College of American Pathologists
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  Sizing up the 2010 physician fee schedule final rule


CAP Today




February 2010
Feature Story

Kim Chisolm

In the 2010 physician fee schedule final rule, the Centers for Medicare and Medicaid Services included a cut in physician reimbursement of 21.1 percent. This is because of the flawed sustainable growth rate formula the agency uses to set physician payment rate updates The reduction was included in the 2010 Medicare conversion factor, which lowers the 2009 rate of $36.066 to $28.4062. This cut was averted when, in late December, Congress passed and the president signed into law a provision to temporarily suspend the 21.1 percent payment cut for a two-month period beginning Jan. 1.

The provision to suspend the payment cut was passed to allow Congress more time to consider and achieve a more permanent Medicare physician payment fix that is being discussed as part of health care reform legislation. The CAP has been working with the medical community on legislation that would permanently repeal the SGR so future short-term fixes will not be necessary.

Here are some of the details of the 2010 physician fee schedule.

Physician-administered drugs removed from SGR formula. The rule finalized CMS’ proposal to remove physician-administered drugs retro­actively from the calculation of the sustainable growth rate. The removal of these drugs from the SGR formula would be retroactive to the 1996–1997 base year. Their removal from the SGR will restore $122 billion for funding physician services over 10 years. In comments submitted to the CMS previously, the CAP had requested that the CMS remove these drugs from the SGR formula.

Work RVUs accepted for new pathology codes. The CMS accepted the physician work relative value units that the CAP developed and recommended for two new pathology CPT codes, 88387 and +88388. The language of the two new CPT codes for 2010 is as follows:

  • 88387 Macroscopic examination, dissection and preparation of tissue for non-microscopic analytical studies (eg, nucleic acid-based molecular studies); each tissue preparation (eg, a single lymph node).

  • +88388 in conjunction with a touch imprint, intraoperative consultation, or frozen section, each tissue preparation (eg, a single lymph node) (List separately in addition to code for primary procedure).
  • Practice expense RVUs to be updated. The CMS finalized its proposal to use the Physician Practice Information Survey data to update the practice expense RVUs associated with physician payment. The CAP participated along with other medical specialties in this survey, the aim of which was to update practice expense costs associated with physician services.

    The CMS will phase in the revised practice expense RVUs over a four-year period because of the payment reductions some specialties will experience. The change in practice expense resulted in the indirect costs becoming a larger proportion of the total practice expense costs. The direct costs will decline to 51 percent from the current 63 percent. While some medical specialties notified the agency that this disadvantages those services with high supply costs, this change actually increases the weight of the indirect practice costs associated with professional component pathology services. This policy change will also reduce the practice expense RVUs used to calculate the direct practice costs associated with technical component services.

    The lower-valued PC codes related to pathology experienced relatively no increase in practice expense RVUs, while the higher-valued codes show a slight increase. The professional component practice expense RVUs had been scheduled for reduction due to the final year of the phase-in from the CMS’ last practice expense methodology change. The use of the Physician Practice Information Survey helped to offset the scheduled reduction.

    Malpractice liability RVUs updated. The CMS updated the malpractice RVUs using specialty-specific malpractice premium data available through the states’ departments of insurance. It used malpractice premium data from coverage years 2006 and 2007. The professional component for pathology-related services experienced no in­crease to a minimal decrease in malpractice RVUs as a result of the use of these updated data.

    The CMS said in the final rule that the malpractice RVUs for the technical component would experience a slight decrease. The AMA/ Specialty Society Relative Value Scale Update Committee has previously supported the supposition that there is no malpractice liability associated with the technical component, which the CAP has not supported. The CMS was able to get malpractice premium data for independent diagnostic testing facilities, but these data reflected minimal cost. The CMS decided to use these data to determine the technical component malpractice RVUs.

    PQRI requirement removed. The CMS had proposed setting a minimum patient sample size for reporting quality measures. The proposal would have required providers to submit quality measures for a minimum of 15 Medicare beneficiaries for one measure for a 12-month period, or a minimum of eight beneficiaries for a six-month reporting period. In comments submitted to the CMS, the CAP had opposed this requirement, saying it would reduce even further the number of pathologists able to report quality measures. Based on the CAP’s comments, the CMS decided against making the proposal final.

    To make reporting periods more consistent for the different reporting mechanisms (claims-based, registry, and EHR), providers are able to submit claims-based measures for either a 12-month period or a six-month period starting this year (Jan. 1–December 2010, or July 1–December 2010). Claims-based reporting is currently the only way providers with fewer than three measures can submit quality measures.

    Evaluation/management consultation codes eliminated. The rule finalized a provision stipulating that the consultation codes are no longer recognized for Medicare part B payment, effective Jan. 1. Codes no longer recognized include inpatient codes (99251–99255) and office/ outpatient codes (99241–99245) with the exception of the G-codes for telehealth consultations. In place of the consultation codes, providers are instructed to code patient evaluation and management visits with E/M codes that represent where the visit occurs and that identify the complexity of the visit. In the inpatient hospital setting and the nursing facility setting, all physicians (and qualified nonphysicians where permitted) who perform an initial evaluation and management can bill the initial hospital care codes (99221–99223) or nursing facility care codes (99304–99306). As a result of this change, multiple billings of initial hospital and nursing home visit codes could occur in a single day.

    The CMS will implement this rule in a budget-neutral way by raising the work RVUs for initial hospital and nursing facility visits by about 0.3 percent, and by raising the work RVUs for new and existing office visits by about six percent. In addition, the CMS will adjust the practice and malpractice expense RVUs for the initial visit codes to recognize the increased use of these visits.

    The documentation requirements for consultations will no longer be applicable. Physicians will need to meet only the applicable evaluation and management documentation requirements for the initial visit code selected.

    For additional information on this change, refer to CMS transmittal 1875 at

    Kim Chisolm is CAP assistant director for economic affairs, Division of Advocacy, Washington, DC.

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