2007 Medicare Physician Fee Schedule
In late December President Bush signed into law the Tax Relief and Health Care Act of 2006, which stopped implementation of the statutorily mandated 5.0% drop in Medicare fees that was set to go into effect for 2007. The Act calls for the maintenance of the same conversion factor that was used to determine Medicare fees in 2006 -- $37.8975. However, as explained below, because of the budget neutrality requirements that govern Medicare, this does not mean that the fees are exactly the same as they were last year.
The way Medicare fees are established is extremely complex. To determine the reimbursement amount for each procedure (or CPT code), the conversion factor is multiplied by the relative value units (RVUs) that have been assigned to that procedure, and an adjustment is made based on the geographic location of the practice. The RVUs are based on three elements: the work required for each procedure, the practice expense incurred for the procedure, and the cost of professional liability insurance.
Despite the maintenance of the conversion factor that was used in 2006, the 2007 Physician Fee Schedule is not the same as the 2006 fee schedule. This is because of changes made to work RVUs as a result of the "five-year review" process and other changes made to the practice expense RVUs because a new methodology was used to determine practice expenses.
Impact of the Five-Year Review Process
With the development of the RBRVS (Resource Based Relative Value System), which is used to determine Medicare fees, Congress mandated that all work RVUs undergo a review every five years by the American Medical Association's Specialty Society Relative Value Update Committee (RUC) to ensure that they are appropriately valued based on current practice. The most recent five-year review process was completed in 2006, and new work values for over 400 codes went into effect with the 2007 physician fee schedule. The vast majority of the work values increased in value, including those for select codes within the general evaluation and management (E/M) service codes (99xxx series).
Medicare law requires that CMS make an adjustment to the payments to maintain budget neutrality if changes to the RVUs result in an increase or decrease in overall fee schedule outlays of more than $20 million dollars. CMS estimated that the new work values for the 400+ codes would result in an increase in expenditures of approximately $4 billion dollars.
As a result, CMS implemented a budget neutrality adjuster (.8994) that was applied to the work RVUs for payment purposes. In other words, as a result of the large number of increased work values, all work values were adjusted down to bring spending in line with Medicare's budget neutrality requirements.
What This Means for You
What this all means is that even though the conversion factor is the same as it was last year, in 2007 some codes pay slightly less than they did in 2006, while others pay slightly more. Those of you who use codes from both the general evaluation and management section of CPT and the psychiatry section of CPT may actually see a slight overall increase in your reimbursement because of an increase in the work values of select evaluation and management codes. To review your coding options, see the CPT Psychiatric Code Matrix at http://www.psych.org/news_room/cptpsychiatriccodematrix.pdf. For more information on how to code using the general evaluation and management codes to see Coding a Documentation of Evaluation and Management Services at http://www.psych.org/news_room/codinganddocumentation.pdf.
To find the 2007 Medicare fee schedule for your location, you should go to your state's Medicare Carrier's Web site. A list of the carriers with links to their Web sites can be found on the APA Web site at - http://www.psych.org/psych_pract/medicare_medicaid/medicare_carriers/medcarrier_list.cfm.
If You're Thinking About Changing Your Medicare Status
Because of the lateness in the issuance of the fee schedule for 2007, the deadline for the Medicare participation enrollment period has been extended to February 14, 2007. This means that if you wish to become a participating (Par) physician under Medicare, you need to complete and return CMS Form 460 to your Medicare contractor by the February 14 deadline. CMS form 460 and the instructions can be found at: http://www.cms.hhs.gov/cmsforms/downloads/cms460.pdf. Your Par status will be effective January 1, 2007.
If you want to change your participation status from Par to non-participating (Non-Par), you must notify your Medicare contractor in writing of your decision to terminate your Par agreement. If you change your Par status during this extension period you should begin to submit claims based on your new status retroactive to January 1, 2007. Please note that states may have laws that limit payments to Non-Par physicians to less than the limiting charge set by Medicare or may have mandatory assignment laws. Be sure to check on your state's policy before you make the decision to change from Par to Non-Par.
For more information, please refer to Psychiatric News articles:
" Congress Rejects Big Cut In Medicare Payment" by Mark Moran, January 5, 2007
" Medicare Physician Fee Cuts Pack Huge Wallop for 2007" by Mark Moran, December 15, 2006