"Physicians should note that while CMS is required to publish a proposed physician fee schedule at this time, both the House and the Senate version of the Medicare legislation contain provisions that address the proposed fee schedule cuts."

The proposed fee schedule reductions are mandated by the design of the physician fee schedule (RB-RVS). When the volume of Medicare physician services increases, the fee schedule methodology is designed to impose a reimbursement reduction in order to maintain budget neutrality. However, Congress has interceded several times in the past when Medicare cuts were proposed. Last year, Congress mandated a 1.6 percent increase instead of the proposed 5.4 percent reduction proposed by CMS. This year, the House has already proposed a 1.5 percent increase, while at least one Senate plan merely attempts to eliminate the anticipated reduction.

In addition to the proposed fee schedule reductions (which can be accessed at our Web site www.tuckerlaw.com in the Health Care practice section; click on "Health Resources") there are also suggested changes in several specific areas. Public comment is due by October 7, 2003 and can be submitted (original plus 2 copies) at the following address:

Centers for Medicare & Medicaid Services

Department of Health and Human Services

Attn: CMS-1476-P

P.O. Box 8013

Baltimore, MD 21244-8013

CMS has also designated an individual responsible for each specific area; their names and telephone numbers are included in the respective discussions.

CMS is seeking comments regarding whether licensing standards should be imposed upon individuals who provide

outpatient therapy services to Medicare beneficiaries in physician offices as "incident to" services. The request for comments states that the licensing standards imposed by 42 CFR § 484.4 are applicable in "almost all settings" except physician offices. The intent of CMS is clear from the announcement, which states:

"While there are currently no national standards for qualifications of individuals providing outpatient therapy services incident to physician services, we believe that standards similar to those in § 454.4 are appropriate…

"We are considering adopting the existing qualification and training standards (with the exception of licensure) in § 454.4 for individuals providing therapy services independently and incident to physician services."

Public comments are solicited. The CMS contact person listed as responsible for this issue is Dorothy Shannon (410-786-3396).

CMS is continuing what it describes as a massive refinement of the practice expense RVUs as part of a process that is designed to convert the expense methodology from one which allocated expenses within medical practices based upon charges to one which allocates expenses based upon utilized resources, designated as a "top down" methodology. The practice expense proposals for 2004 are as follows:

The non-physician work pool will continue for 2004. This concept was created to allocate expenses based upon clinical staff input for services which did not have physician work components, and was necessary because the existing expense allocation method allocated practice expenses to procedures based upon physician time. This will continue while further study is performed.

The Balanced Budget Refinement Act of 1999 required CMS, then HCFA, to survey practice organizations in order to collect data to refine practice expense allocations. Since CMS has not completed this process, it is proposing a two year moratorium on these modifications to allow sufficient time to complete the practice survey process.

CMS has completed its survey of clinical practice expenses for supplies and in Addendum D to the proposal, has established revised unit prices for supplies.

CMS has not proposed a GPC1 (geographic practice cost index) for malpractice costs at this point. It proposes to collect 2001 and 2002 actual data, project 2003 malpractice costs, and make the GPCI proposal by January 1, 2004. The contact for practice expense issues is Rick Ensor (410-786-5617) and for the unit pricing of practice supplies is Gail Addis (410-786-4552).

Since home cardiac monitoring has become available, CMS would like to establish new codes and national payment amounts for these services, and would classify them as diagnostic tests.

CMS has concluded that dialysis capitation is a disincentive for patients to be seen by their physician and that some patients benefit from more frequent visits.

Therefore, CMS is proposing to invalidate CPT codes 90918, 90919, 90920 and 90921 and create three new codes to cover different levels of patient visits. The contacts for all coding issues are Diane Milstead (410-786-3355), Latesha Walker (410-786-1101) or Gaysha Brooks (410-786-3355).

