Proposed Medicare 2009 Physician Fee Schedule

self-referral related proposals from last year 9s proposed Physician Fee Schedule, it is important to note that CMS indicated in the final CY2008 Physician Fee Schedule published in November 2007 that it believes that it has the authority to finalize the proposed revisions to the self-referral regulations that it has already made without the need for new proposals and additional public comment. There are conflicting reports as to whether CMS believes that it has the authority to expand cstand in the shoes d provisions to indirect compensation arrangements (ventures with physician investment) without the need for additional proposed regulations.<br><br> CMS could finalize last year 9s proposals in this year 9s final Physician Fee Schedule, or elsewhere, and may extend the reach of cstand in the shoes d without providing an opportunity for further public comment. Anti-Markup Provisions Last year, CMS proposed and finalized regulations regarding the mark up of the technical component ( cTC d) and the professional component ( cPC d) of diagnostic tests. In response to complaints that the regulations in their final form created unintended consequences, CMS postponed application of the regulations until January 2009, except as they apply to anatomic pathology.<br><br> In the Proposed 2009 Rule, CMS revisits the anti-markup regulations and proposes two alternative approaches to the anti-markup provisions for diagnostic tests. In these regulations, CMS uses the term cphysician organization d rather than cgroup practice d so that the regulations apply to all medical practices and not just those that meet the Stark definition of a cgroup practice. d CHARLOTTE CHICAGO GENEVA LONDON LOS ANGELES MOSCOW NEW YORK NEWARK PARIS SAN FRANCISCO WASHINGTON, D.C. www.winston.com Under the first approach, CMS would abandon the csite-of- service d approach to applying the anti-markup provision ( i.e.<br><br> , that the services must be performed in the physician 9s office). Instead, CMS would apply the anti-markup provision in all cases where the TC or the PC of a diagnostic testing service is either (i) purchased from an outside supplier, or (ii) performed or supervised by a physician who does not cshare a practice d with the billing physician or physician organization. CMS would interpret cshare a practice d with the billing physician or physician organization to mean a physician who is employed by, or contracts with, a single physician or physician organization.<br><br> "The technician that performs the TC need not be an employee of the billing physician or physician organization. "The physician that supervises the TC must either be an employee or independent contractor of the billing physician or physician organization and the supervising physician only may provide supervision to one physician or physician organization. "Services provided to a free clinic or moonlighting in a hospital emergency department or as a hospitalist would not be taken into account.<br><br> "Recognizing that such a bright-line approach might exclude certain necessary temporary arrangements, CMS is soliciting comments on whether and how it could permit a physician to provide occasional services outside his or her physician organization without precluding that physician from csharing a practice d with his or her physician organization ( e.g., during vacation, maternity leave, illness). Under the second approach, CMS would continue the current csite of service d method of determining whether a physician cshares a practice d with the billing physician. CMS is re- proposing that the anti-markup provision would apply to the TC and PC of non-purchased tests performed outside of the coffice of the billing physician or other supplier. d CMS would make what it terms cclarifications d (really changes) to the current anti-markup provision.<br><br> CMS proposes to cclarify d that to avoid the anti-markup provisions, the diagnostic test must be performed in the same building where the ordering physician (not his or her physician organization) provides substantially the full range of patient care services that the physician generally provides. "The anti-markup provision would apply if either the TC or PC of a diagnostic test is performed or supervised outside of the building where the office of the billing physician is located. "The diagnostic testing need only be located in the same building, and not the same office suite, as the physician or physician organization 9s practice.<br><br> "Two or more group practices or other physician organizations could share a diagnostic service as long as the ordering physician provides substantially the full range of patient care services in that building as the ordering physician generally provides. "Aphysician or physician organization only may bill the lowest of: (i) the performing supplier 9s net charge to the billing physician or other supplier; (ii) the billing physician or other supplier 9s actual charge; or (iii) the fee schedule amount for the test that would be allowed if the performing supplier billed directly. The cperforming supplier d for the TC is the physician that supervised the test, while for the PC it is the physician that performed the PC.