latest in the Medicare payment shenanigans in Washington, the Senate voted again last night to delay the 21 percent cuts. (This after Sen. Bunning blocked the bill last week.)

Now, Congress has until April 1 to fix the flawed payment formula.

From AMA President J. James Rohack, MD: “Physicians are outraged by the Senate’s failure to act before the March 1 deadline, as their patients and practices are hurt by the continued instability in the Medicare system.”

He continues to say, “The vicious cycle of short-term delays … must come to an end.”

Medicare payment cut update

Late last week, the clock was ticking for Congress to pass legislation to stave off the 21 percent Medicare payment cuts, which were to go into effect today.

But they left for the weekend before doing so, surely leaving many practitioners in a panic about the impending cuts and their own future with accepting Medicare patients.

Then, this morning the news is that CMS delayed the physician cuts themselves.
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So the issue was that the Medicare payment fix was part of a larger jobs bill that would have extended unemployment benefits and federal subsidies for health premiums. But Sen. Jim Bunning, a Republican from Kentucky, blocked the bill, saying it should be paid for rather than added to the deficit. With him refusing to relent, the NY Times explains, Dems will have to move to override his objections, but that couldn’t happen until early this week.

This morning, HealthLeaders Media reports that CMS ordered contractors to hold claims for 10 days, which temporarily halts the pay cut. This gives CMS and Congress 10 days to fix it. CMS also said they don’t expect this affect provider cash flow.

How do you feel about accepting Medicare?

Will you stop accepting Medicare because of the looming rate cut?

Time is running out for Congress to step in and block a 21 percent Medicare reimbursement rate cut set for Monday. Some docs are saying they will stop taking Medicare patients, Kaiser Health News reports.

The AMA continues their intense lobbying effort to have Congress repeal the cuts and the faulty SGR payment formula on which the rates are based. But in the meantime, they are also providing information to their members, including how to remove themselves from the Medicare program and help their patients find other doctors, AMA according to CNN.

If you’re losing money every time you see a Medicare patient, why keep seeing them? Primary-care physician and blogger Kevin Pho (KevinMD) put it this way: Duty and conscience. He references fellow doc and blogger Dr. Robert Lambert’s post on the topic. Dr. Lamberts writes:

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“So why in the world do I accept M/M still? Why would I continue to make my life so difficult? Two words: duty and calling. I view my seeing M/M patients as a social responsibility (especially Medicare). These people need to be seen and they deserve good care, and despite the hassle and drain on income they cause, I make a reasonable income. So far.”

Dr. Lamberts says his conscience and tolerance of pain keep him accepting Medicare, but that he is sympathetic to docs who drop insurance and Medicare. For some, the conscience isn’t enough to stay in business.

Congress has consistently stepped in in the past to stave off the payment cuts, most recently just a few months ago to extend the deadline to March 1. But what if they fail to act this time? What will you do? How do you feel about accepting Medicare patients?

Trendspotter: RACs Are Now Encouraged to Search For Fraud

There’s good reason for physicians to be worried about Medicare’s new Recovery Audit Contractors, better known as “the RACs.” Like auditors for Medicare carriers, the RACs seek to recover money for the government by finding evidence of overpayments to hospitals and physicians. What makes these four private companies different from traditional auditors is that they’re being paid a percentage—9 to 12 percent—of whatever they recover from providers. (See “Medicare’s New Bounty Hunters” in the current issue of Physicians Practice.)

While the January 1 launch of the permanent, nationwide RAC program was a wake-up call for providers, there hasn’t been much concern that the RACs would actively seek out fraud. They are supposed to forward fraud cases to CMS, but they have no financial motivation to ferret it out, says Jessica Gustafson, a Southfield, Mich.-based attorney who specializes in Medicare audits. “The financial incentive is for them to do the audit,” she points out, because that’s how they make money.

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But something in that equation changed recently. CMS has decided to provide formal training to the RACs on how to identify fraud and where to refer fraud cases. It is also developing a database to track fraud referrals. Needless to say, this will give the contractors’ personnel an extra incentive—although not yet a financial one—to look for fraud wherever it may lurk.