CMS Publishes Two Final Rules Requiring More Electronic Submissions

For two consecutive weeks, the Federal Register contained new rules regarding electronic submission standards. The first was for the submission of Medicare claims by physicians and providers, and the second for the submission of Medicare cost reports. This article contains a brief synopsis of the rules and how the covered health care facilities may be affected.

All physicians and providers, excluding those covered by the exceptions (which are primarily "small providers" as discussed below) will be required to submit Medicare claims electronically after October 16, 2003.

The electronic submission requirement is a product of HIPAA and the Administrative Simplification Act (ASA). Medicare is a covered entity pursuant to HIPAA and, as such, is required to adhere to the HIPAA electronic standards requirements. To assist Medicare in enforcing compliance, the ASA requires Medicare to deny payment for claims which are not submitted in accordance with the electronic standards, unless exceptions are provided by regulation.

On August 15, 2003, the Department of Health and Human Services (HHS) issued interim final regulations implementing the ASA effective October 16, 2003. The electronic submission requirement will apply to providers (defined by Medicare as hospitals, home health agencies, CORFs, SNFs and rehabilitation facilities) and to all physicians (defined by Medicare as doctors, dentists, podiatrists, optometrists and chiropractors), practitioners, facilities or suppliers except the following:

1. Small providers, i.e. providers with fewer then 25 full time employees;

2. Small practices, i.e. physician, practitioners, facilities or suppliers with fewer than 10 full time employees;

3. Dental claims;

4. Electronic services interruptions outside of the control of the billing entity; or

5. Other extraordinary circumstances approved by the Secretary of HHS.

The small practice exception could actually be the "rule," because CMS and the AMA estimate that it will apply to 70 percent of physician practices. CMS is reported to be concerned that so many practices will convert to paper claims that the entire system will be "clogged."

In the August 22, 2003 printing of the Federal Register, the Centers for Medicare & Medicaid Services ("CMS") published a final rule amending a regulation that requires certain health care facilities to submit cost reports required by Medicare in a standardized electronic format. This rule goes into effect for cost reporting periods ending on or after Dec. 31, 2004, and affects all hospices, organ procurement organizations, rural health clinics, federally qualified health centers, community mental health centers, and end-state renal disease facilities.

Generally, the above facilities that participate in Medicare are reimbursed for the reasonable costs of the covered items and services provided to Medicare beneficiaries. In order to receive these reimbursements, the facilities are required to maintain sufficient financial records and statistical data to properly determine the amount to be received by the facility. Providers are to submit cost reports annually, following accounting, statistical and reporting practices as accepted in the health care industry. The new rule handed down by CMS states that these reports must follow the electronic filing requirements already used by hospitals, skilled nursing facilities and home health agencies.

The rule will be phased in over a two-year period, allowing the affected entities an opportunity to familiarize themselves with the new electronic filing requirements. To address the concern that some facilities may not be able to afford the software necessary to implement these new elec-tronic cost reports, CMS has stated that free software is expected to be available by September 30, 2004 for those facilities that are financially unable to purchase the software on their own.

The new rule applies to all cost reports ending on or after December 31, 2004, but a delay or waiver may be available where financial hardships render compliance with the rule unreasonable for a facility. The decision of whether or not to grant such delay or waiver will be made by CMS on a case-by-case basis, based on factors such as cash-flow problems, previous years’ operating losses and various other similar fiscal problems. CMS is providing this two-year period as an opportunity to rectify any problems that the affected facilities may experience.

"The change will make it easier to file and review cost reports, helping Medicare to pay for services more accurately," said Tommy G. Thompson, Department of Health and Human Services Secretary. CMS believes that this move will free up important resources and time that can be better used helping Medicare recipients.

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Physicians and professional organizations have frequently stated that the malpractice problems in Pennsylvania are adversely impacting patient access. Critics label this a hyperbole. The following facts, released by the Pennsylvania Medical Society and reported recently by AMA News, make the point regarding the decline in physicians for the period ending December 31, 2002.

Neurosurgeons -- 16% decrease in 7 years

Anesthesiologists -- 6% decrease in 2 years