Medicare physician fee schedule (MPFS) payments are scheduled to be cut by 27.4% in 2012 under the Centers for Medicare & Medicaid Services’ (CMS) final rule to be published November 28, 2011. The steep reduction is a result of the statutory Sustainable Growth Rate (SGR) formula. While Congress is widely expected to take action to mitigate the SGR cuts, the scope and timing of any such “fix” is uncertain at this time. If the final rule goes into effect as written, however, the conversion factor for 2012 would be $24.6712, down from the current $33.9764. In addition to updating MPFS rates, the sweeping final rule includes numerous policy provisions impacting many types of providers, including the following:

• CMS has adopted a controversial policy to expand its multiple procedure payment reduction (MPPR) policy for advanced imaging services (computed tomography scans, magnetic resonance imaging, and ultrasound), which now applies to only the technical component (TC) of the service, to the professional component (PC) of the service. Effective January 1, 2012, the advance imaging procedures with the highest PC and TC payments will be paid in full, but the PC payment will be reduced by 25% for subsequent procedures furnished to the same patient, by the same physician — including physicians in the same group practice — in the same session on the same day (CMS initially had proposed reducing the PC by 50%). The TC payment will continue to be reduced by 50%.   Note that in the proposed rule, CMS indicated it is considering more expansive MPPR policies in 2013 and beyond, which could include applying the MPPR to the all imaging services (not just advanced imaging studies) or to the technical component of all diagnostic tests (e.g., tests associated with radiology, cardiology, audiology, procedures furnished in the same encounter). CMS did not finalize any such broader expansion in the final rule.
• CMS is updating certain payment policies for Part B drugs to specify that the average manufacturer price (AMP) substitution policy will apply only when the average sales price (ASP) exceeds the AMP by 5% in two consecutive quarters immediately prior to the current pricing quarter, or three of the previous four quarters immediately prior to the current quarter. CMS will make an AMP substitution only for those situations in which AMP and ASP comparisons are based on the same set of NDCs for a billing code. CMS also is adopting a number of changes to the manufacturer ASP reporting template.
• CMS is updating a number of physician incentive programs, including the Physician Quality Reporting System, the ePrescribing Incentive Program, and the Electronic Health Records Incentive Program. CMS also is adopting performance measures for a new “value-based modifier,” mandated by the Affordable Care Act (ACA), that will reward physicians for providing higher quality and more efficient care. CMS is using 2013 as the initial performance year for purposes of adjusting payments in 2015.
• CMS is taking a number of steps to address payment for “potentially misvalued codes,” including reviewing the value of high-expenditure codes in each specialty and adopting a new public nomination process under which the public can nominate potentially misvalued codes and submit documentation supporting the need for review.
• CMS has formally retracted a widely-criticized policy adopted in the 2011 MPFS rule that required the signature of a physician or qualified nonphysician practitioners on a requisition for clinical diagnostic laboratory tests paid under the Clinical Laboratory Fee Schedule. In withdrawing the policy, CMS cites stakeholder concerns about the many negative practical effects of the policy on beneficiaries and providers, including potential adverse impacts on timely patient care.
• The rule also, among many other things: changes how CMS adjusts payment for geographic variation in practice costs;revises the criteria for updating services available through telehealth; updates the methodology for calculating the productivity adjustment for ambulatory surgical center (ASC), ambulance, clinical laboratory, and durable medical equipment (DME) prosthetics, orthotics, and supplies (DMEPOS) fee schedules; sets the 2012 outpatient therapy cap amount at $1,880; and clarifies the applicability of the “3-day payment window” policy to certain services furnished in a wholly owned or wholly operated physician practice.

Note that CMS will accept comments on a limited number of provisions in the rule, including the interim final relative value units for new, revised, potentially misvalued codes and the physician self-referral designated health services codes, until January 3, 2012.