On July 7, 2008, CMS published its proposed rule to update the Medicare Physician Fee Schedule (MPFS) for calendar year (CY) 2009. The rule, which was issued prior to Congressional passage of H.R. 6331, calls for a 5.4 percent across-the-board cut in 2009 physician fee schedule payments as a result of the statutory sustainable growth rate (SGR) formula. Note that upon enactment of H.R. 6331, MPFS payments for 2009 instead will be increased by 1.1 percent.

The sweeping rule proposes many other policy changes, include the following:

• CMS is proposing to amend the independent diagnostic testing facility (IDTF) performance standards to require any physician or nonphysician practitioners organization furnishing diagnostic testing services (except diagnostic mammography services) to enroll as an IDTF and be subject to most of the IDTF performance standards, including licensure, supervision, and practice location requirements. CMS seeks comments on whether these standards should apply to all diagnostic services or to a subset of services, such as those that require more costly testing and equipment, imaging services generally, or only advanced imaging techniques, such as MR, CT, and nuclear medicine (including PET).
• CMS offers two alternative approaches to revising the anti-markup rule. In brief, under the first alternative approach, the anti-markup provision would apply if the professional component or technical component of a diagnostic test is ordered by a billing physician and is either: purchased from an outside supplier, or performed or supervised by a physician who does not share a practice with the billing physician or physician organization. A supervising or interpreting physician can "share" a practice as an employee or contractor of the single physician or physician group billing the test; otherwise the anti-markup restriction applies. Under the second alternative approach, CMS would continue to apply the anti-markup provisions to the technical and professional components of diagnostic tests performed outside the “office of the billing physician or other supplier,” but CMS would more broadly define the “office of the billing physician or other supplier” to include space in which diagnostic testing is performed provided that it is located in the same building (not including certain mobile vehicles) in which the billing physician or other supplier regularly furnishes patient care. Under this option, CMS also would clarify other aspects of the definition of office of the billing physician with respect to physician organizations and clarify when the anti-markup provision applies to the technical component of a diagnostic test furnished by an outside supplier. CMS is soliciting public comments on a number of specific aspects of the anti-markup provisions, including how to define the term net charge, whether direct billing should be required in certain situations, and the effective date of certain related provisions.
• CMS suggests providing an exception to the physician self-referral rule that would protect remuneration provided by a hospital to physicians on its medical staff under incentive payment or shared savings programs, if specified conditions are met. In proposing these provisions, CMS notes that “the Medicare program and private industry stakeholders are increasingly exploring the benefits of various types of gainsharing, pay-for-performance, value-based purchasing, and similarly-styled incentive payment or shared savings programs that use economic incentives to foster high quality, cost-effective care.”
• CMS proposes expanding the quality measures that eligible professionals may report to qualify for incentive payments under the Physician Quality Reporting Initiative (PQRI), providing new PQRI reporting periods, and allowing PQRI data to be submitted via clinical registries and electronic health records systems.
• CMS outlines its proposed plans to identify and correct potentially misvalued services under the physician fee schedule, including a process to update the prices for high cost supply items that are paid under the practice expense methodology, and a review of services often billed together (which could lead to the application of the multiple procedure payment reduction to additional non-surgical procedures).
• CMS is proposing a series of enrollment and documentation-related changes. Among other things, the rule would require physicians to report to their carrier any changes of ownership, adverse legal actions, or change in practice location within 30 days or face revocation of Medicare billing privileges and the recoupment of Medicare payments from the date of the reportable change. CMS also is proposing that providers and suppliers maintain ordering and referring documentation (including the referring physician’s National Provider Identifier) for 10 years from the date of service, and that physicians and nonphysician practitioners maintain written ordering and referring documentation for 10 years from the date of service. CMS also proposes clarifying the date of effective date of Medicare billing privileges.
• The rule would codify changes to the Part B drug average sales price payment methodology resulting from the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) that went into effect April 1, 2008, including the use of a volume-weighted methodology and revised payment rules for certain inhalation drugs.
• CMS proposes several changes to the competitive acquisition program (CAP) for Part B drugs, including refinement of the annual CAP payment update methodology, changes to the definition of a CAP physician, a relaxing of restrictions on physician transportation of CAP drugs between practice locations, and modification of the dispute resolution process.
• The rule would add new HCPCS codes specific to the telehealth delivery of follow-up inpatient consultations to the list of Medicare approved telehealth services.
• CMS proposes to update the End Stage Renal Disease (ESRD) facility wage index, and proposes no change in the drug add-on payment, although CMS seeks comment on alternative methods to calculate the drug-add on adjustment.
• CMS proposes numerous other policy and payment changes, including refinements to resource-based practice expense and malpractice expense relative value units and geographic practice cost indices; performance standards for mobile independent diagnostic testing facilities; revisions to the conditions of participation and other requirements affecting comprehensive outpatient rehabilitation facilities; technical changes to rehabilitation agency requirements; a solicitation of comments regarding payment for physician certification/recertification for home health services; and a prohibition on payment to suppliers of a continuous positive air pressure device when the supplier, or its affiliate, is directly or indirectly the provider of the sleep test that is used to diagnose a Medicare beneficiary with obstructive sleep apnea.

CMS will accept comments on the proposed rule until August 29, 2008. The text of the rule is posted here.