Life Science Compliance Update

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August 16, 2017

CMS Issues Proposed Rule on Physician Fee Schedule


Last month, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that includes proposals to update payment policies, payment rates, and quality provisions for services furnished under the Medicare Physician Fee Schedule (PFS) on or after January 1, 2018. The calendar year (CY) 2018 PFS proposed rule is one of several proposed rules that reflect a broader Administration-wide strategy to create a healthcare system that results in better accessibility, quality, affordability, empowerment, and innovation.

The wide-ranging proposed rule addresses reimbursement to off-campus departments under section 603 of the Bipartisan Budget Act of 2015, telehealth, and a range of other issues. It seeks comments on biosimilar coding, E/M guidelines, emergency department visit valuations, PAMA lab rate implementation, and more.

The proposed rule notes that overall CY 2018 rates will be updated by +0.31 percent. This reflects the Medicare Access and CHIP Reauthorization Act’s specification of a 0.50 percent update, reduced by -0.19 percent stemming from the misvalued code target recapture amount in the Achieving a Better Life Experience (ABLE) Act of 2014.

The -0.19 percent recapture across all services is necessary because CMS proposes -0.31 percent of misvalued code reductions, short of the 0.50 percent ABLE Act target. These adjustments are coupled with a statutory budget neutrality adjustment to yield a proposed 2018 PFS conversion factor of $35.99, up from $35.89 in CY 2017.

Highlights of the Rule

Off-Campus Departments 

CMS proposes to reduce current fee schedule payment rates for non-excepted items and services furnished by off-campus hospital outpatient provider-based departments by 50 percent. Specifically, the percent-of-OPPS rate currently paid under the current fee schedule for these services would decline from 50 percent to 25 percent, CMS explains, to “encourage fairer competition between hospitals and physician practices by promoting greater payment alignment.”

CMS says that “for CY 2019 and for future years, we intend to examine the claims data in order to determine not only the appropriate PFS Relativity Adjuster(s), but also to determine whether additional adjustments to the methodology are appropriate – especially with the goal of attaining site neutral payments to promote a level playing field under Medicare between physician office settings and non-excepted off-campus PBD settings, without regard to the kinds of services furnished by particular off-campus PBDs.” It seeks comment on methodology changes that would account for “specialty-specific patterns.”

E/M Guidelines

CMS notes “we continue to agree with stakeholders that the E/M documentation guidelines should be substantially revised” and adds that “a comprehensive reform of E/M documentation guidelines would require a multi-year, collaborative effort among stakeholders.” The agency says it is “especially seeking comment on how we might focus on initial changes to the guidelines for history and exam, because we believe documentation for these elements may be more significantly outdated.”

Emergency Department Visits 

Through a comment solicitation, CMS requests input on “whether emergency department visits are undervalued due to increasing heterogeneity of the settings under which emergency department visits are furnished and changes to the patient population.”

Office-based Behavioral Services

CMS proposes increasing payment for office-based behavioral health services, saying its proposal will “better recognize overhead expenses for office-based face-to-face services with a patient.”

Biosimilar Coding Request for Comments

CMS solicits public comments on its current policy of grouping all biosimilars under a single HCPCS code if they have the same reference product (and thus basing ASP on all biosimilars in that code). It says it seeks “comments on the effects of its payment policy based on experience with the United States’ biosimilar product marketplace since the regulations went into effect on January 1, 2016” and is “particularly interested in new or updated material, such as market analyses or research articles that provide evidence which supports positions expressed in comments.” It also asks about “data to demonstrate how individual HCPCS codes could impact the biosimilar market, including innovation, the number of biosimilar products introduced to the market, patient access, and drug spending” and asks about “other novel policies” that increase competition and reduce costs, such as “legislation, demonstrations, and administrative options.” No such policies are actually proposed in the rule.

In providing context for the comment solicitation, CMS says it anticipates growth in biosimilar approvals and use. It adds that it “seeks to promote innovation, to provide more options to patients and physicians, and competition to drive prices down, recognizing that even though these two goals may be difficult to achieve concurrently, to delink them would be counterproductive.”

The agency also says “CMS’s goal [is] to further investigate a solution that allows market forces to provide a robust and comprehensive selection of choices for patients at a fair price” and “we are interested in better understanding if and how the innate differences in biological products and their current regulatory environment should be reflected in Medicare payment policy for biosimilars, particularly as it relates to biosimilars that are licensed for fewer than all indications for which the reference product is licensed or situations where different biosimilars may be licensed for different subsets of indications for which the reference product is licensed.”

Request for Information

In addition to the payment and policy proposals, CMS is releasing a Request for Information (RFI) to welcome feedback on positive solutions to better achieve transparency, flexibility, program simplification, and innovation. This will inform the discussion on future regulatory action related to the PFS.

CMS is soliciting ideas for regulatory, sub-regulatory, policy, practice, and procedural changes to better accomplish these goals. Ideas could include recommendations regarding payment system re-design; elimination or streamlining of reporting; monitoring and documentation requirements; operational flexibility; and feedback mechanisms and data sharing that would enhance patient care, support the doctor-patient relationship in care delivery, and facilitate patient-centered care. Ideas could also include recommendations regarding when and how CMS issues regulations and policies and how CMS can simplify rules and policies for beneficiaries, clinicians, providers, and suppliers.

In responding to the RFI, provide clear and concise proposals – including data and specific examples. If the proposals involve novel legal questions, analysis regarding CMS’ authority is welcome. CMS will not respond to RFI comment submissions in the final rule, but rather will actively consider all input in developing future regulatory proposals or future sub-regulatory guidance. 

Comments on the proposed rule and RFI are due by September 11, 2017.

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