Eleven physician specialty groups sued HCFA last week, claiming the agency is giving primary-care doctors an unlawful boost to their Medicare practice-expense payments through 2002.
The suit, filed in U.S. District Court in Chicago, challenges a HCFA final regulation enforcing the 1999 physician fee schedule. It includes rules on a transition to "resource-based" practice-expense compensation as required by the federal Balanced Budget Act of 1997. The rules would be effective Jan. 1, 1999.
Practice-expense payments for rent, equipment and office labor account for roughly 40% of physicians' Medicare revenues. Such expenses are reimbursed on the basis of historical charges. A 1994 law, however, required Medicare to begin paying for practice expenses in 1998 using a resource-based formula like the one used to reimburse physicians for their professional work.
The balanced-budget law delays implementation of the resource-based formula and requires a transition through 2001. It also provides a one-time $390-million bonus for primary-care office visits in 1998 as a down payment on the change in the payment formula, which will likely shift money from specialty and surgical procedures to primary-care office visits.
HCFA's rule, published last week in the Federal Register, calls for the 1998 practice-expense compensation to be used as a baseline for the transition to the new schedule. But specialty groups argue that doing so will increase the practice-expense payments shifted during the transition. As a result, $495 million will be cut from surgical and specialty procedures. That reduction was not included in the balanced-budget law, said the specialty groups (See chart).
In publishing the rule, HCFA argued that using 1997 as a base year would reduce primary-care practice-expense compensation in 1999, which the balanced-budget law did not intend. The agency also said the 1997 base line would be a regression to an outmoded compensation formula.
Primary-care groups back HCFA.
"I'm not surprised that some of the groups who are adversely affected by this would sue," said Robert Doherty, senior vice president for governmental affairs and public policy with the American College of Physicians-American Society of Internal Medicine.