CMS chose this course after the Office of the Inspector General (OIG) in the Department of Health and Human Services examined what the RACs were doing about fraud—which was not much. During the three-year pilot that preceded the current program, an OIG report says, the RACs turned over evidence of fraud to CMS in only two cases. CMS wasn’t aware of these cases, according to the report, but has now forwarded them to OIG for further development.

OIG’s interest reflects the Obama Administration’s crackdown on fraud and abuse in the Medicare and Medicaid programs. “The government thinks they can whack close to 10 percent of their healthcare spending by nailing people for fraud,” says David Glaser, a healthcare attorney in Minneapolis who defends physicians against Medicare audits. “So concern is warranted, because they’re coming after you and it’s a way of reducing healthcare costs that doesn’t offend anyone except physicians.”

When does a pattern of improper coding become fraud? “The majority of audits involve a pattern of medically unnecessary services,” says attorney Abby Pendleton, one of Gustafson’s colleagues. “That’s a common reason for denial of claims. When does it rise to the level of fraud and abuse? It’s got to be pretty extreme.”

The government’s definition of fraud is vague, says Glaser. If a single claim error is viewed as an honest mistake, but a series of errors is regarded as fraud, he notes, that definition ignores the likelihood that someone who makes one mistake is likely to repeat it. “Say a lab had one code wrong a couple hundred times. Should the false claims law apply?” He has also seen an overpayment of $150,000 to one doctor regarded as evidence of fraud, while another physician who got a $3 million overpayment merely had to refund it.

In any case, the RACs are still less likely to turn up fraud than a Medicare auditor would be. The OIG report notes, “We recognize that RACs are not responsible for identifying potential fraud; however, we believe that there may be a disincentive for RACs to refer cases of potential fraud because they do not receive their contingency fees for cases determined to be fraud.” Let’s hope that it remains that way: the RACs should not have a financial incentive to find fraud and turn in physicians who may have made honest mistakes.

Meanwhile, the government needs to develop a better definition of fraud and a more reliable method of identifying it. Certainly, some providers are cheating the government, and they should be caught and punished. But especially when private contractors are enlisted in this effort, there is a danger that physicians may be wrongly accused unless CMS carefully supervises the anti-fraud effort.

Don McDaniel: Health reform death spiral

I gave a speech in early January 2010 to a group of bankers and accountants to discuss the impact of proposed health reform on business. Everyone is nervous about what’s coming down the pike, and the average business owner (or even the average business advisor) doesn’t have the time or the proclivity to dig into reform legislation to understand how it might affect them — it seems our legislative process is geared to obfuscation.

As I thought about health reform and how it might affect business, I started to focus on the impact on one of my favorite small businesses: the physician practice. It seems that even without reform in the offing, the physician-entrepreneur is moving toward extinction — how many businesses can, or want, to operate in an environment where revenue is largely fixed, heavily regulated — sort of like a utility — and highly dependent mostly upon factors outside the control of the entrepreneur, and operating and capital expenses are rising every year.
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So, cash flow is being squeezed from every conceivable angle, the government is mandating purchase of expensive information technology (which mostly benefits others that aren’t contributing to the purchase), and practicing physicians in many states deliver services every day under the specter of being sued.

What else could happen to make things even peachier? How about health reform, which is really insurance reform, which is really focused on expanding coverage for the uninsured?

Here’s one scenario from a particularly contrarian observer (me) that nonetheless has legs. As health reform will be paid for largely on the back of reductions in the Medicare program — almost $700 billion in cuts over the next 10 years — it seems an inevitability that the Medicare program will continue devolving into one of the poorest payers for physicians and hospitals, second only to the Medicaid program.

And, oh by the way, a lot of the proposed coverage expansion in the Senate bill will manifest as new Medicaid enrollees — yes, that’s right, the program that is busting the budgets in states all across the country, will be expanded. So, we’ll have growing public sector programs, at the expense of commercial insurance enrollment, which is today subsidizing the underpayments from Medicare and Medicaid.

