CMS Estimates Medicare Physician Payment Cuts, Outlines Cost-Containment Steps

CMS estimates that Medicare payments to physicians will decline by 10.6% below current levels on July 1 and by 15.4% below current levels on Jan. 1, 2009, under the current payment formula, CQ HealthBeatreports. The estimates were released on Friday in a letter from Jeffrey Rich, director of the CMS Center for Medicare Management, to the Medicare Payment Advisory Commission. The cuts reflect an increase in the volume of services provided by physicians that exceeds growth targets. 

Nancy Nielsen, president-elect of theAmerican Medical Association, in a statement on Friday said that lawmakers should "replace 18 months of looming Medicare physician payment cuts ... with funded payment updates that reflect medical practice cost increases," adding, "This sensible approach will give Congress time to work with physicians to legislate a solution to the long-term Medicare physician payment problem." Nielsen said that if the 10.6% cut goes into effect on July 1, about 60% of physicians say they will have to limit how many new Medicare beneficiaries they can treat, and more than half say they will have to reduce office staff.

Congress is working on a Medicare package that would block the cuts, according to CQ HealthBeat. One plan by the Senate Finance Committee would block all cuts in 2008 and 2009.

Rich in the letter also outlined steps CMS is taking to improve quality and efficiency, including:

• Continuing and expanding the Physician Quality Reporting Initiative, which pays physicians an additional 1.5% of their billed charges for reporting quality-of-care data;
  
• Implementing "structural measures," which include purchasing and using electronic health record systems;
  
• Intensifying efforts to collect and share data on physicians' comparative costs to improve efficiency; and
  
• Testing pilot programs, which currently include one that pays for efficiency in treating chronic conditions and another that develops medical homes for beneficiaries.

Rich in the letter wrote, "The real issue is how Medicare can rapidly transform itself from a passive payer for services into an active purchaser of high-quality care by linking payment to the value of care provided" (Reichard, CQ HealthBeat, 3/3).

HHS Denies Request To Halt Competitive Bidding 
In related news, HHS last week denied a request by the American Clinical Laboratory Association to suspend a pilot program that tests competitive bidding for Medicare clinical laboratory services, CQ HealthBeat reports. The three-year program will be tested in the San Diego market and affects any laboratory that has Medicare revenues above $100,000. The trade group requested that the pilot be suspended for a minimum of 180 days. Meanwhile, a lawsuit brought by clinical labs that aims to halt the program is pending (CQ HealthBeat, 3/3).

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