Physician Fee Schedule for 2006 Final Rule Summary and Implications for ASH Members

CMS issued its final physician fee schedule rule for 2006. Absent legislation in 2005, there will be a 4.4 percent reduction in the conversion factor due to the Sustainable Growth Rate (SGR) beginning January 2006. Other major changes in the rule of general interest to beneficiaries and physicians include expansion of coverage for glaucoma screening, expanded access to Medicare Advantage Plans for rural beneficiaries, a reduction in payment for multiple imaging services, a revision of payment for ESRD services, changes in payment for inhalation therapy, and the application of the Stark provisions to nuclear medicine services.

Some other changes of general interest to physicians include the following:

New tech supply cost review: CMS will consider options for revaluing high cost "new tech" supply items more frequently than every five years and will include a discussion in the next proposed rule.

GPCIs: CMS will not create new, separate payment localities for Santa Cruz and Sonoma Counties in California due to lack of support indicated in the public comments the agency received. CMS will work with MedPAC and other interested parties to ward a more comprehensive evaluation of potential refinements of the payment localities.

GPCIs for Alaska will be 1.017 for physician work, 1.103 for PE, and 1.029 for malpractice costs for 2006.

Malpractice RVUs - 5 percent specialty threshold: CMS will exclude data for any specialty that performs less than 5 percent of a particular service or procedure from the malpractice RVU calculation for that service or procedure. The decision was based on concerns that the malpractice RVUs could be inappropriately inflated or deflated due to irregular data based upon incorrectly reported specialty classifications. No other changes will be made to the calculation of malpractice RVUs.

Dominant specialty for low-volume codes: CMS did not adopt the recommendation from the PLI workgroup to use the dominant specialty approach for calculating malpractice RVUs for services/procedures with fewer than 100 occurrences and to apply the approach to the list of 1,844 services supplied by the workgroup. CMS believes that low volume procedures are not necessarily provided by only one specialty and they would like to be able to distinguish data presumed to be erroneous from data reflecting utilization by specialties that perform the service but are not the dominant specialty. CMS will continue to work on the issue with the PLI workgroup.

For hematologists and oncologists, the following would represent the more significant policy changes in the final rule:

• Deferral of the sweeping changes proposed in the system for calculating practice expense values
• Technical changes in ASP and other revisions in drug payment policy
• Changes to the Competitive Acquisition Program (CAP)
• Changes in payment for IVIG
• Establishment of a revised cancer demonstration program
• Change in payment for photopheresis

Practice Expense Proposals for CY 2006

In the notice of proposed rulemaking, CMS proposed three major changes in the method for calculating practice expenses (PE) for 2006. These were:

• A change from the “top down” to the “bottom up” method for calculating direct expenses.
• The elimination of the non-physician work pool (NPWP) which provided special reimbursement treatment for the technical component of radiology and cardiology services and other services without a physician work value.
• The adoption of supplemental PE per hour studies submitted by urology, radiology, cardiology, gastroenterology, dermatology, and allergy.

These changes, which were to be phased in over a four year period, would have led to substantial redistribution of payments between specialties. For the final rule, CMS has decided not to implement any of these changes for 2006. Several reasons were cited for this decision including the fact that a technical error was made in the calculation of indirect costs affecting all services, complaints that CMS failed to provide adequate data to permit specialties to thoroughly understand and analyze the changes, and concerns that CMS was adjusting the PE values based on supplemental PE studies from only selective specialties. Despite the stated official rationale, however, we suspect the overriding reason why CMS decided not to proceed was because of the concerns voiced by several of the “losing” specialties who would have sustained substantial reductions under the proposal. In any case, CMS has now decided to withdraw the entire set of PE methodology changes and will hold meetings early next year to solicit input from all interested parties. It is unclear which if any of these proposals will be revisited for 2007.

With regard to CMS’ use of supplemental PE studies for only some specialties, some commenters noted that it would be fairer for CMS to survey all specialties. The reality, of course is that all specialties did have the opportunity to conduct a supplemental PE study if they were dissatisfied with the SMS survey data and the deadline for conducting these studies was, in fact, extended on several occasions. As a result of these comments, CMS has indicated it is planning to develop a strategy for funding and fielding a multi-specialty indirect PE survey and plans to work with the AMA and the medical community. This will address concerns that acceptance and implementation of the current survey data could create a two-tiered system between specialties that submitted surveys and those that did not. What implications, if any, an all specialty study might have on the PE values assigned to the drug administration codes as a result of the ASCO study is also not clear.

