American Society of Hematology

Medicare Announces 27.4 Percent Physician Payment Cut in the 2012 Physician Fee Schedule; Obama Administration Commits to Ensuring Cuts Do Not Take Effect

Published on: November 02, 2011

The Centers for Medicare & Medicaid Services (CMS) issued a final rule that updates payment policies and rates for physicians for services paid under the Medicare Physician Fee Schedule (MPFS) in calendar year (CY) 2012. The Final Rule assumes a 27.4 percent payment cut for physicians in CY 2012 – less than the 29.5 percent reduction that CMS had estimated in March because Medicare cost growth has been lower than expected. As the final rule was released, Secretary for Health & Human Services Kathleen Sebelius issued a statement indicating the Obama Administration is committed to fixing the sustainable growth rate (SGR) and ensuring these payment cuts do not take effect.

CMS is required to issue a final rule that reflects current law. Under current law, providers will face steep across-the-board reductions in payment rates, based on a formula – known as the sustainable growth rate (SGR) – that was adopted in the Balanced Budget Act of 1997. Without a change in the law from Congress, Medicare payment rates to providers paid under the MPFS will be reduced by 27.4 percent for services in CY 2012. This is the eleventh time the SGR formula has resulted in a payment cut, although the cuts have been averted through legislation in all but CY 2002.

ASH has strongly opposed the proposed draconian cuts to Medicare physician payment and will continue to advocate for a repeal of the flawed payment formula and stable and adequate reimbursement for physicians. The Society successfully urged the Administration to avert cuts in previous years and most recently submitted comments on the proposed rule calling for a permanent solution to the physician payment formula.

In the final rule, CMS is also making several policy changes. This includes expanding the potentially misvalued code initiative, an effort to ensure Medicare is paying accurately for physician services and more closely managing the payment system. This year, CMS is focusing on the codes billed by physicians in each specialty that result in the highest Medicare expenditures under the MPFS to determine whether these codes are overvalued. In the past, CMS has targeted specific codes for review that may have affected a few procedural specialties like cardiology, radiology or nuclear medicine but has not taken a look at the highest expenditure codes across all specialties. This effort results in increased payments for primary care services that have historically been undervalued by the fee schedule.

CMS is also making changes in how it adjusts payment for geographic variation in the cost of practice. The Patient Protection and Affordable Care Act and the Medicare and Medicaid Extensions Act made some temporary adjustments that were in place for two years while CMS and the Institute of Medicine (IOM) began to comprehensively study these issues.

The final rule officially will be published in the Nov. 28, 2011, Federal Register. ASH will submit comments by the Dec. 31, 2011 deadline on all issues concerning hematology. Because a change in the law by Congress is required to avert the 2012 cuts, ASH will continue to work with Congress to resolve this issue and strongly urges all ASH members to participate in the Society's advocacy campaign contacting all Representative and Senators to take immediate action. Please visit the online ASH Advocacy Center to join the campaign today.

The Physician Fee Schedule Final Rule is available for download from the CMS website.

The CMS press release is available online:

Additional CMS Fact Sheets can be found here:

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