Proposed payment changes: Both good and bad news

October 1, 2006

If the conversion factor cut stands, urologists' Medicare income will decrease overall by about 5%.

The proposed rules included a 5.1% decrease in the conversion factor, due in large part to the flawed sustainable growth rate update formula. There is a chance that Congress will address the conversion factor reduction late this year or early next year, as has occurred in the past few years.

First, some good news

As a result of the 5-year review, coupled with effective lobbying and sheer number of primary care physicians, the proposed rules include an increase in values for most evaluation and management services. The proposed rules also include a revision to the practice expense values. CMS decided to accept the practice expense data presented by AUA. While most work values for surgical services changed very little in the 5-year review process, the changes that CMS has proposed to many of the practice expense values will lower payments. Without the hard work of AUA, the proposed cuts would have been much greater.

In this "zero sum" payment game, increased work values for high-volume services, such as E&M, affect other services negatively. The decreases in practice expense values for many surgical services have reduced the conversion factor change to a degree. When the value changes are coupled with the conversion factor adjustment, some specialties will see projected Medicare reductions of 10% to 18%.

The bottom line is that if the conversion factor cut stands, urologists' Medicare income will decrease overall by about 5%. If this cut is negated and the conversion factor is "frozen," urology overall will be even for 2007, although there will be payment increases in some areas and decreases in others. The increases will mainly be in some E&M codes, such as a third-and fourth-level established patient visits and some office procedures, such as the prostatic needle biopsy. The main decreases in urology will come from other office-based procedures.

4-year phase-in period

Once the various calculations and recommendations were finalized, it became apparent that the full implementation of the practice expense review changes in 1 year would be difficult for many specialties to absorb. Therefore, CMS decided to phase these practice expense changes in over a 4-year period. CMS has left the door open to change this time frame after observing the first-year impact.

Although tedious, the analysis of these value changes and their impact is an important part of shaping a practice plan for the future. Space does not allow an in-depth report of the impact for all codes. Therefore, the following is a grouped analysis of the impact of the proposed changes. The summary that follows highlights some of the larger impact areas with a few specific numbers. With a potential change in the conversion factor, we will focus on the value changes and their effect on common urology services only. The value changes below are based on the fully phased-in changes scheduled for completion in 2010. The impact in 2007 will be approximately one-quarter of what is listed here.