On July 15, 2015, the Centers for Medicare & Medicaid Services (CMS) published its proposed rule to update the Medicare physician fee schedule (MPFS) for CY 2016 – the first rulemaking since the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) repealed the sustainable growth rate (SGR) formula.  Under the proposed rule, the 2016 MPFS conversion factor (CF) would be $36.1096, compared with the 2015 CF of $35.9335, reflecting a 0.5% update factor specified under MACRA and a budget neutrality adjustment of 0.9999.  Note that the CF is subject to change in the final rule, however, if CMS does not meet a statutory target for expenditure reductions related to its review of misvalued procedures (discussed below). The proposed rule addresses numerous aspects of Medicare Part B and other CMS program policies.  Highlights include the following: 

  • Numerous provisions in the proposed rule address potentially misvalued services, including both valuation of specific procedures and broader policy issues.  For instance, CMS proposes a list of 118 high-expenditure codes that it believes are potentially misvalued codes.  CMS also is proposing to increase from 50% to 75% the utilization rate assumption used to determine capital equipment costs for radiation therapy services – to be implemented over two years – a change that would  yield  the biggest payment cuts in the proposed 2016 MPFS.  CMS also plans to revalue services that include moderate sedation, and the agency requests comments on practice expense inputs for nonfacility functional endoscopic sinus surgery and nonfacility cataract surgery.
  • The proposed rule would implement a Protecting Access to Medicare Act of 2014 (PAMA) provision that would phase in over two years any decrease of 20% or more in total relative value units (RVUs) for an existing service.  Rather than apply the decrease evenly over two years, CMS proposes to reduce the RVUs by the maximum allowed amount (19%) in the first year, and apply the remainder of the reduction in the second year.
  • CMS discusses at length the methodology it will use to implement a PAMA provision, as amended by the Achieving a Better Life Experience Act of 2014, that directs CMS to meet a 1% target for net reductions in MPFS expenditures resulting from adjustments to misvalued code RVUs in 2016 (the target drops to 0.5% for CYs 2017 and 2018).  If the estimated net reduction is less than the target for a year, then the CF must be reduced.  CMS notes that CY 2016 is a transition year in a process it adopted last year to allow greater public input on proposed changes to RVUs.  Because of the timing of RVU decisions this year, CMS is not incorporating its estimate of misvalued code savings compared to the target into the proposed CF.  Based on misvalued code RVU adjustments identified in the proposed rule, and not including final rule changes, the net reduction would be approximately 0.25% compared to the 1% target.  While CMS could identify additional misvalued codes in the final rule to move closer to the 1% target, the final 2016 CF could potentially be reduced as a result of this provision.
  • CMS requests comments on data that could be used to more accurately value surgical services under its MACRA authority to review services furnished during the global surgery period.
  • The proposed rule would make a series of changes to the Physician Quality Reporting System (PQRS) for 2016 to address gap areas, eliminate topped out or duplicative measures, and identify more robust measures.  If the proposed measures are finalized, there will be 300 PQRS measures for 2016.  CMS also proposes to add a reporting option that will allow group practices to report quality-measures data using a qualified clinical data registry.  In addition, CMS proposes Physician Value-Based Payment Modifier (VM) program requirements for 2018 and changes to the Medicare Electronic Health Record (EHR) Incentive Program clinical quality measure submission requirements.
  • CMS discusses future implementation of major MACRA reforms that will link physician payment updates to quality, value, and participation in alternative payment/delivery models.  In particular, MACRA mandates the development of the Merit-based Incentive Payment System (MIPS) to replace existing physician quality programs beginning in January 1, 2019.  MACRA also encourages providers to participate in alternative payment models (APMs) that focus on coordinating care, improving quality, and reducing costs.  CMS is seeking comments on various MIPS and APM policies in advance of future rulemaking.
  • CMS proposes to base Medicare payment for a biosimilar biological product on the average sales prices (ASPs) of all National Drug Codes assigned to the biosimilar biological products included within the same billing and payment code.
  • The proposed rule would modify Medicare Shared Savings Program regulations related to quality measures, health information technology incentives, and assignment of beneficiaries to accountable care or
  • CMS invites comments on whether to make Open Payments (“Physician Payments Sunshine Act”) data available on the Physician Compare website, linked to individual eligible professional profile pages, in addition to the current posting of payment data on http://www.cms.gov/openpayments/.
  • CMS proposes a series of revisions to current physician self-referral restrictions “to accommodate delivery and payment system reform, to reduce burden, and to facilitate compliance.”  In particular, CMS proposes establishing two new exceptions and clarifying certain regulatory terminology and requirements.  Reed Smith is preparing a separate analysis of these provisions. 
  • The proposed rule includes numerous other policy provisions, including:  new separate Medicare payment for advance care planning services; implementation of a PAMA requirement that physicians who order advance diagnostic imaging services consult with appropriate use criteria via a clinical decision support mechanism; changes to the telehealth services list; refinements to malpractice RVU policies; and clarifications to physician “incident to” rules to, among other things, require the billing physician or practitioner also to be the supervising physician/practitioner.

CMS will accept comments on the rule until September 8, 2015.