<br><br> "CMS believes that this second approach addresses the concerns expressed by multi-specialty groups where certain specialties only provide substantially the full range of services for that specialty at some locations but not others. On the other hand, in most cases a group practice with multiple offices could not locate its diagnostic testing in just one office. "Services provided in a mobile vehicle would be subject to the anti-markup regulations.<br><br> "The TC of a diagnostic test would not be deemed to be purchased from an outside supplier if the test is conducted and supervised within the office of the billing physician and the supervising physician is an employee or independent contractor of the billing physician or other supplier, even if the technician conducting the TC is not an employee of the billing physician or other supplier. "CMS is proposing two alternatives to its proposal regarding technicians: (i) if the TC is performed by a technician that is not an employee of the billing physician or physician organization, it would be deemed purchased from an outside supplier regardless of where the TC is performed and irrespective of the relationship between the supervising physician and the billing physician or physician organization; or (ii) if the TC is performed by a technician that is not an employee of the billing physician or physician organization and is performed outside of the billing physician 9s or physician organization 9s office, the TC would not be deemed a purchased test if the supervising physician is an employee or independent contractor of the billing 2 physician or physician organization. Curiously, CMS states that if this second proposal is adopted, the TC would still be subject to anti-markup rules unless some exception (not stated) applies.<br><br> CMS also proposes to cclarify d how to determine the cnet charge d for a purchased test (payment is limited to the least of the cnet charge d to the physician, the billing physician 9s actual charge, or the fee schedule amount). CMS proposes that the amount that the billing physician or physician organization paid the other physician for supervising the TC or performing the PC would be the cnet charge. d In addition to the solicitation of comments noted above, CMS is soliciting comments on these issues: "whether there is a better approach to revising the anti- markup provisions than the alternatives proposed. "whether items such as overhead should be included in the calculation of cnet charge. d "whether, in states where the law requires physicians (usually pathologists) to bill directly and are not permitted to reassign payments, CMS should require the physicians who supervise TC or perform PC to bill Medicare directly (and not permit reassignment).<br><br> "whether CMS should further delay the implementation date of the anti-markup provisions beyond January 1, 2009. Independent Diagnostic Testing Facility Enrollment Under the Proposed 2009 Rule, a physician practice that furnishes diagnostic tests would be required to enroll in Medicare as an independent diagnostic testing facility ( cIDTF d). CMS is proposing to require every physician or nonphysician practitioner ( cNPP d) organization, which it defines as cany physician or nonphysician practitioner entity that enrolls in the Medicare program as a sole proprietorship or organizational entity such as a clinic or group practice, d to enroll as an IDTF for each practice location furnishing diagnostic testing services.<br><br> The requirement would become effective September 30, 2009 for physicians and physician practices that are already enrolled in the Medicare program. For new enrollees, the effective date would be January 1, 2009. As currently proposed in regulation text, the regulation would cover all diagnostic services.<br><br> CMS is soliciting comments as to whether it should only require IDTF enrollment for certain diagnostic services. Among the questions are: whether required enrollment should be limited to diagnostic services that involve expensive testing and equipment; whether enrollment should be limited to only imaging services; and, if limited to imaging services, whether the requirement should exempt x-ray, ultrasound, and fluoroscopy, and only cover advanced services such as MRI, CT, and nuclear medicine (including PET). CMS also is requesting comments on whether it should exempt services such as EKGs and other diagnostic tests frequently furnished by primary care physicians.<br><br> Because physician and physician organizations already meet or exceed some of the IDTF standards, CMS is also proposing to exempt physicians and physician organizations from certain standards. Physician organizations enrolled as IDTFs would not be required to: (i) maintain additional comprehensive liability insurance (physicians maintain more than the minimum insurance required of an IDTF 3 currently $300,000); (ii) maintain a formal clinical compliant process; (iii) post IDTF standards for review by patients and the public; or (iv) maintain a visible sign posting business hours. In addition, physician organizations would not be prohibited from sharing a practice location with another Medicare- enrolled individual or organization.<br><br> Currently, whether any physician may supervise diagnostic services and licensing of technicians is left to state law. CMS asserts that it is proposing the IDTF requirement out of concern that two distinct regulatory standards are in effect for diagnostic services (one for physician organizations and another for IDTFs), and that some physicians and physician organizations furnish diagnostic services with NPPs that are not qualified to provide services. Nonetheless, IDTF enrollment would impose requirements on physicians as well.