Anyway as FFS reimbursement for Medicare (and Medicaid) continues to degrade, physicians, especially primary care physicians, will vote with their pocket books and decide to, in the short run, drop out of public sector programs, and in the longer term, those historically groomed to practice medicine are going to start deciding to choose another career path — one without frivolous malpractice risk, crazy student loans, ever-growing expenses and fixed revenue.

That seismic workforce shift will further drive structural physician shortages, creating a lot of upward pressure on prices (i.e. outsize growth in expenditures) forcing the dreaded r-word – explicit rationing. Get ready to queue-up for that procedure!

Don McDaniel, president and CEO of Sage Growth Partners LLC, is an entrepreneur, economist, technologist, educator, speaker, and writer. He is a skeptical contrarian who writes about the power of free markets, disruption, innovation, and technology in healthcare.

Trendspotter: Obama campaign against Medicare fraud emboldens RACs

By Ken Terry


Since last March, the domain of Medicare’s new Recovery Audit Contractors (RACs) has expanded from four states to nearly the whole country.

During the three-year pilot that preceded this expansion, the RACs focused mostly on hospitals, and 85 percent of the $900 million-plus in overpayments that were returned to the Medicare trust fund from 2005 to 2008 came from hospitals. Nevertheless, some experts warn that the RACs will eventually pay more attention to physician practices. And, with the Obama administration ramping up its rhetoric against Medicare “fraud and abuse,” the RACs are getting plenty of encouragement.
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President Obama announced the new direction in his healthcare address to Congress in September. “The only thing this [reform] plan would eliminate [from Medicare] is the hundreds of billions of dollars in waste and fraud, as well as unwarranted subsidies in Medicare that go to insurance companies,” he said.

Then, in November, the White House announced that the Centers for Medicare and Medicaid Services (CMS) had made $54.1 billion in improper payments in fiscal 2009, and that the number of erroneous payments by the fee for service Medicare program had roughly doubled to $24.1 billion from the previous year’s level. As a percentage of total Medicare fee for service payments, that represented 7.8 percent, compared with 3.6 percent in 2008. The implication was that if these improper payments could be eliminated, the galloping rise in Medicare costs could be curtailed.

However, as White House Budget Director Peter Orszag quickly acknowledged, the apparent increase in Medicare overpayments was largely due to a change in accounting methods. For example, he said, payments on claims supported by poor documentation or illegible signatures were now being regarded as errors; before, they had generally been disregarded. And this is where the RACs may see an opening to harass physicians who have submitted Medicare claims in good faith for services they actually performed.

According to David Glaser, a Minneapolis attorney who specializes in defending physicians against Medicare audits, the RACs “are nailing people on things like unsigned notes that don’t necessarily take a lot of work. It’s clearly unfair to the doctors, because you’re fighting over that stuff even though there’s no doubt the service was provided. And recently, the RACs have been hinting that if your signature is illegible, that’s a basis for a denial.”

Then there’s the small matter of the RACs’ contingency fees for recovering government money. Those range from 9 percent to 12.5 percent of the funds they collect, depending on the region. This bounty hunting, which Glaser calls a “legitimate concern” for doctors, reflects another new approach of the Obama Administration. For example, the Office of Civil Rights in the Health and Human Services Administration is now empowered to support its investigation of HIPAA privacy violations with a portion of the fines it imposes on physicians and hospitals.

The RACs’ bounty hunting may have one positive aspect, Glaser notes. If the RACs go after physicians for minor rule violations and most of the doctors win on appeal, the RACs won’t get any money in those cases. “So that holds out some hope that they’ll be more rational than the past Medicare audits have been,” he says.

In any case, you should remember that Medicare carriers are still actively auditing physician claims, as well. So, even if the RACs don’t aggressively pursue physicians for some time, you could still feel the sting of an auditor’s letter. And, if the government continues its aggressive campaign against Medicare fraud, those audits might occur more frequently. So mind your Ps and Qs.

