It happens every year. All healthcare professionals have learned to anticipate annual changes in Medicare regulations, coding and reimbursement. However, this year’s delays and payment uncertainties definitely qualify 2003 as one of the worst years yet for physicians trying to do some financial planning for their practices.
For starters, the Centers for Medicare and Medicaid Services (CMS) released its 2003 Medicare Physician Fee Schedule and Final Rule on Dec. 31, 2002, two months behind schedule. As a result of that delay, the payment rates for 2003 were amended to take effect on March 1, and 2003 procedures provided prior to that date were to be reimbursed at last year’s rates.
The flawed formula that was used to calculate the annual pay updates included a 4.4 percent reduction in the fee schedule conversion factor (CF) across the board. Under that Final Rule, the physician fee CF for 2003 ($34.5920), which adjusted the base calculation for all physician services, was not to become effective until March 1 because of the delay in its release. Services provided on or after Jan. 1 and before March 1 were paid under the 2002 Fee Schedule at the $36.1992 CF.
Without congressional intervention, physicians could well have been facing an overall drop of 18 percent over a four-year period, with CY 2005 fee payments falling below the 1991 Medicare payment scale.
In an attempt to halt the proposed reductions prior to implementation, congressional negotiators agreed in early February to increase Medicare payments to doctors by nearly $49 billion over the next 10 years. Doing so warded off the scheduled March 1 pay cut that many feared could drive thousands of physicians out of the program.
Finally, the agreed-on remedy, beyond maintaining payments at current levels, provided an approximately 1.6 percent increase. This legislative change in Medicare payments was attached to the $395 billion annual appropriations bill that had been delayed for more than four months by partisan battling. The bill, applying to all government departments and program funding, cleared both the House of Representatives and the Senate on Feb. 14. Finally, after waiting for over two months into the year, the Medicare CF of $36.7856 became finalized for professional physician services provided during the period of March 1 through Dec. 31, 2003.
As this issue went to press, CMS was revising its opinion on the effect of the legislation and estimating that Medicare payments to physicians will decline during the years 2004-2007, with a 4.2 percent cut in 2004. This change is due to the Sustainable Growth Rate (SGR), which cuts payments if growth in Medicare patients’ use of services exceeds the growth in the Gross Domestic Product (GDP) of the entire U.S. economy. Physicians are the only medical providers subject to the SGR.