Part B Insider (Multispecialty) Coding Alert

Published on Fri Jul 16, 2004 PDF

One formula can't meet all doctor payment goals

Come fall, you can expect Congress and the Medicare Payment Advisory Commission to increase their attention to an upcoming task: Overhauling Medicare's physician-payment formula.

That was the prediction of MedPAC Executive Director Mark Miller at a June briefing with health reporters.

Like physicians, analysts and lawmakers are concerned about the recent volatility of Medicare Part B payments under the so-called sustainable growth-rate formula. But they're also worried about the current formula's failure to check the high growth in volume and intensity of physician services , which continues unabated even though the SGR scheme was enacted specifically to help control it, Miller said.

The SGR formula was intended to keep real Part B spending growth per beneficiary at levels comparable to overall growth in the national economy, and to motivate physicians to slow their provision of services if Part B grew faster. Under the SGR, annual physician fee increases will be less than doctors'projected costs if services grow faster than the gross domestic product.

On the other hand, if Part B spending grows slower than the economy, physicians will see their service-by-service fees rise faster than the cost of producing services.

Just one problem: These supposed incentives don't work, most analysts agree. In fact, some argue that the system actually encourages physicians to increase their service volume, thus accelerating spending growth, to compensate for lower service-by-service fees.

MedPAC has argued for several years that Congress should scrap the formula.

Lookout for mechanisms to rein in just one set of services whose volume is rapidly increasing, such as imaging services, or schemes to link quality outcomes and efficiency with payments, Miller said.

A CMS spokesperson clarified that CMS'official policy holds that diagnostic tests shouldn't be billed incident-to. This was clarified in the December 31, 2002 Federal Register, where it states that "...only services that do not have their own benefit category are appropriately billed as incident to a physician service."

Several Miami-area doctors, a community hospital and several assisted living facilities were all sued by the U.S. Attorney for the Southern District of Florida for violations of the False Claims Act. Allegedly Larkin Community Hospital paid kickbacks to doctors, and the doctors "churned" patients from the ALFs to the hospitals for medically unnecessary services and procedures.