Ken Terry is a New Jersey-based freelance writer and the author of the book "Rx for Health Care Reform." In his weekly Trendspotter column, Ken is looking out for trends and changes that may affect your practice.

Update on the Senate debate

In case you blinked in the past few days, Senators were considering — then scrapped — expanding Medicare to people starting at age 55.

They ditched the idea almost as fast as they pitched it, thanks to Sen. Joe Lieberman’s comments on television Sunday. He said he wouldn’t support the healthcare legislation if it included Medicare expansion or a public option.
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So there went those provisions. The Democrats need his vote to pass the legislation, so they agreed to do away with those parts of the legislation.

Lest you think they have gutted the bill of controversial items, the WSJ health blog notes that there is still plenty to fight over: “People will still be required to buy insurance or pay a penalty. Insurers will still be required to sell policies to people with pre-existing conditions. And some people who don’t get insurance through work will still get federal subsidies to help them afford insurance, with subsidies sliding based on income.”

In other news, a provision that would allow the import of prescriptions drugs was narrowly defeated.

And an amendment that would have banned the sale of doctors’ prescription data for marketing purposes is still alive but has been shelved. Staffers have said it is unlikely to be a part of the healthcare overhaul.

Podcast: CMS 2010 update

Looking for more information about CMS' final physician fee schedule for 2010?

For this month's podcast, I spoke with consultant Betsy Nicoletti about changes to consultation codes, e-prescribing, and the overall 21 percent cut -- and what it all means for your practice.

More on the CMS fee schedule and a payment fix

On the heels of CMS’ release of the final physician fee schedule for 2010 on Friday, AMA renewed their cries for a permanent fix to the flawed payment formula.

“Permanent repeal of the payment formula is an essential element of comprehensive reform to improve the health system for patients and physicians,” AMA’s President J. James Rohack, MD, said in a statement.

But before you decide to stop taking Medicare patients, a fix could be on its way. Read more

Congress has historically stepped in and passed legislation stopping the drastic cuts, and it looks like this year is no different. The House Ways and Means Committee introduce legislation on Thursday that would stop that 21 percent reduction in 2010 — and “replace the physician payment formula with a more stable system that ends the unrealistic cycle of threats of ever-larger fee cuts followed by short-term patches,” according to a committee statement about the bill.

The bill would replace SGR (the Sustainable Growth Index, which Medicare rates are based on), with a formula that, according to the committee:
- Removes items such as drugs and lab services not paid directly to practitioners from spending targets;
- Allows the volume of most services to grow at the rate of GDP plus 1 percentage point per year (compared to GDP without any adjustment today);
- Allows the volume of primary and preventive care services to grow at GDP plus 2% per year;
- Encourages coordinated, innovative care by allowing Accountable Care Organizations to be responsible for their own growth paths, irrespective of reductions or increases that apply elsewhere in the system.

A permanent fix has been batted around in Washington for the last couple weeks, and fizzled in the Senate, so it remains to be seen if this time it will move forward.
Still, many physicians are getting off the rollercoaster and saying no to Medicare patients.

Meanwhile, the Medicare rule also formalizes the removal of physician-administered drugs from the formula, according to AMA, and Rohack called this “a long overdue step on the road to permanent reform.” CMS says this will reduce the number of years in which physicians may see a negative update.

CMS also will stop making payment for higher-paying specialists’ consultation codes. The savings would be redistributed to increase payments for E&M services, with an eye toward increasing payments to primary-care physicians.

Among other changes, the fee schedule also includes changes to the PQRI program. For 2010, participants can earn 2 percent of total allowed charges. CMS will add 30 individual PQRI measures and add an EHR-based reporting mechanism. For more, check out their fact sheet.

There's a lot there, so I welcome your thoughts here on the changes.

CMS finalizes physician fee schedule

CMS came out with their final physician fee schedule this afternoon, and yep, that whopping 21 percent cut is there.