ASP and Other Changes in Drug Payment

Wholesaler charge backs: CMS will not require manufacturers to calculate ASP for direct sales independently from the ASP for indirect sales and submit to the agency the weighted average of direct sales ASP and indirect ASP. The decision was based on overwhelmingly negative feedback from manufacturers to the proposal. CMS will continue to work with manufacturers to better understand instances in which the proposed methodology may benefit the program and the potential for appropriate use of that methodology for certain or all NCDs, and whether such an approach would be sustainable. CMS also will not make changes to the methodology for calculating the lagged price concessions percentage which had been discussed in the proposed rule.

Limitations on ASP: CMS will continue the 5 percent threshold in 2006 as the level which the Secretary may disregard the ASP for a drug or biological that exceeds the WAMP or AMP.

Clotting factor furnishing fee: The furnishing fee for 2006 will be $0.146 per unit clotting factor, a 4.2 percent increase for the 12 months ending in June 2005.

Supplying fee: Beginning in 2006, for drugs provided by pharmacies, CMS will establish a supplying fee of $24 for the first prescription in a 30-day period and $16 for each subsequent prescription in the period. Each pharmacy will be eligible for one $24 fee per beneficiary per 30-day period.

Originally, CMS proposed to pay $24 for the first prescription supplied during a month and $8 for each additional prescription supplied to the beneficiary in the same month. However, commenters argued that CMS had included no new cost data to support the $8 figure for subsequent prescriptions and some submitted cost data to support a higher fee.

Commenters also raised concerns that if beneficiaries who sought refills before the end of the month, the pharmacy would not be eligible for a $24 fee for that refill so CMS changed the language to "30-day period."

CMS will also expand the circumstances under which it pays the supplying fee to include paying separate fees for different strengths of the same drug that are supplied on the same day. This will not affect the supplying fee for the first immunosuppressive prescription after a transplant, which will continue to be paid at $50. If a supplier receives a $50 supplying fee for the initial prescription after a transplant, a supplying fee of $16 will be paid for all subsequent prescriptions, after the initial prescription, furnished by that supplier to the beneficiary during that 30-day period.

IVIG: In response to concerns about beneficiary access to IVIG, CMS is establishing a temporary add-on payment for 2006 to cover the additional preadministration-related services required to locate and acquire adequate IVIG product during this current period of market insatiability. CMS has determined that the pricing for IVIG is accurate and that there is no overall product shortage. However, in the face of factors such as increased IVIG demand, manufacturer allocation of many different formulations, CMS recognizes the added burdon on physician office staff in locating and obtaining IVIG and in scheduling patient infusions.

For these reasons, CMS has decided to provide an additional payment to physicians and to hospital outpatient departments that administer IVIG via a temporary G code for CY 2006 only. The G code (G0332, preadministration-related services for intravenous infusion of immunoglobulin, per infusion encounter) will allow separate payment for the substantial additional resources that are associated with locating and acquiring IVIG product and preparing for an office infusion of IVIG in the current environment. HCPCS code G0332 will have 1.90 PE RVUs and may be billed in conjunction with administration of immunoglobulin. It can also be billed in addition to any significant and separately identifiable E/M services (level 2 - 5) in association with the infusion encounter (append the -25 modifier to the E/M services).

Over the coming year, CMS will use its historical claims databases to study the epidemiology of IVIG treatment of Medicare beneficiaries in the outpatient setting. CMS is taking this action because of reports of patients experiencing difficulties in accessing timely IVIG treatments and reports of providers experiencing difficulties obtaining adequate amounts of IVIG products on a consistent basis to meet their patient's needs. CMS will also review the forthcoming OIG study on the availability and pricing of IVIG that is currently being conducted as part of its monitoring of market prices.

Competitive Acquisition Program (CAP)

Implementation of the CAP program was suspended based on a rule published August 3, 2005. After evaluating the comments received, CMS again is reinstating the bidding process based on this rule. The plan is to have physicians enroll in the CAP next spring, presumably for implementation July 1, 2006. Another enrollment opportunity will be provided for CY 2007. The basic process described in the rule published earlier this year is largely unchanged. However, certain technical changes are being made based on the comments received. The CAP will still be implemented for essentially all categories of drugs, i.e., no differentiation by specialty or therapeutic category of drug.

Changes in drug listing for CAP bidding: CMS is making several changes to the single drug category in this interim final rule which will be subject to bidding. Also, certain new drugs which did not appear in the previous listing of new drugs for which no utilization data was available and which are not subject to the composite bid are also added. Finally, CAP vendors will be permitted to adjust and update their drug lists during the year based on CMS approval. CMS indicates that any changes in the approved CAP vendor's CAP drug list will improve, or at least maintain, a participating CAP physician's selection of available drugs.

