United States: CMS Finalizes Medicare Physician Fee Schedule Update For 2018

Last Updated: November 17 2017
Article by Thomas W. Greeson, Gail Daubert and Debra A. McCurdy

Delays AUC Requirement until 2020, Cuts Off-Campus Hospital Department Payments

The Centers for Medicare & Medicaid Services (CMS) has published its final Medicare physician fee schedule (PFS) rule for CY 2018. In addition to updating rates for 2018, the rule includes important policy changes, including an additional delay in implementation of appropriate use criteria (AUC) for advanced diagnostic imaging services and another reimbursement cut for off-campus hospital outpatient departments (although not as deep as proposed). Highlights of the final rule include the following:

  • The 2018 MPFS conversion factor (CF) is $35.99096, up slightly from the 2017 CF of $35.8887. CMS applied a 0.5% update factor specified under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which is partially offset by a -0.1% relative value unit (RVU) budget neutrality adjustment and a -0.09% "target recapture amount" (since the 0.41% savings from final revisions to "misvalued code" RVUs do not meet a statutory 0.5% target).
  • The final rule further reduced payments to certain newly-acquired, provider-based, off-campus hospital outpatient departments (which CMS calls "off-campus provider-based departments" or "off-campus PBDs"). By way of background, the final 2017 Medicare hospital outpatient prospective payment system (OPPS) rule implemented Section 603 of the Bipartisan Budget Act of 2015, which establishes a site-neutral payment policy for off-campus PBDs. Effective for services provided on or after January 1, 2017, off-campus PBDs are usually paid under the PFS, rather than the generally higher-paying OPPS (with certain exceptions). The 2017 rule set PFS rates for the technical component of such non-excepted off-campus PBD services at the OPPS rate scaled downward by 50% (called the PFS Relativity Adjuster). For CY 2018, CMS proposed to reduce the Relativity Adjuster to 25% of the OPPS rate. As a result of comments, CMS mitigated somewhat the additional reduction for these services. Specifically, CMS adopted a Relativity Adjuster of 40%, meaning that nonexcepted items and services furnished by nonexcepted off-campus PBDs will be paid a PFS rate that is 40% of the CY 2018 OPPS rate. CMS estimates that this change will cut Medicare Part B spending by $12 million for CY 2018.
  • CMS delayed by another year implementation of a Protecting Access to Medicare Act of 2014 (PAMA) requirement that physicians who order advance diagnostic imaging (ADI) services (diagnostic magnetic resonance imaging, computed tomography, and positron emission tomography/nuclear medicine) billed under the PFS, the OPPS, or the ambulatory surgery center payment system consult with AUC via a clinical decision support mechanism (CDSM). While PAMA mandated that CMS fully implement the AUC program by January 1, 2017, CMS did not meet this deadline. In the final 2018 rule, CMS announced it will begin the Medicare AUC program on January 1, 2020 as an "educational and operations testing year" – one year later than proposed. Specifically, ordering professionals will be required to consult specified applicable AUC using a qualified CDSM when ordering applicable ADI services, and furnishing professionals will be required to report consultation information on the Medicare claim, effective January 1, 2020. However, CMS will pay claims for ADI services in 2020 regardless of whether the claims report the AUC consultation. CMS intends to provide a voluntary participation period from July 2018 through December 2019 during which "early adopters" can begin reporting limited consultation information on Medicare claims. While CMS had discussed requiring the use of a variety of G-codes and modifiers for reporting, CMS is expected to propose in the 2019 rule less burdensome options, such as the use of a unique consultation identifier on claims. CMS also is expected to propose methodologies for identifying physicians who are outliers in their ordering practices and who may have their ADI orders subject to possible prior authorization review.
  • CMS modified its policy regarding Medicare Part B payment for biosimilar biological products. CMS currently bases payment for a biosimilar biological product on the average sales price (ASP) of all National Drug Codes (NDCs) assigned to the biosimilar biological products included within the same billing and payment code. Under the final rule, effective January 1, 2018, newly approved biosimilar biological products with a common reference product will no longer be grouped into the same billing code. Reimbursement for a biosimilar product will equal the ASP for the biosimilar product plus 6% of the ASP for the reference product. Also with regard to Part B drugs, the final rule implemented ASP-based payment for infusion drugs furnished through an item of durable medical equipment, in conformance with the 21st Century Cures Act.
  • The rule established a new "FY" payment modifier to implement a Consolidated Appropriations Act of 2016 provision that encourages the transition from traditional X-ray imaging to digital radiography by reducing the PFS payment for the technical component of X-rays taken using computed radiography technology beginning in 2018. The statutory reduction equals 7% during 2018 through 2022, rising to 10% beginning in 2023.
  • The rule made various revisions to physician quality and value programs (the Medicare Electronic Health Record Incentive Program, the Physician Quality Reporting System (PQRS), and the Value-Based Payment Modifier). The rule includes policies to better align these programs with reporting requirements under the new Quality Payment Program (QPP) (see related final rule updating the QPP for 2018). CMS also revised 2018 payment adjustments under the Value Modifier program to continue the transition to the Merit-based Incentive Payment System. Notably, CMS reduced certain automatic downward payment adjustments for not meeting minimum quality reporting requirements (based on practice size) and adopted its proposal to hold harmless all physician groups and solo practitioners meeting minimum PQRS reporting requirements from downward payment adjustments for performance under quality-tiering.
  • The rule includes numerous other policy provisions, including: modifications to Medicare Shared Savings Program beneficiary assignment rules; revisions to the physician self-referral list of CPT/HCPCS codes; payment and supplier enrollment policies to implement the Medicare Diabetes Prevention Program expanded model nationally on April 1, 2018; revisions to telehealth policies; and coding and payment changes to support care management and behavioral health services.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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