2008 Medicare Physician Fee Schedule

On Thursday, November 1, the Centers for Medicare and Medicaid Services (CMS) released the 2008 Medicare physician fee schedule. The final rule will be published in the November 27, 2007 Federal Register. The combined impact for dermatology is a negative 8 percent. While not much consolation, it is important to note that because of other fee schedule changes, dermatologists will fare relatively better than most other specialties (impacts range from -12 percent to a +2 percent).

The main factor contributing to the reduction is the flawed Sustainable Growth Rate (SGR) formula, causing a 10.1 percent reduction to the conversion factor. This is a deeper cut than the 9.9 percent reduction in the proposed rule. The conversion factor, currently set at $37.8975, will be reduced to $34.0682 beginning January 1, 2008.

In addition to the flawed SGR formula-caused reduction, last year's Tax Relief and Health Care Act that staved off the 2007 cut by using an accounting gimmick (not fully funded) doubled the physician cut for next year. The AAD and the physician community are advocating for a repeal of the SGR and at least 2 years of a positive update that is fully funded.

There is consensus on Capitol Hill that physicians cannot receive a 10.1 percent reduction in payment. Some Members of Congress agree that a two-year positive update is needed, while others are looking at a one-year freeze. Both options are expensive in the current budget situation, and the legislative session is winding to a close. Members of Congress need to hear from dermatologists now to keep this issue on the front burner as an issue that must be addressed before adjournment.

CMS has also finalized its proposal to use the Physician Assistance Quality Improvement fund (PAQI) that provides $1.35 billion for physician payment and quality improvement initiatives, to fund bonus payments for the 2008 Physician Quality Reporting Initiative (PQRI). CMS will not use the $1.35 billion dollar fund to lessen the negative physician payment update. The AAD believes that the $1.35 billion PAQI fund should be used to offset the scheduled 10.1 percent reduction and not used to fund PQRI bonuses in 2008.

Dermatology Specific Reductions
In the final rule, CMS removed the Multiple Procedure Reduction Rule (MPRR) exemption for Mohs micrographic surgery. Under the multiple procedure payment reduction policy, reimbursement for subsequent surgical procedures performed during the same operative session by the same physician is reduced by 50 percent. The estimated impact of this change-which would be in addition to the reductions outlined above-is currently being evaluated. The Mohs surgery codes have been exempt from the multiple procedure payment reduction rule since 1992.

Here is a sample of the 2008 fee schedule's impact on selected dermatology codes:

The final rule can be located at: www.cms.hhs.gov/physicianfeesched/downloads/CMS-1385-FC.pdf