On July 1, 2009, the Centers for Medicare & Medicaid Services (CMS) released the advance text of its proposed rule with comment period updating the Medicare physician fee schedule (MPFS) for calendar year (CY) 2010. Most notably, the proposed rule calls for a 21.5% across-the-board reduction in physician fee schedule payments under the statutory sustainable growth rate (SGR) formula. Over the past several years, Congress has repeatedly stepped in to block cuts triggered by the SGR formula, and such efforts are underway as part of broader health reform legislation, although the level of relief, if any, that may be provided is uncertain at this time. In the proposed rule, CMS has exercised its regulatory authority to remove drugs from the definition of “physicians’ services” for purposes of the SGR formula. CMS notes that spending on physician-administered drugs has risen faster than all other MPFS services, contributing significantly to the large projected reductions in future MPFS updates under the SGR formula. While this would not mitigate the projected negative 21.5% update for 2010, it would reduce the number of years in which negative updates are expected. In other policy areas the rule would, among many other things:

• Change the equipment usage assumption for imaging equipment priced over $1 million from the current 50% usage rate to a 90% (which would significantly reduce per procedure practice expense relative value units (RVUs) — and thus the per procedure technical component reimbursement — for services using such imaging equipment) and begin to implement the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) provision mandating an accreditation process for entities furnishing certain non-hospital advanced diagnostic testing procedures by January 1, 2012;
• Expand the measures and measure groups that eligible physicians can report under the Physician Quality Reporting Initiative (PQRI), allow physicians to report data on PQRI measures through a qualified electronic health record product, and establish a new process for group practices to be considered successful electronic prescribers.
• Refine malpractice RVUs to redirect payment to physicians with the highest malpractice costs;
• End payments for consultation codes and instead require use of evaluation and management codes;
• Amend the "stand in the shoes" standard for considering compensation arrangements under Stark;
• Establish a process for submitting claims for damages caused by the MIPPA provision terminating contracts awarded in 2008 under the durable medical equipment, prosthetic, orthotic and supplies (DMEPOS) competitive bidding program, and make changes in the “grandfathering” rules for noncontract suppliers;
• Implement MIPPA provisions that provide Medicare coverage of cardiac and pulmonary rehabilitation services and chronic kidney disease (CKD) education;
• Revise Medicare end stage renal disease facility (ESRD) rates, including updating the drug add-on adjustment (using a refined methodology for projecting growth in drug expenditures), the wage index adjustment, and the ESRD wage index floor;.
• Make changes to the Part B drug competitive acquisition program designed to better define certain aspects of the program and minimize the administrative burden for participating physicians and vendors; and
• Require authorized compendia used in determining medically-accepted indications of drugs and biologicals used off-label in an anti-cancer chemotherapeutic regimen to have a transparent process for evaluating therapies and for identifying potential conflicts of interests.

The official version of the rule will be published in the Federal Register on July 13, 2009, and comments will be accepted until August 31, 2009.