July 19, 2011, the Centers for Medicare & Medicaid Services (CMS) published its proposed update to the Medicare physician fee schedule (MPFS) for calendar year (CY) 2012. Most notably, the proposed rule calls for a negative 29.5% update for 2012 under the statutory sustainable growth rate (SGR) formula. For 2012, CMS projects a conversion factor of $23.9635, compared to the 2011 conversion factor of $33.9764. While Congress is expected to consider legislation to advert the upcoming cut, as it has in previous years, the scope, timing, and outcome of any such legislative “fix” is still speculative. The sweeping proposed rule includes numerous other policy proposals, which are summarized after the jump.

• CMS has made a proposal that is very controversial in the industry 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 of the service, to the professional component (physician interpretation) of the service. If finalized, Medicare would pay 100% of the technical and professional component for highest-paid procedure, while the payments for the technical and professional component of the second and each additional imaging service done on the same patient during the same session would be reduced by 50%. CMS also has requested comments on more expansive reduction 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 proposes to updates 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 percent 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 is also proposing a number of changes to the manufacturer ASP reporting template.
• CMS proposes to update 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 proposes quality and cost measures for a new value-based modifier, mandated by the Affordable Care Act (ACA), that would reward physicians for providing higher quality and more efficient care. CMS is proposing to use CY 2013 as the initial performance year for purposes of adjusting payments in CY 2015. Payments under the value-based payment modifier provision will be risk-adjusted and budget-neutral.
• Among many other things, CMS identifies a variety of potentially misvalued code and proposes a new public nomination process under which the public could nominate potentially misvalued codes and submit documentation supporting the need for review. CMS also proposes changes in how it adjusts payment for geographic variation in the cost of practice; revisions to how it updates services available through telehealth; updates to the productivity adjustment for ambulatory surgical center (ASC), ambulance, clinical laboratory, and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) fee schedules; and clarification of the applicability of the “3-day payment window” policy to certain services furnished in a wholly owned or wholly operated physician practice. CMS also seeks comments on physician activities and the associated resources involved in physician provision of effective care coordination surrounding a hospital discharge.

Comments on the proposed rule will be accepted until August 30, 2011.