CMS Announces Physician Fee Schedule Effective Jan. 1, 2007

Medicare payments to physicians will decrease an average of 5% in 2007, according to a final version of CMS rules made public on Wednesday. CMS in the draft version of the rules had projected a 5.1% reduction. Under the final version, payments to physicians will be cut by more than 5% for some services and by less than 5% for others. Acting CMS Deputy Administrator Herb Kuhn said payments will increase for most "evaluation and management" services, such as preventive care. For example, payments will increase by one-third for office visits, the most frequently billed physician service. Acting CMS Administrator Leslie Norwalk said the new rules "will encourage physicians to spend more time with their patients, assessing their health status and educating them about how to live longer, healthier lives." The new payment rates are scheduled to take effect Jan. 1, 2007. The payment reduction is based on a formula that offsets increases in the volume of care provided to Medicare beneficiaries by physicians. Congress since 2003 has intervened to stop scheduled cuts. Although Congress might act in the lame-duck session after the midterm elections to block the cut, some observers say the 5% reduction could take effect for a while if Democrats make big gains in the election and decide to deal only with appropriations bills in that session. The final rules also included changes for Medicare payments to hospitals. CMS said it will delay until 2009 changes that would require hospitals to report quality-of-care data to Medicare in order to receive increased payments for outpatient care. The delay will allow hospitals and CMS to reach an agreement on which quality-of-care measures should be reported for outpatient care, the agency said. In the meantime, Medicare payments for outpatient hospital care will increase 3% for 2007, CMS said. Had CMS finalized the proposed requirements for reporting quality-of-care data, hospitals that failed to report the information would have received only about a 1% increase. With the 3% increase, Medicare will make an estimated $32.5 billion in payments to hospitals for outpatient services in 2007.