The final rule establishing Medicare payment for 2007 was released on Nov. 1, 2006, and the outlook is not promising. The Centers for Medicare & Medicaid Services made no significant changes to values from the proposed rule released in August, which we reviewed previously in Urology Times (“Proposed payment changes: Both good and bad news,” Oct. 1, 2006).
At this writing, Congress had not taken action to mitigate the impact of the sustainable growth rate (SGR). Therefore, the current published conversion factor will be $35.9848 if no action is taken. This conversion factor update represents an adjustment of –5.0% compared with last year’s conversion factor of $37.8975 (as dictated by the Deficit Reduction Act of 2006), which represented a freeze of the 2005 conversion factor. There is still a chance that Congress may take similar action again to mitigate the negative adjustment, but the current political climate is unpredictable.
In addition to the negative adjustment to the conversion factor, CMS will implement a budget neutrality (BN) factor adjustment. The BNf is an additional negative adjustment applied by multiplying the work value by .8994 (a –10.06% adjustment to the work value), resulting in an additional 4.06% reduction in potential Medicare payments. The resulting equation for the calculation of Medicare payments for 2007 is shown in the accompanying table.
Before assuming that all the reductions will result in a 9.1% decrease in urology income for 2007, recall that 2007 also includes changes in relative value units for work values and practice expense values. When all the changes, both positive and negative, are applied to a similar service mix supplied by all urologists in 2005, the projected change in revenue for urology in 2007 is –5.0%. Therefore, urology Medicare revenue could remain relatively unchanged in reimbursement if Congress acts to freeze the conversion factor at 2005 levels again.
Another change in Medicare affecting payment to some areas is the finalization of a 2-year change in the work geographic cost of practice indices. For 2007, the work value floor of 1.00 will be removed. This change will result in decreases in the work value for certain parts of the country. In fact, this will negatively affect 55 of the 93 Medicare localities.
There is an area of discrepancy in the text of the final rule with the actual values published. In the final rule, CMS indicated that indirect costs included in practice expense values would be calculated using values that were not adjusted by the BN factor. However, it appears that the indirect costs were calculated using the BN-adjusted values. At this time, it is unclear what CMS will do about this discrepancy.
In the end, CMS will do what it is required to do by Congress and the laws that govern the Medicare fee schedule. However, understanding the nuances of Medicare’s adjustments will be important in private sector contracts. If possible, contracts based on straight percentage of Medicare should be avoided. However, contracts based on the most current version of the Medicare fee schedule with a more favorable conversion factor and without GPCI or BN adjustments could result in better reimbursement for your practice.
Overpayment investigations
In addition to the changes in Medicare reimbursement, we felt it important to alert you to some activity regarding audits due to a rash of audit requests letters received by urologists in Florida and California. CMS uses a number of post-payment review programs to ensure the integrity of the Medicare payment system. It’s important for all physicians, including urologists, to be aware of active programs.
The final rule establishing Medicare payment for 2007 was released on Nov. 1, 2006, and the outlook is not promising. The Centers for Medicare & Medicaid Services made no significant changes to values from the proposed rule released in August, which we reviewed previously in Urology Times (“Proposed payment changes: Both good and bad news,” Oct. 1, 2006).
At this writing, Congress had not taken action to mitigate the impact of the sustainable growth rate (SGR). Therefore, the current published conversion factor will be $35.9848 if no action is taken. This conversion factor update represents an adjustment of –5.0% compared with last year’s conversion factor of $37.8975 (as dictated by the Deficit Reduction Act of 2006), which represented a freeze of the 2005 conversion factor. There is still a chance that Congress may take similar action again to mitigate the negative adjustment, but the current political climate is unpredictable.
In addition to the negative adjustment to the conversion factor, CMS will implement a budget neutrality (BN) factor adjustment. The BNf is an additional negative adjustment applied by multiplying the work value by .8994 (a –10.06% adjustment to the work value), resulting in an additional 4.06% reduction in potential Medicare payments. The resulting equation for the calculation of Medicare payments for 2007 is shown in the accompanying table.
Before assuming that all the reductions will result in a 9.1% decrease in urology income for 2007, recall that 2007 also includes changes in relative value units for work values and practice expense values. When all the changes, both positive and negative, are applied to a similar service mix supplied by all urologists in 2005, the projected change in revenue for urology in 2007 is –5.0%. Therefore, urology Medicare revenue could remain relatively unchanged in reimbursement if Congress acts to freeze the conversion factor at 2005 levels again.
Another change in Medicare affecting payment to some areas is the finalization of a 2-year change in the work geographic cost of practice indices. For 2007, the work value floor of 1.00 will be removed. This change will result in decreases in the work value for certain parts of the country. In fact, this will negatively affect 55 of the 93 Medicare localities.
There is an area of discrepancy in the text of the final rule with the actual values published. In the final rule, CMS indicated that indirect costs included in practice expense values would be calculated using values that were not adjusted by the BN factor. However, it appears that the indirect costs were calculated using the BN-adjusted values. At this time, it is unclear what CMS will do about this discrepancy.
In the end, CMS will do what it is required to do by Congress and the laws that govern the Medicare fee schedule. However, understanding the nuances of Medicare’s adjustments will be important in private sector contracts. If possible, contracts based on straight percentage of Medicare should be avoided. However, contracts based on the most current version of the Medicare fee schedule with a more favorable conversion factor and without GPCI or BN adjustments could result in better reimbursement for your practice.
Overpayment investigations
In addition to the changes in Medicare reimbursement, we felt it important to alert you to some activity regarding audits due to a rash of audit requests letters received by urologists in Florida and California. CMS uses a number of post-payment review programs to ensure the integrity of the Medicare payment system. It’s important for all physicians, including urologists, to be aware of active programs.
