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On Nov. 1, the Centers for Medicare and Medicaid Services (CMS) released the final 2007 Physician Fee Schedule which set forth payment rates and policies beginning Jan. 1, 2007. Although the overall impact of the new fees and policies is estimated to be a negative 5 percent to all specialties, CMS points out that many physicians will see an increase in reimbursement. However, a closer look reveals that 2007 Physician Fee Schedule is a mixture of good, bad and even ugly news.



The Good (And Bad)

Physicians will receive an increase in reimbursement for evaluation and management services due to increases in the work component of these CPT codes. For example, the work RVUs for an intermediate office visit and for one requiring moderately complex decision making are increasing by 37 percent and 29 percent, respectively.

Leslie V. Norwalk, CMS acting administrator, has stated, "We believe this increase in the work component will encourage physicians to spend more time with their patients, assessing their health status, and educating them about how to live longer, healthier lives."

However, Table 36 of the final fee schedule reflects estimated changes in payment for Evaluation & Management (E&M) Code 99203, office/outpatient visit new to be 10 percent less than in 2006. For E & M Code 99213, office/outpatient visit established, the increase will be 7 percent and for E & M Code 99214, office/outpatient visit established, the increase will be 4 percent.

Based on the tables included in the final fee schedule, it appears that reimbursement for mid-level visits for new patients will actually be at a lower rate than the 2006 schedule.

In addition, practitioners can argue that the work component and reimbursement for evaluation and management services has been undervalued for some time.



The Bad (And Good)

For those practices generating revenues from imaging services, there is not so good news. The final rule implements several provisions affecting payment for imaging services under the fee schedule.

For multiple imaging procedures, the first procedure will receive 100 percent of the fee schedule, while additional imaging procedures performed on contiguous body parts during the same session will receive a 25 percent reduction. This applies to the technical component of the service, which leaves the professional fee intact.

There is a limitation provision for outpatient department payments. A requirement of the Deficit Reduction Act (DRA) of 2005, this provision limits reimbursement for the technical component of certain imaging services to the amount paid to a hospital outpatient department under the Hospital Outpatient Prospective Payment System.

For imaging services subject to both the multiple imaging reduction policy and the outpatient hospital cap, CMS will first apply the multiple imaging adjustment and then apply the outpatient cap. This approach results in higher payments than if the cap were applied first. The final rule includes a list of codes to which the outpatient cap would apply.

Another imaging provision is the addition of nuclear medicine to the list of designated health services under Stark effective Jan. 1, 2007.



The Ugly

The Medicare law includes a statutory formula that will require CMS to implement a minus 5.0 percent update in payment rates for physician-related services. Each of the final physician fee schedules published for the last five years imposed payment cuts based on the current formula for developing fees. The negative update went into effect in 2002. However, in 2003 and through 2006, Congress intervened and temporarily suspended the requirements of the formula.

As of Dec. 1, 2006, congressional leaders had no actions proposed which would prevent the 2007 fee cut from implementation. With the exceptions of family practice, endocrinology, emergency medicine, infectious disease, and pulmonary disease, all other specialties will face reductions ranging from 1 percent to 18 percent. Radiology specialties are among the hardest hit. General practice will see a 3 percent reduction; general surgery a 6 percent reduction; and internal medicine a 1 percent reduction. Hopefully, by the time this article is published, Congress will have stepped in to prevent these reductions in payments to physicians at a time when their expenses continue to rise.

It is important for physicians to communicate with their congressmen about the total inadequacies of the current SGR (sustainable growth rate) formula that serves as the methodology for reimbursing physicians under Part B Medicare services.

Reimbursement to practitioners continues to decline from both governmental and private payors while patients watch their healthcare insurance premiums dramatically rise. Because of reimbursement policies, compensation formulas and shifting agendas, medical practitioners have been forced to continually find ways to provide quality healthcare to their patients while being compensated at a rate that does not cover costs.



Lucy R. Carter, CPA, and Sara S. Lankford, CPA, are principals of Tennessee accounting firm Carter, Lankford CPAs, PC.




February 2007

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