<br><br> Under current IDTF regulations the supervising physician cmust evidence proficiency in the performance and interpretation of each type of diagnostic procedure performed by the IDTF d and determination of proficiency standards for physicians and technicians is left to the carrier for the service area in which the IDTF is located. The regulations provide that c[p]roficiency may be documented by certification in specific medical specialties or subspecialties or other criteria established by the carrier for the service area in which the IDTF is located. d CMS has not proposed any change in this regard. Aquick perusal of carriers indicates some differences among the carriers as to which physician specialties are deemed proficient to supervise specific tests.<br><br> Many physician specialists that are not radiologists are not viewed by carriers as proficient in imaging. 3 If physician proficiency standards are left to the local carriers and standards are not changed, many physician practices and other physician organizations would need to employ or contract with a radiologist to supervise diagnostic imaging services performed in their offices. And, if the proposed anti- markup provisions are finalized permitting a radiologist only to supervise one site, many physician groups may not be able to maintain their diagnostic imaging services.<br><br> CMS is soliciting comments on whether it should establish additional exceptions to the IDTF standards for physician or NPP organizations. CMS is proposing two other IDTF-enrollment changes. First, it would require entities furnishing mobile diagnostic services to enroll in Medicare and bill directly for the mobile diagnostic services they furnish, regardless of the site of service.<br><br> Second, if CMS revokes the Medicare supplier number of an IDTF, it would limit the amount of time the IDTF may continue to bill for services furnished prior to the revocation. Historically, CMS has allowed such billing to continue for up to 27 months after the effective date of the revocation. The proposed rule would require an IDTF that has lost its Medicare status to submit all outstanding claims within 30 calendar days of the effective date of the revocation.<br><br> Proposed Pay-for-Performance and Gainsharing Exception to Stark CMS is proposing a new exception to the physician self- referral or cStark d law for what is commonly called cpay for performance d and cgainsharing d but which in these proposed regulations are termed cincentive payment and shared savings programs. d The pay for performance programs addressed by the proposed regulations are those where payers make payments to a hospital to meet certain quality standards. In order to achieve performance goals, the hospital needs the collaboration of physicians and may want to share the payments with the physicians. The exception also addresses programs initiated by a hospital to meet certain performance goals.<br><br> In gainsharing arrangements, the hospital seeks to share with physicians cost savings achieved as the result of efforts to reduce the cost of patient care. This is sometimes achieved by changes in ordering patterns, or use of certain supplies. An incentive payment and shared savings program that entails direct or indirect payment from a hospital to a physician would create a financial relationship between the two.<br><br> The referrals by a participating physician to the hospital would violate the Stark law unless an exception applies. CMS notes that while some programs can be structured to satisfy existing Stark exceptions, these exceptions may not provide sufficient flexibility. The proposal would create a single set of requirements that would apply to both incentive payment (pay-for- performance) and shared savings (gainsharing) programs.<br><br> The exception would protect only cash (or cash equivalent) payments made to participating physicians or cqualified physician organizations d composed entirely of participating physicians that participate in the achievement of patient care quality measures or cost savings measures (collectively, cperformance measures d). Under the proposed rule, an incentive payment and shared savings program must be a formal program offered by a hospital that is set out in a written agreement. The program must seek cto achieve the improvement of quality of hospital patient care services through changes in physician clinical or administrative practices or actual cost savings for the hospital resulting from the reduction of waste or changes in physician practices, without adverse affect on the quality of patient care services. d Aphysician could not receive payment for the use of any item, supply, or device if the physician (or qualified physician organization) has an ownership or investment interest in, or a compensation arrangement with, a manufacturer, distributor, or GPO that supplies, or arranges for the purchase of, the item, supply, or device.<br><br> Participation Requirements "Participation would be limited to physicians that are members of the hospital 9s medical staff at the commencement of the program. "Participating physicians would need to participate in cpools d of five or more physicians. cPools d must be formed at the commencement of the program and could either be based on existing qualified physician organizations or created by the hospital.