Geographic Practice Cost Indices

Geographic Practice Cost Indices (GPCI) Locality

At this time, CMS uses 89 physician payment localities among which fees are adjusted however; the AMCNO strongly believes that Medicare’s geographic payment adjustment formula does not accurately reflect practice costs in Northern Ohio. Currently, the state of Ohio is designated as a statewide locality. The AMCNO commented that this is problematic for our physician members practicing in Northern Ohio because CMS has not revised the geographic boundaries of the physician payment localities since 1997. Also, since that year, CMS has indicated that the only mechanism the agency has set forth to modify the payment localities is for the state medical association to petition for change by demonstrating that the change has the overwhelming support of the physician community. We also noted that this mechanism for change in the payment localities seems biased since the state medical association does not represent all of the physicians in the state of Ohio.

The AMCNO has been sending comments to CMS for a number of years outlining our concerns with the geographic payment adjustment formula so we were pleased to learn that CMS has asked the Institute of Medicine (IOM) to evaluate the accuracy of the geographic adjustment factors used for Medicare physician payment. The AMCNO has reviewed the June 2011 IOM report and noted that the IOM has recommended utilizing geographic health sector data from the Bureau of Labor Statistics, expanding wage data to account for all types of health workers in private practice, and using the same number of geographic market areas for physician and hospital payments. The IOM committee also concluded that the program should be using more accurate data when adjusting pay rates based on where physicians and hospitals are located. Geographic adjustments to Medicare payments are intended to accurately and equitably cover regional variations in wages, rents, and other costs incurred by hospitals and individual health care practitioners. The report also stated that the program should employ the metropolitan statistical areas (MSAs) developed by the Office of Management and Budget for both hospitals and physicians. The IOM report also mentions that MSAs reflect information on where people live and work and decisions made by employers and employees that define labor markets' boundaries.

The AMCNO has advocated for geographic adjustment reforms for many years and we included in our comments to CMS that the IOM recommendations validate the AMCNO concerns and we agree that a payment option should be based on geographic areas as defined by the Office of Management and Budget, and one which uses Metropolitan Statistical Areas (MSAs) and Metropolitan Divisions (MDs) to form localities in each state. The AMCNO believes that this option is viable due to the fact that it is based upon the localities used to pay other Medicare providers, such as hospitals, skilled nursing facilities and ambulatory surgery centers, which allow for a more focused recognition of geographic cost differences. We informed CMS that if implemented, this option would create additional localities in Ohio and would be of benefit to the physicians in our area of the state as well as other metropolitan areas in Ohio.

Due to the timing of the release of IOM’s report and the fact that CMS does not yet have the second supplemental report on the GPCIs, CMS was unable to address the full scope of the IOM recommendations in this proposed rule, however, the AMCNO has asked CMS to carefully review and evaluate the IOM reports and make changes in the Medicare program to use more accurate data when adjusting pay rates based on where physicians and hospitals are located.

The AMCNO physician leadership will continue to monitor these issues and provide additional information to our membership as it becomes available.