In a 20-page letter sent to the Centers for Medicare & Medicaid Services (CMS) in October, Dr. William F. Jessee, FACMPE, president and CEO of the Medical Group Management Association (MGMA), outlined the myriad of concerns the organization has with the proposed 2007 Medicare physician fee schedule. In his correspondence, Jessee noted, "We appreciate the Centers for Medicare & Medicaid Services' outreach to the provider community and their willingness to participate in constructive dialogue to improve the Medicare program." Behind the politeness, however, is a heightened sense of urgency as providers and administrators see an ever-increasing gap between expenses and revenue streams and begin to ponder the viability of continuing to accept Medicare patients. Lisa P. Goldstein, JD, government affairs representative for MGMA's eastern and southern section, said that at the heart of the issue is one of the components of the formulary used to calculate the price per medical service. The proposed rule contains an average 5.1 percent cut for physicians, which is larger than the 4.6 percent reduction originally anticipated. Updated data used to calculate the sustainable growth rate (SGR) altered the 2007 conversion factor resulting in a larger cut. "Ultimately, the SGR is really the problem within the conversion factor," said Goldstein. "Our primary concern is that the SGR formula is flawed and must be fixed." Dr. Cecil Wilson, chair of the board of the American Medical Association (AMA), said the problem with the SGR formula is that it doesn't take inflation into account, doesn't factor in the increase in seniors and doesn't recognize the expansion in Medicare services Congress has approved over the past seven years. "It has nothing to with the cost of providing care," he said. "It has to do with trying to control volume." In the end, the system has borrowed from the future to try to pay for the present, and Congress now plans nine straight years of cuts. Factoring in inflation, Wilson said that for every $1 a physician receives today from Medicare, that same service would be reimbursable for only 40 cents nine years from now. Instead of the drastic cuts called for by SGR calculations, MGMA and the AMA are urging Congress to tie the annual update to the Medical Economic Index, which factors in some allowance for increasing overhead costs. Since it is a Congressional statute, Goldstein pointed out any modifications to the SGR formula would require legislative action. However, MGMA contends there are steps CMS can take without Congressional intervention. "We believe CMS has the authority to remove drugs from the formulary," she said. In the case of physician-administered drugs, MGMA says the actual cost of the drugs should not be included under the definition of physician services. Instead, only the administration of those drugs should be factored into the SGR formula. Also of great con cern to MGMA are rule changes attached to reassignment and self-referral. "What CMS has proposed would really limit the flexibility group practices have in how they set up arrangements with independent contractors for the provision of diagnostic testing services," said Goldstein, adding the new rules restrict what had previously been relaxed as part of the Medicare Moderniz ation Act. "It's really micromanagement of group practice arrangements." Diagnostic testing is one area that would be greatly impacted by the proposed changes. The net effect of the tighter rules would essentially require three separate entities to treat the patient and perform the technical and interpretive components of diagnostic testing. MGMA is concerned about what such a mandate might do to the continuity of care as well as patient access to services. CMS also plans to tighten the definition of "centralized building" in response to concerns over "pod labs" that might pose a threat to the integrity of self-referral rules. However, the broad sweeping language proposed would not only affect the pod labs but also group practices that seek to provide diagnostic testing services under the exception to the Stark law that requires such services be performed in a "centralized building." "Utilization of diagnostic imaging services in physician practices has grown in recent years, making it a target for Congress and CMS. Many of the provisions in the proposed fee schedule seem to target the ability of group practices to provide these services in their offices," said Goldstein. She added the new regulations both cut reimbursements and add additional layers of government regulation, thus adding to the administrative burden. "Providers want to do what is right by their patients and what is right by the law, but all of this over-regulation just makes it more difficult to do so and drives up costs significantly," she stressed. Goldstein underscored the impact any CMS decision has on the larger e changes to take action — providers, administrators, billers, coders, family and friends. "The first thing they should be doing is writing letters and contacting members of Congress about the payment issue. It's critical. Interested members of Congress have said that they have not heard from their constituents on this issue in significant numbers. Providers need to let Congress know what an impact a 5 percent cut would have on their practice and the patients they serve," Goldstein stressed. December 2006