Doctors will face a 4.5% reduction in their Medicare payments next year unless congressional negotiators approve a provision to stem the scheduled fee cuts.
CMS on Wednesday announced a final rule that includes the 4.5% cut in physician reimbursement, effective Jan. 1, 2004. The scheduled cut is slightly larger than the negative 4.2% update that the government forecast earlier this year.
A House-Senate conference committee is considering a provision in the House-passed Medicare bill that would replace projected cuts in 2004 and 2005 with a minimum 1.5% increase each year while Congress reconsiders the physician payment structure.
Physicians were hit with a 5.4% payment cut in 2002 but were spared a scheduled 4.4% cut in 2003 when President Bush signed an omnibus appropriations bill last February that included a 1.6% increase instead.
A dramatic rise in the number of services provided by physicians in 2002 triggered the cut, CMS says. Service volume is one factor in the complicated physician fee formula designed to curb growth on physician spending. The controversial sustainable growth rate, or SGR, used in the formula is based on annual calculations involving medical inflation, projected growth in the domestic economy, the number of beneficiaries in traditional Medicare and changes in law or regulation.
Physicians argue that the formula is flawed because instead of linking payment directly to medical inflation and practice costs, it ties fee updates to the health of the overall economy. AMA President Donald Palmisano, M.D., calls the Medicare cut an "outrage."
"Last year the Administration predicted a 'Medicare meltdown' if a cut this size went into effect; this cut will have the same result," Palmisano says in a written statement. "Medicare payments are not keeping up with physicians' practice costs, and there are clear signs that seniors will suffer if Medicare continues to cut payments to physicians and other health professionals."
The Medical Group Management Association, Englewood, Colo., says continued cuts threaten the economic stability of medical groups because the Medicare physician fee schedule is widely used as a benchmark for private insurance reimbursement rates.
The cost of operating a medical group practice rose by an average 4.1% per year over the last decade, including a 7.4% increase between 2001 and 2002, according to MGMA data.
Thomas Russell, M.D., executive director of the American College of Surgeons, says in a statement, "Over the last 15 years, Medicare reimbursements for surgical services have declined steeply. Reimbursements for many surgical procedures are now less than half of what they once were. With the price of medical liability insurance and other practice expenses continuing to escalate, surgeons, like other physicians, find themselves struggling to keep up with the demands of an aging population."
CMS Administrator Thomas Scully says the agency has no option other than to base its final rule on the formula mandated by current law.
"If Congress does pass legislation improving payments to physicians, CMS will implement the new payment rates as quickly as possible," Scully says in a written statement.
Medicare will pay about $48.8 billion to 900,000 physicians and other health professionals in 2004, up 1.7% from the $48 billion projected for 2003, CMS says.
The final rule, which will be published in the Federal Register on Nov. 7, revises the CMS physician payment methodology for 2004 by changing the base year of the Medicare Economic Index (MEI), which measures practice inflation and wage rates, from 1996 to 2000. The rule also changes MEI data sources, cost categories and price proxies.
In an attempt to address rising malpractice premiums, the changes will give more weight to the costs of professional liability coverage, CMS says. The rule also will adjust the proportion of payments linked to physician work, practice expense and professional liability insurance to reflect their weights in the MEI.
Additionally, the final rule adjusts geographic payment factors "to better reimburse physicians affected by local market changes in insurance premiums."