Life Science Compliance Update

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November 03, 2016

CMS Issues Final Rule on CY 2017 Physician Fee Schedule


Centers for Medicare & Medicaid Services (CMS) issued a final rule updating payment policies and payment rates for services furnished under the Medicare Physician Fee Schedule (PFS), on January 1, 2017. In the rule, CMS finalized a number of new PFS policies that will improve Medicare payment for those services provided by primary care physicians for patients with multiple chronic conditions, mental and behavioral health issues, and cognitive impairment conditions.

The final rule addresses other topics related to the Medicare program, such as release of certain Medicare Advantage bid data and Part C and Part D Medical Loss Ratio (MLR) data, enrollment requirements for providers and suppliers in Medicare Advantage, and the Medicare Diabetes Prevention Program (MDPP) expanded model.

CY 2017 Identification and Review of Potentially Misvalued Services

CMS considered many public comments, and finalized misvalued code changes that achieve 0.32 percent in net expenditure reductions. As these changes do not fully meet the misvalued code target of 0.5 percent, there is a required adjustment to the 2017 overall physician update. The 2017 PFS conversion factor is $35.89, an increase to the 2016 PFS conversion factor of $35.80.

Table 52 on p. 1329 depicts the estimated payment impact by specialty, including +1 percent for allergy and immunology; 0 percent for cardiology and neurology; 0 percent for pediatrics; +3 percent for family practice; -5 percent for independent labs; and -1 percent for interventional radiology.

Primary Care, Care Management, and Cognitive Services

CMS also finalized a variety of coding and payment changes for primary care, care management, and cognitive services. Some of the key policies in the final rule include: make separate payments for codes describing non-face-to-face prolonged evaluation and management services; revalue existing CPT codes describing face-to-face prolonged services; make separate payments using new codes to pay primary care practices that use interprofessional care management resources to treat patients with behavioral health conditions; and make separate payments for codes describing chronic care management for patients with greater complexity.


Medicare Shared Savings Program

CMS codified several proposed policies in the final rule. These include:

  • Updating ACO quality reporting requirements, including changes to the quality measure set and the procedures for quality validation audits, revisions to terminology used in quality assessment, revisions that would permit eligible professionals in ACOs to report quality separately from the ACO, and updates to align with the Physician Quality Reporting System and the final Quality Payment Program;
  • Modifying the assignment algorithm to align beneficiaries to an ACO when a beneficiary has designated an ACO professional as responsible for their overall care; and
  • Establishing of beneficiary protection policies related to use of the Skilled Nursing Facility 3-day waiver.

Data Collection on Resources Used in Furnishing Global Services

The rule finalizes a claims-based data collection strategy that diverges from the proposed rule. The agency says the final policy “significantly reduces the burden on practitioners compared to the proposed rule.” It: (1) requires reporting of post-operative visits only for high-volume/high-cost procedures; (2) uses existing CPT code 99024 instead of the proposed G-codes; (3) requires reporting only from a sample of practitioners consisting of those in larger practices (10 or more practitioners) in specified states (FL, KY, LA, NV, NJ, ND, OH, OR, RI); and allows all others (e.g., in smaller practices or other geographic areas) to report voluntarily while being encouraged to report. Further details on information to be reported can be found beginning on page 160 of the final rule.


As noted beginning on p. 90, CMS finalized a number of additional codes to its list of services that may be furnished through telehealth, including: End-stage renal disease (ESRD) related services for dialysis; advance care planning services; and critical care consultations furnished via telehealth using new Medicare G-codes.

CMS notes that, although it “expect[s] these changes to increase access to care in rural areas, based on recent utilization of similar services already on the telehealth list, [CMS] estimate[s] no significant impact on PFS expenditures from the additions relative to overall PFS expenditures.”

Appropriate Use Criteria (AUC) for Diagnostic Imaging

Building on its steps to begin implementing this PAMA directive last year, the final rule finalizes the first eight priority clinical areas: (1) coronary artery disease (suspected or diagnosed); (2) suspected pulmonary embolism (newly changed to be a distinct area from coronary artery disease); (3) headache (traumatic and non-traumatic); (4) hip pain; (5) low back pain; (6) shoulder pain (to include suspected rotator cuff injury); (7) cancer of the lung (primary or metastatic, suspected or diagnosed); and (8) cervical or neck pain. 

Altered mental status, abdominal pain, and suspected stroke were removed from the proposed list. In future rulemaking, CMS plans to address outlier calculations that may inform whether clinicians will be subject to prior authorization. The final rule also addresses the clinical decision support mechanism (CDSM) requirements, noting that CDSMs are “electronic tools through which a clinician consults AUC to determine the level of clinical appropriateness for an advanced diagnostic imaging service for that particular patient’s clinical scenario.” It describes the CDSM application process, and exceptions for ordering processionals. The application deadline for the first round of preliminary and full qualifying CDSMs March 1, 2017.

Medicare Advantage (MA) Provider and Supplier Enrollment

CMS has finalized a requirement for providers and suppliers who furnish services to MA beneficiaries. They must undergo screening and enrollment requirements akin to providers in other Medicare programs. Additionally, the rule prevents enrollment by those that have had their Medicare enrollment revoked or have been excluded by the Office of the Inspector General (OIG). CMS believes that the new requirements will help protect both beneficiaries and the Medicare Trust Funds. The enrollment provisions will be included in CMS contracts with the designated plans and programs, and will begin in two years, effective on the first day of the plan year. A fact sheet provides a list of the types of providers and suppliers to which the new screening requirement will apply.

Open Payments

There were no Open Payments program changes proposed, or finalized, within the final rule. CMS has asked on several occasions for public comments on the Open Payments program, which “creates transparency around the nature and extent of relationships that exist between drug, device, biologicals and medical supply manufacturers, and physicians and teaching hospitals (covered recipients and physician owner or investors).”

Since Open Payments was finalized in the 2015 PFS, various stakeholders have provided CMS with feedback and, as a result, CMS has identified areas that might benefit from revision or subregulatory clarification down the road, including: expansion of the nature of payment categories; length of continued reporting obligations; length of time in which Open Payments data remains relevant to users; definition of a teaching hospital; the impact of mergers, acquisitions, and other business dealings on reporting; and clarification on the definitions of ownership and investment interest terms.

While CMS notes that they received a varied response, that the comments “broadly supported our effort to engage the program’s stakeholders before revising or creating new reporting requirements,” and that CMS will “consider the public comments received in the future through possible rulemaking or publication of subregulatory guidance.


The CY 2017 PFS final rule is the latest showing of the Administration-wide strategy to create a health care system that results in better care, smarter spending, and a healthier population.

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