On July 8, 2015, CMS issued its annual proposed rule outlining payment policies, payment rates, and quality provisions for services furnished under the Medicare Physician Fee Schedule (PFS) for CY 2016.  In the proposed rule, CMS seeks comments on the implementation of the new Merit-based Incentive Payment System (MIPS) that will apply to payment for items and services beginning in CY 2019.  The proposed rule also contains several policy proposals, including new exceptions to the Stark physician self-referral law, a clarification of Part B payment policy for biosimilars, a methodology to adjust misvalued codes, and a new payment for advance care planning visits.  Comments on the proposed rule are due by September 8, 2015, with the final rule expected to be published in the Federal Register by November 1. 

Payment Provisions

CMS outlines several payment policy proposals in the proposed rule, the most sweeping of which is the implementation of the MIPS.  Earlier this year, on April 16, Congress enacted the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which, among other provisions, repealed the contentious Sustainable Growth Rate (SGR) update methodology for physicians’ services, established annual PFS payment rate increases for 2015 and subsequent years, and created the MIPS, under which the payment to physicians and other healthcare professionals will be adjusted based on their past performance, beginning in CY 2019.  (For a detailed summary of MACRA, please see our prior Health Headlines article here.)  In the proposed rule, CMS seeks comments on the general implementation of MIPS as well as two specific aspects:  (1) the low-volume threshold for professionals to qualify for MIPS eligibility (i.e., a minimum number of Medicare beneficiaries, services, or claims), and (2) the clinical practice improvement activities that should be used (along with other performance categories) in determining the composite performance score. 

CMS also proposes updates to the Physician Value-Based Payment Modifier, a program that will expire in CY 2018 and will be replaced by the MIPS.  These updates include the application of the Value Modifier to non-physician eligible professionals, and the setting of payment-at-risk under the CY 2018 Value Modifier to 4.0 percent for groups with ten or more eligible professionals.

The proposed 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 CY 2016-2018.  In the proposed rule, CMS proposes a methodology to identify changes to misvalued codes, the implementation of which would achieve 0.25 percent in net reductions in estimated expenditures, and solicits comments on the changes needed to achieve the statutory goal of 1 percent.  CMS also proposes to make changes to misvalued codes for radiation therapy and codes for lower gastrointestinal endoscopy services.

The proposed rule contains several additional payment policy provisions: 

• With respect to drugs, CMS proposes to set the Part B payment amount for each biosimilar based on the average sales price (ASP) of all of the biosimilars referencing the same reference biologic. 
• With respect to “incident to” services, CMS proposes to clarify that the billing physician must also be the supervising physician.  Accordingly, the use of the Medicare billing number of the ordering practitioner would only be appropriate if the practitioner directly supervised the auxiliary personnel.
• Section 218 of PAMA directed CMS to establish a program to promote the use of appropriate use criteria (AUC) for advanced diagnostic imaging services.  In the proposed rule, CMS proposes several regulatory definitions and an implementation process focused onto define “provider-led entity,” “priority clinical areas of priority,” and “specified applicable appropriate use criteria,” and outlines its plan for implementing the program. 
• CMS proposes to establish payment for two advance care planning visits, separate from the payment for a “Welcome to Medicare” visit, and paid based on a dedicated CPT code.
• CMS is soliciting comments on the potential expansion of the Comprehensive Primary Care Initiative (CPCI) beyond currently participating practices, but does not propose an expansion.
• The proposed rule does not discuss the implementation of section 216 of PAMA, which reforms Medicare payment for clinical laboratory tests by setting the Medicare payment based on the rates paid for certain tests by commercial payers.  To comply with statutory deadlines, CMS may implement these payment reforms in a separate rulemaking.

Compliance Provisions

The proposed rule contains several significant revisions to the  Stark physician self-referral law, with the stated goal of reducing compliance burdens.  These proposals include:

1. Recruitment and retention.  Establishing an exception for payment by hospitals, Federally Qualified Health Centers (FQHCs), and Rural Health Clinics (RHCs) to physicians to assist with employing non-physician practitioners; and clarifying the geographic area for FQHCs and RHCs that rely on the exception. 
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, because they are not prescriptive of specific actions.  Also clarifying that the 2010 baseline physician-ownership percentage includes physicians who do not refer to the hospital.
3. Other exceptions.  Establishing a new exception to permit timeshare arrangements in underserved areas; and clarifying that separate billing of a patient by a hospital and a physician do not necessarily create a financial relationship.
4. Administrative requirements. 
   • Clarifying regulatory flexibility with certain administrative requirements, including:
   • The regulatory exceptions requiring writing can be satisfied through a collection of documents. 
   • The term of a lease or personal services arrangements need not be in writing if the arrangement lasts at least one year and is otherwise compliant.
   • Holdover arrangements may last indefinitely (or, alternatively, for longer than six months), provided that certain safeguards are met.
   • The requirement to obtain missing signatures can be complied with within a 90-day grace period, regardless of whether the failure to obtain a signature was inadvertent.

CMS is also seeking comments on additional changes to the Stark physician self-referral law that may be needed to facilitate alternative payment models and value-based purchasing. 

Quality Provisions

The proposed rule includes updates to policies regarding the quality of patient care.  CMS proposes to continue to implement the Physician Quality Reporting System (PQRS) in CY 2018, while adding and removing certain measures, and employing new policies to promote the public reporting of quality data.  In CY 2019, PQRS will be replaced by the MIPS.  

The proposed rule also includes quality proposals applicable to Accountable Care Organizations (ACOs) participating in the Medicare Shared Savings Program.  These proposals would add a statin therapy quality measure, preserve the ability to maintain and revert measures in certain circumstances, clarify compliance with PQRS for professionals within an ACO, and include services by Electing Teaching Amendment hospitals in the definition of primary care services. 

The proposed rule is scheduled for publication in the Federal Register on July 15, 2015 and is available in pre-publication form here.  The accompanying CMS Fact Sheet is available here.

Reporter, Igor Gorlach, Houston, +1 713 276 7326, igorlach@kslaw.com.