In its second crack at it, HCFA last week published proposed regulations on how Medicare reimburses physicians' practice expenses. This set of rules would shift less money to primary-care doctors from surgeons and procedure-oriented specialists.
The new regulations would enforce resource-based practice-expense reimbursement, as required under a 1994 law. Practice expenses, such as rent, office labor, equipment and supplies, account for about 41% of doctors' Medicare compensation.
At stake is about $4 billion, which could be diverted to the primary-care doctors from surgeons and specialists. Resource-based practice-expense reimbursement would be consistent with the formula used to compensate doctors' professional work.
The rule published in the Federal Register last week revised the technique HCFA used in an initial proposed rule published last year (June 16, 1997, p. 4). HCFA estimated that proposal would have increased family physicans' Medicare income by 12% but cut cardiologists' Medicare income by 17%, for example.
In reaction, specialists successfully lobbied for provisions in the balanced-budget law enacted last year to require that HCFA rewrite the rule and delay its enforcement.
The new proposed rule calculates much of physicians' practice-expense reimbursement by using American Medical Association data to estimate the hourly costs of running a practice in various specialties. Those costs are allocated to specific procedures. HCFA refers to this technique as a top-down approach.
Last year's proposed rule started with estimates of the inputs related to each procedure and applied those inputs to pricing data to build a reimbursement schedule. HCFA now refers to that technique as the bottom-up approach.
Using the top-down approach, family physicians' Medicare income would rise only 6%, and cardiologists' Medicare income would drop only 13%, HCFA said.
Primary-care groups said HCFA did not tell them the agency would drastically change the way it calculates practice-expense payments.
"This 11th-hour shift raises questions as to whether this has gone through a critical process," said Robert Doherty, vice president of governmental affairs and public policy with the American Society of Internal Medicine. He said using current practice-expense data could "inappropriately lock in some of the inequities" of Medicare's charge-based payment system.
Specialists expressed cautious optimism about the new rule. HCFA's estimates of how Medicare income would change for each specialty indicate that the new rule is an improvement, said Randy Fenninger, co-chairman of the Practice Expense Coalition, which represents specialty groups hurt by the June 1997 rule.
But he added, "What I want to make sure of is that there really is some substance to the changes and it's not just '97 in drag."
The debate is far from over. The public comment period ends in 90 days, and the final rule isn't expected until year-end.