CMS will revise section 414.906(f)(4)(iii) to specify that substitutions that are due to a drug shortage, or other exigent circumstance, may become effective immediately provided that the approved CAP vendor’s participating CAP physicians are notified of the substitution immediately following CMS approval.

Approved CAP vendors may also request CMS approval to add single indication orphan drugs to their CAP drug list.

Beginning in 2007, approved CAP vendors will be able to request approval to add newly approved drugs to their CAP drug list before the drug is assigned a HCPCS code. At a future date, CMS will issue additional guidance to approved CAP vendors on the application procedures for requesting approval to add changes to the approved CAP vendor’s CAP drug list. CMS also will issue additional guidance to participating CAP physicians on how to order these particular drugs once they are added to the approved CAP vendor’s CAP drug list.

Beginning in 2007, approved CAP vendors will also be able to request approval to add new “NOC” drugs to their CAP drug lists. The procedures will parallel those for addition of new HCPCS codes and new NDCs within a HCPCS code, the approved CAP vendor must make a written request to CMS (or its designee). Requests for approval must include a rationale and discussion of impact on the CAP, including safety, waste, and potential for cost savings. The requests will be reviewed and, if approved, changes will become effective on a quarterly basis.

Quality/product integrity: As CMS gains more experience with CAP, the agency will explore the Verified-Accredited Wholesale Distributors Program and other options to further protect product integrity. CAP physicians should notify the approved CAP vendor immediately if there are any questions regarding the integrity of a CAP drug, and report violations to the appropriate federal and state authorities, as well as to the designated carrier's dispute resolution staff.

Bidding process: Given the six month delay in implementation and the corresponding change in the bidding period, CMS will make adjustments to the bidding process to account for more recent data. However, CMS will require bidders to base their bid on the October ASP file. Bidding for potential CAP vendors will commence upon publication of this final rule and bidders will have 30 days to submit an application.

Unused drug product (waste and returns): CMS has clarified that physicians may bill the program for the unused portion of a drug remaining in a single-use vial to be administered for the limited purpose of the Act only under the following conditions:

• only if the participating CAP physician has made a good faith effort to minimize the unused portion of the CAP drug in how he or she scheduled patients and how he or she ordered, accepted, stored, and used the drug; and
• only if the approved CAP vendor has made good faith efforts to minimize the unused portion of the drug in how it supplied the drug. This policy does not apply to multiple-use vials.

CMS is including a new obligation in participating CAP physician’s CAP election agreement that requires the participating CAP physician to make good faith efforts to minimize the unused portion of CAP drugs in how he or she schedules patients and how he or she orders, accepts, stores, and uses the drugs.

CMS clarified that approved CAP vendors will (instead of "should") establish policies on unused drug product issues that comply with the applicable laws and regulations and make the policies available for physicians to review during the election period and through the term of the approved CAP vendor's participation.

Resupply option/definition of emergency: CMS has clarified that it does not have the authority to change, or to make optional, any of the following criteria under which a participating CAP physician may acquire drugs under the CAP to resupply his or her private inventory:

• The drugs were required immediately;
• The participating CAP physician could not have anticipated the need for the drugs;
• The approved CAP vendor could not have delivered the drugs in a timely manner; and
• The participating CAP physician administered the drugs in an emergency situation.

CMS clarified that approved CAP vendors do not have the authority to override a participating CAP physician's determination of what constitutes an emergency situation for purposes of the resupply provision.

The determination of clinical need rests with the participating CAP physician and CMS leaves it to the participating CAP physician to determine the scope of the clinical need. However, CMS stated in the final rule that it does not believe that driving distance in itself should be a determining factor in the use of the emergency supply provision. Rather, the participating CAP physician should evaluate the entire clinical situation of the patient and make an appropriate determination based on all relevant information.

Order form information on patient's weight and height: CMS is amending the regulations to specify that height and weight should be provided only if necessary.

Furnished as written (FAW): If the approved CAP vendor does not carry a specific NDC that is medically necessary for a patient, the participating CAP physician may purchase the drug, bill for it, and use the FAW modifier on the drug claim. In this situation, the local carrier will pay the participating CAP physician under the ASP payment system. CMS reminded physicians that the FAW process requires documentation of medical necessity.

CMS also clarified that the examples provided in the proposed rule were illustrative only and were not meant to exclude other situations where FAW could legitimately be used in order to furnish a patient with the most appropriate therapy. The examples were intended to illustrate two points: (1) participating CAP physicians who use FAW must appropriately document clinical judgment in support of the use of FAW; and (2) FAW is not intended to provide participating CAP physicians with an “end run” around their decision to participate in the CAP.

