Medicare Final Rule Announces 2008 Physician Fees and Reforms

The Centers for Medicare & Medicaid Services (CMS) has issued a final physician payment rule. Under the new rule, Medicare estimates that it will pay approximately $58.9 billion to about 900,000 physicians and other health care professionals. The revised payments, quality incentive rates and related policy changes, which will become effective January 1, 2008, are included in the Medicare Physician Fee Schedule (MPFS) final rule. As directed by the Tax Relief and Health Care Act of 2006, CMS implemented a voluntary reporting program for 2007 for physicians and other health care practitioners. Since July 1, 2007, under the Physician Quality Reporting Initiative (PQRI), eligible professionals who report specific measures on quality of care furnished to Medicare beneficiaries may earn incentives up to 1.5 percent of their total allowed charges, subject to a cap. In the 2008 final rule, CMS outlines PQRI measures that were endorsed by the National Quality Forum, and other sources completing development for upcoming PQRI implementation. These structural measures, which focus on whether a health care professional uses electronic health records and/or electronic prescribing, emphasize the importance of this technology for delivery of high-quality health care services. Physician and non-physician professionals’ not meeting PQRI measures will be allowed to participate by reporting on their use of health information technology. The Physician Assistance and Quality Initiative Fund will provide $1.35 billion for physician payment and quality improvement initiatives for services furnished in 2008.

The Medicare law includes a statutory formula requiring CMS to implement a negative 10.1 percent update in payment rates for physician-related services. This formula compares the actual rate of growth in spending to a target rate, which is based on such factors as the growth in the number of Medicare fee-for-service beneficiaries and statutory or regulatory changes in benefits. CMS has no choice but to implement this negative update because it is mandated by a statutory formula. Under this law, if the actual rate of spending growth exceeds the target rate, the update is decreased; if it is less, the update is increased. Since 2002, because payment for physician services increased faster than projections, the statutory update formula dictated payment cuts. A negative update went into effect in 2002, but for 2003 to 2007, Congress intervened and temporarily suspended requirements in favor of specific, statutory updates. To view the entire CMS Press Release go to http://www.cms.hhs.gov/apps/media/press_releases.asp  To view a copy of the final rule go to https://www.cms.hhs.gov/center/physician.asp