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2017 Medicare Physician Fee Schedule Final Rule: 7 key provisions for practicing physicians

On November 2, CMS released its 1,401-page 2017 Medicare Physician Fee Schedule Final Rule. Here are the seven key provisions most likely to have a direct impact on practicing physicians.

1. Conversion factor

Under the Medicare Access and CHIP Reauthorization Act of 2015, MPFS rates are scheduled to increase by 0.5 percent each year until 2019. Thus, one may assume the 2017 conversion factor would be $35.98, given the current conversion factor of $35.80.

However, there are other statutory requirements CMS had to take into account in calculating the annual conversion factor, all of which detracted from the 2017 MACRA-mandated physician pay raise. As a result, the 2017 conversion factor will be $35.89, representing a one-quarter percent increase over 2016.

The most significant adjustment resulted from CMS’ failure to identify and correct a sufficient number of mis-valued codes (e.g., a procedure for which the practice expense RVU is greater than the actual overhead cost for that service to generate a total of 0.5 percent savings as compared to the prior year).  Under the Achieving a Better Life Experience Act of 2014, CMS was required to reduce the conversion factor to make up the difference, thus spreading the loss across all physicians as opposed to a small number of physicians who have benefited from a mis-valued code.

2. Updated geographic practice cost indices

The $35.89 conversion factor is a national average; the amount is adjusted up or down to reflect local differences in practice costs using GPCIs for each component of MPFS payment — physician work, practice expense and malpractice expense. In the 2017 MPFS Final Rule, CMS has finalized new GPCIs using updated data to be phased in over the next two years. As a result, some providers will see small payment increases or decreases based on their location. 

Also, as required by the Protecting Access to Medicare Act of 2014, CMS in 2017 will begin using new locality definitions for California based on a combination of Metropolitan Statistical Areas as defined by the Office of Management and Budget and the current locality structure. This transition will increase payment to many physicians in urban parts of California. In a few other areas of California, the new locality structure may decrease MPFS payments.

3. Care management services

A. CCM Simplification
Approximately two-thirds of traditional Medicare beneficiaries – approximately 35 million individuals – suffer from multiple chronic conditions. Since 2015, CMS has paid for non-face-to-face care management services furnished to these beneficiaries. Physicians, however, have been slow to adopt chronic care management services; thus far, only 513,000 beneficiaries have received CCM.

In the 2017 MPFS Final Rule, CMS has finalized substantial revisions to the CCM billing rules effective January 1, 2017. The following changes are intended to reduce the regulatory complexity that has prevented many providers from furnishing these services. 

  • Consent form
    Pre-2017 rule:  A physician cannot bill for CCM unless and until the physician secures the beneficiary’s signature on a consent form, the contents of which are specified in the regulation. 
    New ruleA physician may simply document in the medical record that certain information regarding CCM was furnished to the patient.
  • Initiating visit
    Pre-2017 rule:  CCM must be initiated by the billing physician during a face-to-face E/M visit (Levels 2-5 E/M visit, an annual wellness visit or initial “Welcome to Medicare” visit); no CCM services may be billed prior to the date of such visit. 
    New Rule:  Such initiating visit is required only for new patients and patients not seen within the last twelve months.
  • 24/7 access to care
    Pre-2017 rule: The physician must provide the beneficiary with a means to make timely contact with healthcare practitioners in the practice who have access to the beneficiary’s electronic care plan. 
    New rule:  The requirement regarding access to the beneficiary’s care plan is eliminated.
  • Management of care transitions
    Pre-2017 rule: The physician must create and exchange with other providers involved in the beneficiary’s care a clinical summary formatted according to certified EHR technology. 
    New rule:  The continuity of care document does not have to be formatted in a specific manner.
  • Sharing of care plan and clinical summaries
    Pre-2017 rule:  The physician must make the electronic care plan available (a) on a 24/7 basis to all practitioners within the practice whose time counts toward the time requirement, and (b) share care plan information electronically  (by fax only in extenuating circumstances) as appropriate with other providers. 
    New rule:  The electronic care plan must be made available timely within and outside the billing practice as appropriate, and care plan information must be shared electronically (can include fax) within and outside the practice with those involved in the beneficiary’s care.
  • Beneficiary receipt of care plan
    Pre-2017 rule:  The beneficiary must be provided with a written or electronic copy of the care plan. 
    New rule:  The specification of the format in which the care plan is to be provided is eliminated.
  • Documentation
    Pre-2017 rule:  A physician must document (in a qualifying certified electronic health record) communication to and from home- and community-based providers regarding the patient’s psychosocial needs and functional deficits. 
    New rule:  Such communications must be documented in the patient’s medical record, but not necessarily a qualifying certified electronic health record.

B. Payment for complex CCM
To bill for CCM under CPT 99490, clinical staff under the general supervision of a physician or non-physician practitioner must provide a minimum of 20 minutes of non-face-to-face care management services per month. In valuing CCM for purposes of establishing the payment rate, CMS accounted for 20 minutes of staff time. However, when it conducted practitioner interviews as part of its CCM evaluation efforts, CMS learned staff were actually spending 45 minutes to an hour each month with each patient. 

For this reason, CMS will begin payment for complex CCM under CPT 99487. The billing rules for CCM (CPT 99490) and complex CCM are the same, except complex CCM requires 60 minutes of non-face-to-face care management services per month, as compared to 20 minutes for CCM. CMS also will pay for an add-on code for complex CCM, CPT 99489, for each 30-minute increment that goes beyond the initial 60 minutes.

