The Coming Windfall

“It’s time to increase Medicare’s payment rates for physicians to spend time with their patients,” says CMS Administrator Mark McClellan, MD, PhD. “We expect that improved payments for evaluation and management services will result in better outcomes because physicians will get financial support for giving patients the help they need to manage illnesses more effectively.”

While Medicare payments to each hospitalist won’t increase by the same percentages listed in the above examples, 2007 Medicare payments for many evaluation and management services would increase significantly, assuming continuation of the current 2006 dollar conversion factor. (See “The Effect of the Proposed Rule on E/M Codes Billed by Hospitalists,” above.)

Changes in physician work RVUs affect approximately 55% of the total RVUs (the rest are determined by changes in practice expense and medical liability RVUs), so the increase in work RVUs will determine more than half of the total payments per service.

Further, by law CMS must offset the total increases in work RVUs from the five-year review with a separate budget neutrality adjustment so that 2007 expenditures are roughly equal to their 2006 level. The agency is estimating that the proposed changes to the work RVUs would cost Medicare approximately $4 billion. To achieve budget neutrality, CMS is proposing to reduce the work RVU for each service by 10%.

Overall, the proposed notice revises work RVUs for more than 400 services to better reflect the work and time required of a physician in furnishing the service, which can include not just procedures performed but also the services involved in evaluating a patient’s condition, and determining a course of treatment (known as “evaluation and management” services).

Work RVUs account for approximately $35 billion in MPFS payments, representing more than 50% of overall Medicare payments under the fee schedule. TH

SHM encourages hospitalists and others to send a letter to CMS indicating support for the proposed changes.

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