Beneficiary coinsurance: CMS has changed its policy and now will allow an approved CAP vendor to make a financial arrangement with a participating CAP physician to collect coinsurance on its behalf. Parties are cautioned, however, to assure that any such arrangement does not violate the Stark or anti-kickback provisions.

CMS has clarified that the delivery of the coinsurance bill need not be subsequent to Medicare payment if the approved CAP vendor has received notice of drug administration from the participating CAP physician and the beneficiary lacks supplemental insurance.

CMS has clarified that approved CAP vendors do not have the option of not providing information on cost-sharing assistance programs to beneficiaries who request it. In order to resolve any confusion CMS will make the following revision, "Approved CAP vendors must inform beneficiaries,” that they generally make available the categories of assistance described in the regulations.

Advanced Beneficiary Notices (ABNs): In the July 6, 2005 interim final rule with comment, CMS used the phrase “signed ABN” where it meant to say “enforceable ABN." CMS has clarified this point because there are circumstances under which an ABN issued via telephone can be enforced.

Participating CAP physician mid-year opt out: CMS has made a technical change to
state that if the approved CAP vendor refuses to ship to the participating CAP physician because the conditions of §414.914(h) of the regulations have been met; the participating CAP physician can withdraw from the applicable CAP drug category for the remainder of the year immediately upon notice to CMS and to the approved CAP vendor. However, for the initial implementation of the CAP, there is only one CAP drug category. Therefore, a participating CAP physician exercising this option will, in effect, be opting out of the entire CAP program until the next opportunity to elect to participate. No opt out, however, will be permitted on a beneficiary by beneficiary basis.

Other CAP issues:

• CMS agrees that to provide physicians with the maximum flexibility, the use of formularies should be avoided. For this reason, vendors are encouraged to furnish more than one NDC per HCPCS code.
• While CMS indicates that the 14-day requirement for physicians to submit the drug administration claim is not being addressed in this rule, clearly the discussion implies that it is being maintained.
• CMS provides an extensive discussion of the educational effort that will be provided on their Web site, through the specialty societies, and by the vendors.
• Non-participating physicians who enroll in the CAP must accept assignment for all drug administration services.
• All physicians who are part of a group practice billing under a common PIN must make the CAP election as a group decision, i.e., an individual physician cannot opt out of the enrollment unless they bill in their own name and do not reassign their benefits to the group practice.

Chemotherapy Demonstration Project

CMS has decided to replace the current chemotherapy demonstration with a new one year demonstration project. CMS will eliminate the G codes specific to the assessment of patient symptoms, while maintaining its focus on quality cancer care, including the management of debilitating symptoms. Reporting will no longer be specific to chemotherapy administration services, but instead will be associated with physician E/M visits for established patients with cancer. The demonstration is available to office-based hematologists/oncologists who provide an E/M service of level 2, 3, 4, or 5 to an established patient, when the service is delivered to a patient with a primary diagnosis of cancer belonging to one of the following major diagnostic categories:

• Breast cancer (invasive)
• Colon cancer
• Rectal cancer
• Prostate cancer
• Lung cancer (either non-small cell or small cell)
• Stomach cancer
• Esophageal cancer
• Pancreatic cancer
• Ovarian cancer
• Non-Hodgkin lymphoma
• Chronic myelogenous leukemia
• Multiple myeloma
• Cancer of the head and neck

E/M services furnished by hematologists/oncologists for patients with other cancers as the principal diagnosis will not qualify under the demonstration.

The 2006 oncology demonstration payment amount is $23.00 as compared to the current payment of $130 per encounter. The demonstration is available to office-based hematologists and oncologists only. To qualify for the payment, the physician must submit one G-code from each of the following three categories when an E/M service of level 2, 3, 4, or 5 is billed:

(1) the primary focus of the E/M service;
(2) the current disease state; and
(3) whether current management adheres to clinical guidelines.

More information is forthcoming through a fact sheet and information at the CMS Web site.

36522 (Extracorporeal Photophoresis) Clinical Labor

CMS is setting 135 minutes for the clinical staff time and a total clinical labor time of 167 minutes. CMS did not receive specific comments for this revision and are therefore finalizing the changes. "We believe that 135 minutes is a more appropriate estimation of the clinical staff time actually needed for the intra time, as it more closely approximates the time assigned to the other procedures in this family of codes, including CPT codes 36514, 36515, and 36516."

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