On November 1, CMS issued its Final Rules related to the physician fee schedule, home health prospective payment system (HH PPS) and the outpatient prospective payment system (OPPS) that applies to hospitals and outpatient facilities. These payment and policy changes will become effective as of January 1, 2012.
According to the final fee schedule, physician pay rates will be cut by 27.4 percent. The amount of physician payment for a particular service is determined by multiplication of the relative value units for the service by a fixed dollar conversion factor and a geographic adjustment factor. The conversion factor will be $24.6712 in 2012 compared with $33.9764 for 2011. CMS estimates that as a result of these reductions, total payments under the physician fee schedule in 2012 will be approximately $80 billion. Historically, Congress has intervened and reversed these cuts. However, in light of the impasse earlier this year over budget cuts and the debt ceiling, Congress may not intervene in which case substantial reductions in physician reimbursements will occur.
Similar to physician payments, CMS estimates that payments to HH PPS will decrease by 2.3 percent, or roughly $430 million. The rule reflects the combined effect of market basket and wage index increases totaling $290 million and reductions to the HH PPS rates totaling $720 million. CMS will implement the reductions to account for increases in aggregate case mix that are largely related to billing practices rather than changes in the health status of patients. In addition, PPACA applies a 1 percent reduction to the 2012 home health market basket amount. Since the 2012 market basket is equal to 2.4 percent, the payment update for home health agencies for 2012 will be 1.4 percent.
The bright spots in the final rules can be found in the OPPS final rule in which CMS increased payments to ambulatory surgical centers (ASCs) by 1.6 percent and to hospitals and outpatient facilities by 1.9 percent. The payment increase to ASCs reflects the 2.7 percent consumer price index increase for all urban consumers, minus a 1.1 percent multifactor productivity adjustment required by PPACA. The increase to hospitals and outpatient facilities is based on the projected hospital inpatient market basket percentage increase of 3 percent for inpatient services paid under the hospital Inpatient Prospective Payment System (IPPS) reduced by the 1.1 percent productivity adjustment required by PPACA.
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