On October 30, 2015, CMS released the CY 2016 Medicare Physician Fee Schedule (PFS) Final Rule updating payment policies, payment rates, and quality provisions for services furnished under the PFS on or after January 1, 2016.  CMS also finalized new policies and changes to quality reporting initiatives that are associated with PFS payments, including the Physician Quality Reporting System (PQRS) and the Physician Value-Based Payment Modifier (Value Modifier).  The Final Rule also contains two new exceptions to and clarifications of the Stark physician self-referral law, establishes a new payment for advance care planning visits, clarifies a Part B payment policy for biosimilars, finalizes a proposal to amend the “incident to” billing regulations, and adopts a methodology to adjust misvalued codes, among other provisions.

Payment Provisions

In the PFS Final Rule, CMS updated the Value Modifier, a program that will expire in CY 2018 and will be replaced by the Merit-Based Incentive Payment System (MIPS).  These updates include (1) applying the Value Modifier to non-physician eligible professionals and (2) setting payment-at-risk under the CY 2018 Value Modifier to 4.0 percent for groups with ten or more eligible professionals.

The Final Rule contains several policies aimed at correcting misvalued codes.  In the Protecting Access to Medicare Act of 2014 (PAMA) and the Achieving a Better Life Experience Act of 2014 (ABLE), Congress set targets for adjustments to misvalued codes for CYs 2016-2018.  In the Final Rule, CMS implements a methodology to identify changes to misvalued codes, the implementation of which would achieve 0.23 percent in net reductions in estimated expenditures. 

Additional payment policy provisions that are set forth in the Final Rule include the following: 

• With respect to drugs, CMS set the Part B payment amount for each biosimilar based on the average sales price of all of the biosimilar biological products included within the same billing and payment code;
• With respect to “incident to” services, CMS proposed to amend its regulations to state that the physician or other practitioner who bills for incident to services must also be the physician or other practitioner who directly supervises the auxiliary personnel who provide the incident to services.  Accordingly, the use of the Medicare billing number of the ordering practitioner would only be appropriate if the practitioner directly supervised the auxiliary personnel;   
• In PAMA, Congress required that providers that order advanced diagnostic imaging services consult with appropriate use criteria via a clinical decision support mechanism.  CMS was directed to establish such appropriate use criteria from among those developed or endorsed by national medical professional specialty societies and other provider-led entities.  The Final Rule establishes which organizations are eligible to develop or endorse appropriate use criteria, the evidence-based requirements for appropriate use criteria development, and the process CMS will follow for qualifying provider-led entities;
• CMS established separate payment and a payment rate for two advance care planning visits, which are separate from the payment for a “Welcome to Medicare” visit; and
• CMS reduced payments for lower gastrointestinal endoscopy services. 

CMS did not finalize its proposal to implement a new code set for payment of radiation therapy treatment under the PFS.  CMS will continue the use of the current G-codes and values for CY 2016 while it seeks additional public comments and recommendations regarding the proposed new codes.

Compliance Provisions

The Final Rule contains several significant revisions to the Stark physician self-referral law, with the stated goals of reducing compliance burdens, facilitating compliance, and accommodating delivery and payment system reform.  These revisions, consistent with revisions in the proposed rule reported on here in July 13, 2015, include:

1. Two new exceptions
   • Establishing two new exceptions—(1) an exception for payment by hospitals, Federally Qualified Health Centers (FQHCs), and Rural Health Clinics (RHCs) to physicians for the purpose of compensating non-physician practitioners under certain conditions; and (2) an exception to permit timeshare arrangements for the use of office space, equipment, personnel, items, supplies, and other services;
2. Physician-owned hospitals
   • Clarifying that the Affordable Care Act’s physician-owned hospitals website and advertising requirements can be satisfied through a broad range of actions; 
   • Conforming the regulations to the statute so that the baseline and future calculations of hospital’s physician ownership percentage includes all physicians rather than only those physicians who refer to the hospital.  The physician ownership calculation changes take effect on January 1, 2017;
3. Other clarifications—Other clarifications and guidance provided in the Final Rule include, among others, the following:
   • Clarifying that separate billing of a patient by a hospital and a physician do not necessarily create a financial relationship;
   • Clarifying that the regulatory exceptions requiring a writing can be satisfied through a collection of documents;
   • Clarifying that the term of a lease or personal services arrangement need not be in writing if the arrangement lasts at least one year and is otherwise compliant;
   • Allowing expired leases and personal services arrangements to continue indefinitely on the same terms if otherwise compliant;
   • Allowing a 90-day grace period to obtain missing signatures without regard to whether the failure to obtain the signature was inadvertent;
   • Clarifying the geographic service area for FQHCs and RHCs using the physician recruitment exception; and
   • Clarifying that compensation paid to a physician organization cannot take into account the referrals of any physician in the physician organization, not just a physician who stands in the shoes of the physician organization, and that employees and independent contractors need not sign arrangements between the physician organization and a DHS entity.

Quality Provisions

The Final Rule establishes the same criteria for satisfactory reporting that were established for the 2017 PQRS payment adjustment, which are generally to require the reporting of nine measures covering three National Quality Strategy Domains.  If an individual eligible professional or group practice does not satisfactorily report or satisfactorily participate in PQRS for 2016, the Final Rule imposes a two percent negative payment adjustment to covered professional services.  Starting in 2019, adjustments to payment for quality reporting and other factors will be made under MIPS, as required by the Medicare Access and CHIP Reauthorization Act of 2015.  The Final Rule also adds and removes certain PQRS measures.

The Final Rule also includes quality proposals applicable to Accountable Care Organizations (ACOs) participating in the Medicare Shared Savings Program.  The Final Rule (1) adds a statin therapy quality measure, (2) preserves the ability to maintain and revert measures in certain circumstances, (3) clarifies compliance with PQRS for professionals within an ACO, and (4) amends the definition of primary care services to include claims submitted by Electing Teaching Amendment hospitals and to exclude certain claims for services furnished in skilled nursing facilities.

The Final Rule is scheduled for publication in the Federal Register on November 26, 2015, and is available in pre-publication form here.  The accompanying CMS Fact Sheet is available here.

Reporter, Kristin Roshelli, Houston, +1 713 751 3263, kroshelli@kslaw.com.