<br><br> "Eligibility to participate could not be based on the volume or value of referrals or other business generated between the parties. "Ahospital could limit physician participation to physicians in a particular department or specialty, as long as the hospital offers participation on the same terms and conditions to all physicians in the department or specialty. Performance Measures The program must: "identify the performance measures to be used.<br><br> Measures must: (1) use an objective methodology, be 4 verifiable, be supported by credible medical evidence, and be individually tracked; (2) be reasonably related to the hospital 9s practices and patient population; (3) be monitored throughout the term of the arrangement to prevent inappropriate reductions or limitations in patient care services; and (4) in the case of patient care quality measures, be listed in CMS 9s Specification Manual for National Hospital Quality Measures (or, in the alternative, measures listed in the manual would be deemed to satisfy the requirement). "establish baseline and target levels for performance measures based on the hospital 9s historical and clinical data and national or regional data for comparable hospitals, and establish thresholds above or below which no payments will accrue to physicians ( cfloors d and cceilings d). "require a review, before commencement and at least annually thereafter, of the program 9s impact on the quality of patient care services provided at the hospital.<br><br> The review must be performed by an independent individual or organization that is not affiliated with the hospital or a participating physician, and that is not participating in the incentive payment and shared savings program. Incentive payment and shared savings programs must provide for immediate and appropriate corrective action if a periodic review reveals an adverse impact on quality of patient care. "not limit the discretion of physicians to make medically appropriate decisions for the patients.<br><br> Incentive payment and shared savings programs could condition payments on particular physician choices, but could not limit other choices for which physicians would not receive payments. Incentive payment and shared savings programs could not limit the availability of any item, supply, or device (including new technology meeting certain standards) and must permit individual physicians access to the same selection that was available to them before participating in the program. "in the aggregate, be reasonable and necessary for the legitimate purposes of the arrangement, and not involve the counseling or promotion of a business arrangement or other activity that violates any federal or state law.<br><br> Payment Requirements CMS is proposing a variety of requirements and limitations for payments. An incentive payment and shared savings program would last at least one year and no more than three years. The arrangement must be set out in writing, signed by the parties, specify the remuneration (or a formula for the remuneration) in detail, and separately identify each performance measure, including the baseline and target measures.<br><br> Payments must: "be made on a per capita basis to members of each cpool d of five or more physicians. "be made directly to participating physicians or qualified physician organizations. "be set in advance and not vary during the term of the arrangement.<br><br> "not be based in whole or in part on a reduction in the length of stay for a particular patient or in the aggregate for the hospital. "be limited in duration and amount. For gainsharing arrangements, CMS is considering a flat 50 percent limit on the sharing of cost savings, as well as cscaled d limits for incentive payment and shared savings programs longer than one year, under which payments would decrease over the course of the program.<br><br> Cost savings would be measured by comparing the hospital 9s actual acquisition costs for items, supplies, or services that are subject to the program with the hospital 9s baseline costs for these items, supplies, and services over the one-year period immediately preceding the incentive payment and shared savings program. "take into account previous payments made for performance measures already achieved. CMS refers to this requirement as cre-basing, d or recalculating the hospital 9s baseline standards and costs to account for savings or improvements achieved in an earlier period of the arrangement.<br><br> "not take into account any increase in the volume of federal health care patient procedures from the volume provided during the period of the same length as the incentive payment and shared savings program immediately preceding the beginning of the incentive payment and shared savings program. Notice and Reporting Requirements CMS would require that a hospital provide effective prior written notice to patients affected by an incentive payment and shared savings program that: (1) identifies the participating physicians; (2) discloses that participating physicians receive payments for meeting performance measures; and (3) describes the performance measures in a manner reasonably designed to inform patients about the program. 5 CMS would also require that hospitals maintain accurate and current documentation of incentive payment and shared savings programs and provide the documentation to the Secretary of Health and Human Services upon request.