Here are the national average payment rates for the three CCM codes:


Non-facility payment

Facility payment










C. Payment for care plan development
Acknowledging complaints that the time spent developing the CCM-required care plan currently is not reimbursed, CMS now will pay physicians for care plan development under a new code, G0506. The agency has adopted the following description for this code:

Comprehensive assessment of and care planning by the physician or other qualified health care professional for patients requiring chronic care management services, including assessment during the provision of  a face-to-face service.

This add-on code is to be listed separately in addition to the CCM initiating visit and billed separately from monthly care management services. The national average payment rate for G0506 is $63.88 (non-facility) and $46.30 (facility).

While there is no minimum time requirement for G0506, CMS cautions providers that this code only should be billed if the time and effort involved in care plan development is beyond the usual time and effort involved in the underlying E/M service. Also, the code may be billed only one time, at the outset of CCM services.

D. Non-face-to-face prolonged E/M services
CCM and complex CCM reimburse providers for clinical staff time spent providing care management services, not time spent by physicians.  For those cases in which a physician spends a significant amount of time outside the usual office visit addressing an individual patient’s needs, CMS will make payment under two codes beginning in 2017:

Code Description Payment (same for facility and non-facility)
99358 Prolonged E/M service before and/or after direct patient care, first 60 minutes $113.41
99359 Prolonged E/M service before and/or after direct patient care, each additional 30 minutes (listed separately with 99358) $54.55

In discussing these services, CMS warns the time counted toward these codes must be separate and distinct from time spent providing any other service reimbursable under the MPFS including, but not limited to, new and established patient office visits, transitional or chronic care management services or care plan development. 

4. Payment for telehealth services

In 2017, CMS will add the following services to the list of those which may be furnished via telehealth:

  • End-stage renal disease- related services for dialysis
  • Advance care planning services
  • Critical care consultations furnished via telehealth using new Medicare G-codes.

While CMS continues to expand the list of telehealth-eligible services, there remains the statutory requirement that a telehealth service is reimbursable only if furnished to an individual located in a rural health professional shortage area or a county not included in a metropolitan shortage area who is physically present at a specified healthcare facility (as opposed to the individual’s residence).  So long as these restrictions remain in place, telehealth will remain underutilized even as the list of telehealth services grows.     

5.  Implementation of Site Neutral Payments for Off-Campus Hospital Outpatient Departments

The day before CMS released the 2017 MPFS Final Rule, the agency published the 2017 Medicare Outpatient Prospective Payment System (OPPS) Final Rule.  Most notably, CMS has finalized its regulations implementing Section 603 of the Bipartisan Budget Act of 2015.  Effective January 1, 2017, hospital off-campus provider-based departments other than emergency rooms that began furnishing services on or after November 2, 2015 (referred to as “new PBDs”), no longer will be eligible for payment under OPPS.

Instead, CMS will reimburse hospitals directly for items and services provided at new PBDs according to new MPFS payment rates.  To accomplish this, CMS has established a mechanism by which hospitals will continue to submit claims for items and services furnished in a new PBD on the institutional claim form but append a new “PN” modifier to line items for new PBD items and services.  As a general rule, these new MPFS rates for new PBD services will be 50 percent of the OPPS rate with certain exceptions.  Physicians and non-physician practitioners will continue to bill for professional services in the same manner as they do now, and will continue to be reimbursed at the existing MPFS facility rate. 

As a result of these site neutral payments, CMS has effectively leveled the playing field between physician practices and hospitals.  Of course, the impact of this change has yet to be seen, but it will most likely impact hospitals’ decision to acquire and operate physician practices. 

6. Appropriate use criteria for advanced imaging services

Under the Protecting Access to Medicare Act of 2014 (PAMA), CMS must establish a program under which ordering physicians are required in specified circumstances to consult with appropriate use criteria (AUC) through clinical decision support (CDS) mechanisms for all Medicare patients receiving advanced imaging. Under PAMA, only AUC developed by a provider-led entity may be utilized for these purposes.

Last year, CMS established the process for developing AUC. Now, in the 2017 MPFS Final Rule, CMS addresses priority clinical areas, the approval process for CDS mechanisms and exceptions for ordering professionals for whom consultation with AUC would pose a significant hardship. CMS remains on track to implement the prior authorization requirements by January 1, 2020, although PAMA authorizes CMS to extend this deadline due to implementation delay. 

7. Stark Law – per-click arrangements

Back in 2009, CMS adopted Stark Law regulations that effectively prohibit a physician group that contracts to lease space or equipment to a hospital on a per-click basis while referring patients to that hospital for procedures using the equipment. In 2015, a federal appeals court in Council for Urological Interests v. Burwell rejected CMS’ stated justification for its prohibition on per-click arrangements – that they did not meet the statutory “set in advance” requirement for compensation arrangements – as “bewildering.” Rather than declare the per-click prohibition unenforceable, however, the court instructed CMS to consider the rationale for the restriction “with more care than [it] exercised here.”

In the 2017 MPFS Final Rule, CMS did just that, promulgating a revised regulation prohibiting per-click arrangements only to the extent that such charges reflect services provided to patients referred by the lessor physicians to the lessee hospital.  Stated another way, per-click payments are permissible so long as the patients receiving services using the leased equipment are referred to the hospital by someone other than the physicians who own the equipment.

Over nearly forty pages of text, CMS went to great lengths to explain its justification for the rule and to refute its critics.  It is doubtful, however, that this will be the final work on per-click arrangements, as litigation is likely to continue.  For now, however, the slightly modified per-click prohibition now is in effect.  

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