From the CMS press release:

“The Administration tried to avert the pending fee schedule cut in the FY 2010 budget proposal that it submitted to Congress, and remains committed to repealing the SGR,” said Jonathan Blum, director of the CMS Center for Medicare Management. “In the meantime, CMS is finalizing its proposal to remove physician-administered drugs from the definition of ‘physicians’ services’ for purposes of computing the physician fee schedule update. While this decision will not affect payments for services during CY 2010, CMS projects it will have a positive effect on future payment updates.”

So far, Congress’ attempts to fix the SGR payment formula have fizzled and talk of a long-term solution doesn’t seem to be gaining much traction in Washington. It remains to be see what Congress will do about the 2010 cut in payments, or if a health reform bill with touch it.

We'll have more here on the final rule and the other provisions in there next week.

Congress considering fix to Medicare payment formula

It looks like the flawed Medicare payment system is finally getting some serious attention.

Senate Democrats are planning a vote soon on a bill that would permanently eliminate the sustainable growth rate (SGR), the formula used to determine Medicare payment rates. As you probably know all too well, that formula has and will continue to threaten payment cuts each year. Congress usually steps in at the last minute to reverse the cuts, but a 21 percent cut was looming for 2010, and there has yet to be a permanent fix.
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The bill, introduced last week by Sen. Debbie Stabenow (D-Mich.) and separate from the main three health reform bills, would reset the SGR to zero for 2010 and beyond. This basically means it erases the $245 billion debt accumulated from last-minute fixes to avoid deep payment cuts, according to MedPage Today.

Among the major healthcare reform bills being worked out in Congress, the House bill scraps the SGR and later replaces it with the Medicare Economic Index, and the Senate Finance bill fixes it for just one year. That accounts for some of the cost difference between the bills.

The AMA, which supports the bill, launched a campaign last week including a television ad. “Congress can no longer put a band-aid on the problem,” AMA President J. James Rohack, MD, said in a statement.

But the cost (and the fact that the bill doesn’t really explain how to pay for the $245 billion) and the speed (it’s scheduled for a quick floor vote) has made some skeptical about this solution to the Medicare payment system.

So perhaps there are better ways to fix the SGR, but at least it's getting some real attention in Washington.

Stricter Stark rules take effect today

Stricter self-referral rules go into effect today, prompting many physicians and hospitals to rework or cancel contracts.

The Stark law revisions restrict arrangements where hospitals contract with physician-owned entities to provide ancillary services, such as imaging services. Basically, CMS has expanded the scope of designated health services to cover the entity providing the service (the doctor’s offices), consultant Susanne Madden tells me. (Susanne is writing next week’s PEARLS column on the topic, so be sure to sign up that e-newsletter.)

So, what does this all mean?
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Under the new regulations, doctors are no longer exempt from Stark rules, so it’s as if a physician is billing for his own referral services, Madden says. It’s as if they are sending patients to themselves, where before, it wasn’t considered self-referring.

Now, doctors and hospitals are left to quickly revise those contracts. Hospitals may choose to build out their own imaging services, for example. Or it looks like the hospitals may get creative to be able to contract for these services, as physicians could lease equipment or space.

How does the change effect your practice? What do you think of the expanded Stark rules?

Will Congress have to give up Medicare payment control?

It’s quite a perk and a campaign tool for Congress: setting Medicare reimbursement rates for their local hospitals, doctors and home healthcare centers. (Take, for example, Alaska Republican Ted Stevens who managed to secure a permanent 35 percent increase in Medicare payments for Alaska physicians. How’s that for constituent services?)

Now, President Obama is considering taking that power away from Congress, potentially shifting the control to an independent entity, according to the Washington Post.

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An advisory group might be better willing and able to tackle the skyrocketing Medicare spending. The House’s healthcare proposal announced this week, which Bob blogged about yesterday, doesn’t include ways to stem future Medicare costs.

But opponents argue that Congress will be held accountable, even if the power is taken away, so they should be able to protect the interests of their constituents. What do you think?

(Of course, Medicare reimbursement and reform has been a never-ending debate. In the meantime, check out our story on how to actually make it work for you.)