<br><br> The documentation must include, at a minimum: "the written agreement between the parties. "the basis for the selection of performance measures. "the selection and qualifications of the independent medical reviewer.<br><br> "the written findings of the independent medical reviewer. "corrective actions taken by the hospital based on the written findings of the independent medical reviewer. "the amount and calculation of payments made under the incentive payment and shared savings program.<br><br> "the re-basing of performance measures. "the written notice provided to hospital patients. Additional Safeguards CMS is proposing additional safeguards that are not found in its proposed regulatory text.<br><br> It is specifically interested in comments on how to incorporate these safeguards into the regulation. These proposals include: "requiring monitoring of the ages of the patient population treated by the participating physician and their third-party payors. If there are significant changes from the hospital 9s historical measures, the physician would need to be terminated from participation.<br><br> "requiring monitoring of the patient population characteristics across all participating physicians. If there are significant changes, the incentive payment and shared savings program would need to be terminated. "requiring uniform application to all patients including Medicare beneficiaries.<br><br> Solicitation of Comments CMS is soliciting comments on all aspects of the proposed exception, as well as the exception generally. It indicates interest in receiving comments on several specific issues, including: "the effect of incentive payment and shared savings programs on marketplace competition. "whether, and how, incentive payment and shared savings programs offered by entities other than hospitals should be protected.<br><br> "whether it should allow a qualified physician organization to participate in a program if it includes eligible physicians who choose not to participate in the incentive payment and shared savings program; or multi-specialty organizations in which only one specialty participates; and, with respect to such physician organizations, how payments should be structured and what amounts the organizations should be allowed to withhold. "its cpooling d proposal generally and, specifically, how to address the pooling of funds for a program targeted at a specific medical specialty or hospital department where there are fewer than five physicians. "whether the exception should require the hospital to offer the opportunity to participate to all physicians on the medical staff who belong to the department or practice in the specialty relevant to the program.<br><br> "the appropriateness of its proposed performance measures and suggestions for other appropriate performance measures. "the appropriate frequency of review by independent medical reviewers and appropriate corrective actions (including how to incorporate a corrective action requirement into the regulatory text). "alternative approaches to the per capita payment model, such as paying a physician according to his or her contribution to the achievement of performance measures.<br><br> "with respect to the requirement that payments may not take into account increased volume of federal health care patient procedures, whether and how to account for volume changes due to market forces and physician practice growth. "whether the 50 percent ccap d on the sharing of cost- savings is appropriate and how to limit payments under a multi-year program to an amount actuarially equivalent to payments under a one-year program. "whether it should require re-basing at all, whether re- basing cquality only d payments is a necessary safeguard, and potential alternative approaches.<br><br> "an indication of any appropriate quality controls for performance measures that are not amendable to utilization cfloors d and cceilings. d 6 "for physician organizations, what would be the affect of the cstand in the shoes d provisions on the proposed exception. "whether, and if so how, total savings for a particular department or service line should be included in incentive payment and shared savings programs and how they should be monitored to prevent program or patient abuse and permit transparency. "whether CMS should require hospitals to audit the calculation of cost savings and payments under their incentive payment and shared savings programs and, if so, the appropriate formality of such an audit.<br><br> End-Stage Renal Dialysis ( cESRD d) Services Payment Updates In each of the last four year 9s Physician Fee Schedules, CMS has updated certain provisions relating to the payment for renal dialysis services furnished by ESRD facilities. In the Proposed 2009 Rule, CMS is making alternative proposals regarding an update to the drug add-on adjustment to the composite ESRD rates. CMS would either keep the drug add-on at the current level or decrease it by .4 percent adjustment.<br><br> The two proposals rest on both a change in the methodology used to calculate the growth update and alternative interpretations of the enabling statute. In addition, CMS is proposing certain updates to the wage index adjustments, which are described in greater detail below. Drug Add-On Adjustment The statute provides that c 8the secretary shall annually increase 9the drug add-on amount based on the growth in expenditures for separately billed ESRD drugs. d For calendar year 2009, CMS is proposing no update to the CY 2008 drug add-on adjustment of $20.33 per treatment.