New Medicare Economic Index Changes

• The Medicare Economic Index (MEI) is used in conjunction with the SGR formula to update the physician fee schedule. For 2011, CMS will "rebase" the MEI, i.e. update the base year to 2006 (the most recent year with complete information) to reflect changes in physician expenses and "revise" some of the components or categories that comprise the MEI.

• The impact of the proposed MEI changes varies by specialty. Data from the PCPI survey (that ACEP supported and participated in) showed that practice expense (PE) and medical liability costs grew at a faster rate than physician work. Therefore, CMS increased the PE RVUs used in the MEI to 47.44%, malpractice RVUs from 3 to 4%, and reduced work from 52.46%-48.27% of total RVUs.
• Because these changes must be budget neutral in overall impact, CMS proposes to reduce the Conversion Factor by 7.9%, rather than reduce work values. Therefore, the proposed payment levels for high practice expense specialties will increase, while payment to low practice cost specialties, such as emergency medicine may decrease slightly.
  

Primary Care Incentive Program: The health reform law passed in March 2010 created a 10% bonus payment for primary care services performed by specific specialties of family practice, internal medicine, pediatrics, or geriatrics (but not emergency medicine). General surgeons are also eligible for a 10% bonus if they practice in designated shortage areas. Bonus funds are not budget neutral so money will not be taken from other specialties to pay for the bonuses.

Physician Quality Reporting Initiative: CMS is proposing to add 20 new measures to the physician quality reporting initiative (PQRI) and will make 12 additional measures reportable through electronic health records. A list of measures will be provided in the web update. The new law extends the PQRI program through 2014.  Payments to eligible professionals will equal 1% of estimated total allowed fee schedule services for 2011 and .05% for 2012-2014.  In 2015 the payment is replaced by a penalty of 1.5% for non-reporting.  This increases to 2% for 2016 and thereafter.

Imaging: Last year, CMS increased amount of time that complex diagnostic imaging machines (valued at > $1m) are used in practices from 50% of the time to 90% using a 4-year phase-in. The Affordable Care Act changed the amount to 75%. This will affect the technical component only but will reduce practice expenses for many physicians who perform complex imaging services in their offices. The policy will not be phased in and is not budget neutral, meaning that savings will not be redistributed within the fee schedule.