April 22, 2014
On April 1, 2014, President Obama signed legislation that delays the scheduled Sustainable Growth Rate (SGR) cut to physician payments for one year. The legislation contains a number of other provisions, including provisions under Section 220 (Ensuring Accurate Valuation of Services Under the Physician Fee Schedule) that establish alternative approaches for collecting and using information in the determination of relative values, and that instruct the Secretary to examine categories of codes and families of codes that potentially may be misvalued.
Sections 220 (a) and (b) establish alternative approaches for collecting and using information in the determination of relative values. Under the alternative approaches, information may be collected from any of the following:
The legislation also grants authority to the Secretary to establish or adjust practice expense relative values using cost, charge or other data from suppliers or providers of services. As an incentive to participate, the Secretary may provide payment to an eligible professional that submits information.
Section 220 (c) amends sections 1848(c)(2)(K)(ii) of the Social Security Act by adding categories for which the Secretary shall identify potentially misvalued codes. Prior to this legislation, the Secretary examined codes and families of codes based on any of the following criteria:
Section 3134(a) of the Affordable Care Act established these seven criteria and required the Secretary to identify, review and adjust values for potentially misvalued codes that met such criteria. Since 2009, the Centers for Medicare & Medicaid Services (CMS) has reviewed more than 1,000 potentially misvalued codes to refine work relative value units and direct practice expense inputs. The recently passed legislation adds new criteria for codes that the Secretary shall examine:
Section 220 (d) establishes a process by which the Secretary shall determine the net reduction in expenditures under the fee schedule as a result of adjustments to the relative values established for misvalued codes in 2017 through 2020. The legislation states that if the net reduction in expenditures for the year is equal to or greater than the target for the year, reduced expenditures attributable to such adjustments shall be redistributed for the year in a budget neutral manner, and the amount by which such reduced expenditures exceed the target for the year shall be treated as a reduction in expenditures for the succeeding year, for purposes of determining whether the target has been met with respect to that year. The target recapture amount is an amount equal to the difference between the target for the year and the estimated net reduction in expenditures for the year. The target is calculated as 0.5 percent of the estimated amount of expenditures under the fee schedule for the year. The legislation includes an exemption from budget neutrality if the target is not met.
Section 220 (e) establishes a phase-in of significant relative value unit reductions. Effective for fee schedules established beginning with 2017, for services that are not new or revised codes, if the total relative value units for a service for a year would otherwise be decreased by an estimated amount equal to or greater than 20 percent as compared to the total relative value units for the previous year, the applicable adjustments in work, practice expense and malpractice relative value units shall be phased in over a two-year period.