<br><br> The zero update results from CMS 9proposal to alter its methodology for estimating the growth in ESRD drug prices. In the past, CMS has used the Producer Price Index ( cPPI d) for pharmaceuticals in conjunction with two years of ESRD specific drug data to estimate price growth. Although CMS indicated in 2007 that it would continue to use this methodology through 2009, it now believes that it has sufficient pricing information for ESRD drugs to base its growth estimates on the Average Sales Price ( cASP d) for the top 10 separately billable ESRD drugs, plus Aranesp.<br><br> Under this new methodology, CMS projects that ESRD drug pricing will decline by 1.9 percent for 2009. Had CMS continued to use the PPI-based methodology, it would have projected an increase in pricing by 3.8 percent. Based on its utilization data for these 11 separately billable ESRD drugs, CMS also projects a one percent drop in per patient drug utilization for ESRD facilities in 2009.<br><br> CMS is making two alternate proposals. Under the first proposal, although CMS 9s calculations would result in a negative update to the combined growth in per patient utilization and pricing for 2009, CMS is proposing no update to the drug add-on adjustment, rather than a negative update because the language of the statute states that the secretary shall cincrease d the add-on amount based on growth in expenditures. As there is no growth, CMS is proposing no change.<br><br> CMS also believes that the statute can be interpreted to mean that the secretary shall update up or down, based on negative or positive cgrowth. d Under this interpretation, CMS is making an alternative proposal to decrease the add- on adjustment from $20.33 to $19.74 per treatment. Wage Index Adjustment CMS is proposing updates to the wage index adjustment to reflect the proposed CY2009 wage index values in its proposed rule for hospital Inpatient Prospective Payment Systems ( cIPPS d) rates for FY2009. CMS also would complete its four-year transition to CBSA-based geographic area designations and corresponding wage index values.<br><br> For CY2009, wage index adjustments would be 100 percent based on CBSAs. Prior to January 1, 2006, wage indices were restricted to values no less than .9 and no greater than 1.3. Believing that such cfloors d and cceilings d were not appropriate for ESRD wage index values, CMS eliminated the ceilings in 2006 and has gradually reduced the cfloor d each year during the transition to CBSA-based wage index adjustments, with the goal of eventually removing the floor as well.<br><br> For CY2009, CMS proposes to reduce the wage index floor from .75 to .70. In addition, because ESRD composite payments are subject to a budget neutrality requirement, CMS has proposed a budget neutrality conversion factor of 1.056672, which, in combination with other adjustments to the way wage indices are used will result in payments to ESRD facilities in CY 2009 remaining the same as made in CY2008. CMS is also proposing specific wage index values for certain rural areas in Massachusetts and Puerto Rico, and the urban area of Hinesville, Georgia.<br><br> CMS also provides a summary of how wage index changes were adopted in the final CY 2008 IPPS rule. Specifically: Litchfield County in Connecticut and Merrimack County in New Hampshire will be considered crural d under the ESRD composite payment system; and the ESRD wage index values for four CBSAs 4 7 Boston-Quincy, Mass.; Providence-New Bedford-Falls River, RI-Mass.; Chicago-Naperville-Joliet, Ill.; and Lake County- Kenosha County, Ill.-Wis. 4were affected by CMS 9s new policy allocating salaries and hours to the campuses of two multi-campus hospitals with campuses that are located in different labor areas. Budget Neutrality Adjustment CMS proposes to keep the current case-mix budget neutrality adjustment for CY2009.<br><br> CMS will apply a budget neutrality adjustment factor of 1.056672 to the ESRD wage index values. Preventable Facility-Acquired Conditions As required by Congress, CMS does not pay a higher DRG payment to a hospital for a patient whose discharge diagnosis includes one or more of certain preventable chospital- acquired conditions d ( cHAC d). CMS is contemplating applying this principle to other care settings, including SNFs, ESRD facilities, and physician practices.<br><br> CMS notes that it would implement the policy differently for each setting based on differences in each setting, differences in payment systems, and how reasonably preventable the condition is for the setting. CMS is not making any proposals, but it is soliciting comments on the application of HAC payment policies to other settings, such as SNFs, ESRD facilities, and physician practices. 8 If you have any questions regarding the matters discussed in this Client Briefing, please contact any of the attorneys listed below or your usual Winston &Strawn contact.<br><br> Washington, D.C. Tom Millstmills@winston.com(202) 282-5714 Marion Kristal Goldbergmgoldberg@winston.com(202) 282-5788 These materials have been prepared by Winston & Strawn LLPfor information purposes only, and these materials do not constitute legal advice and cannot be relied upon by any taxpayer for the purposes of avoiding penalties imposed under the Internal Revenue Code . Receipt of this information does not create an attorney-client relationship.<br><br> Copyright © 2008, Winston & Strawn LLP.

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