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Medicare Fee Schedule Expands Access to Some Services but Cuts Physician Reimbursement 4.5%

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The 2023 Physician Fee Schedule final rule was released and swiftly drew condemnations from physician leaders because of a 4.5% cut to reimbursement.

CMS released the 2023 Physician Fee Schedule (PFS) rule, which finalized policies relating to telehealth; expands access to behavioral health care, cancer screening coverage, and dental care; and cuts reimbursement by 4.48%.

In the announcement of the final rule, the Biden administration touted the coverage expansions and that the final rule promotes innovation and coordinated care while aligning with the president’s Cancer Moontshot goal to cut the cancer death rate by at least 50% in the announcement of the final rule.

“Access to services promoting behavioral health, wellness, and whole-person care is key to helping people achieve the best health possible,” CMS Administrator Chiquita Brooks-LaSure, said in a statement. “The Physician Fee Schedule final rule ensures that the people we serve will experience coordinated care and that they have access to prevention and treatment services for substance use, mental health services, crisis intervention, and pain care.”

However, at the very bottom of the announcement was the update to the payment rates for calendar year (CY) 2023. The PFS conversion factor is $33.06, which represents a decrease of $1.55, or 4.48%, from the 2022 PFS conversion factor.

“This conversion factor reflects the statutorily required update of 0% for CY 2023, expiration of the temporary 3% supplemental increase in PFS payments for CY 2022 provided by the Protecting Medicare and American Farmers From Sequester Cuts Act, and the statutorily required budget neutrality adjustment to account for changes in payment rates,” the announcement explains.

The cut to the physician reimbursement is what caught the attention of leaders. Jack Resneck Jr, MD, president of the American Medical Association (AMA), said payment rate reduction is “damaging” and the final rule fails to account for inflation in practice costs and challenges to practice sustainability as a result of COVID-19.

“Such a move would create long-term financial instability in the Medicare physician payment system and threaten patient access to Medicare-participating physicians,” Resneck said in a statement. “We will be working with Congress to prevent this harmful outcome.”

The Surgical Care Coalition added that in addition to the Medicare cut, surgical care will face a nearly 8.5% cut.

“Without Congressional action, vulnerable seniors' nationwide access to timely, high-quality, and essential surgical care will be negatively impacted,” Patricia L. Turner, MD, MBA, FACS, American College of Surgeons (ACS) executive director and CEO, said in a statement. “If allowed to go into effect, these reductions will be yet another blow to an already stressed health care system. The ACS has always been willing to work with Congress to find permanent solutions to this issue in the long term, but we must act now to preserve critical access for patients."

However, not all physicians and organizations were upset; there were some positive changes for accountable care organizations (ACOs). The National Alliance of ACOs (NAACOS) praised the final rule. NAACOS President and CEO Clif Gaus, ScD, called the final rule a “win to patients.” CMS is allowing ACOs to have more time before being forced to take on financial risk, providing advanced shared savings payments to some ACOs serving underserved populations, and adding a health equity quality adjustment, according to NAACOS.

“On balance, we believe this final rule will grow participation in accountable care organizations, which have already generated billions of dollars of savings for our health system,” he said in a statement.

However, it wasn’t all compliments. Gaus noted concerns with the use of a prospectively projected administrative growth factor for ACO benchmarks or their spending targets, which NAACOS believes will harm more than one-third of ACOs.

“CMS should consider correcting the ‘rural glitch,’ where ACOs no longer benefit from the regional adjustment when lowering the spending of their assigned patients,” Gaus said. “This change would greatly help ACOs but remains in effect even after today’s changes.”

340B Program Payments

On the same day the PFS final rule was released, CMS also released the final rule of the Hospital Outpatient Prospective Payment System, which included payment for drugs acquired through the 340B program. CMS finalized a general payment rate of average sales price (ASP) plus 6%, which is a reversal from the payment of ASP minus 22.5% for calendar years 2019 through 2022.

The Community Oncology Alliance’s executive director, Ted Okon, MBA, called the final rule an “abdication of duty” to do the right thing for the health care system and patients.

“Just as President Biden seeks to make major efforts to reduce health care spending and lower the price of drugs, it is unbelievable that his administration will grossly overpay large health systems abusing the 340B Drug Pricing Program, which will cost Medicare seniors more out-of-pocket for their Medicare Part B drugs,” Okon said in a statement.

CMS cited the Supreme Court’s unanimous decision in American Hospital Association v Becerra, in which the court declared the reduction in yearly payments to hospitals as part of the 340B program unlawful. According to the decision, the reduced reimbursement rate could have been lawful if HHS had first conducted a survey of hospitals’ acquisition costs and set reimbursement rates based on those costs. Without the survey, HHS could not cut reimbursement rates to 340B hospitals, while maintaining a different reimbursement rate for non-340B hospitals.

“CMS already has survey data and even went into detail in the 2021 proposed payment rule that they should be paying 340B hospitals at ASP –28.7%,” Okon said.

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