Radiation Oncology Policy Update – August 2011

By: Libery Partners Group

Physician Fee Schedule

On July 19, CMS published the Proposed Rule for the CY 2012 Physician Fee Schedule (PFS) in the Federal Register.

I. CY 2012 Physician Fee Schedule Proposed Rule

As part of the CY 2010 PFS Proposed Rule, CMS proposed policies relating to (1) the application of a 90% equipment utilization rate for all services containing equipment costing in excess of one million dollars and (2) the use of data from the AMA Physician Practice Information Survey (PPIS) in place of the AMA’s SMS survey data and supplemental survey data. Those proposed changes would have resulted in an average reduction in payment of more than 35% for the family of radiation treatment delivery services described by CPT codes 77401 through 77418. In the CY 2010 PFS Final Rule, although CMS decided not to apply the 90% equipment utilization rate to radiation therapy equipment, the agency did finalize its proposal to phase-in PPIS data over a four-year period (i.e. 75/25 for CY 2010, 50/50 for CY 2011, 25/75 for CY 2012, and 0/100 for CY 2013).1 CMS also continued to utilize PE/HR values which blend practice expense costs between the freestanding and hospital-based settings.

In the CY 2011 PFS Final Rule, CMS finalized its proposal to rebase the MEI to reflect appropriate physicians expenses.2 While the effects of MEI rebasing masked the cuts for the CY 2011 Physician Fee Schedule, the negative effects of the PPIS policy continue through 2013. CMS notes in the CY 2012 Proposed Rule that it is transitioning an additional 25% of PPIS data in PE RVUs for 2012 and will move entirely to the use of PPIS data in 2013.

The CY 2012 Proposed Rule impact table shows the CY 2012 and CY 2013 impacts from the third and fourth year phase-ins of the four year transition to the use of PPIS data as follows:

Specialty CY 2012 CY 2013
Radiation Oncology – 4% – 8%
Radiation Therapy Centers – 5% – 9%

It should be noted that “radiation therapy center” RVUs are only about 4% of total RVUs contained in CMS’ specialty designations of “radiation therapy centers” and “radiation oncology.” Because these two specialties are self-reported, there is no particular barrier, for example, for an entity which is in fact a radiation therapy center to report to CMS as a radiation oncology specialty. Ultimately, the impact of the Proposed Rule on a particular center will depend on center-specific variables (e.g. case mix).

CY 2012 Conversion Factor

In the CY 2011 Physician Fee Schedule Final Rule, CMS noted Section 1848(c)(2)(B)(ii)(II) of the Social Security Act required that the increases made to PE values as a result of the MEI rebasing be accomplished on a budget neutral basis. Rather than make corresponding reductions to work RVUs; however, CMS finalized its proposal to apply a budget neutrality adjustment of 0.9181 to the conversion factor (CF). Largely as a result of this policy, the CY 2011 PFS CF was reduced to $33.9764. CMS made certain budget neutrality adjustments to the CY 2012 proposed CF which raises the CY 2012 CF from $33.9764 to $34.0103. However, under the “sustainable growth rate” (SGR) formula, CMS projects a 29.5% cut which would reduce the CF to $23.9635.

Debt Ceiling Debate
On August 2, President Obama signed the Budget Control Act of 2011, a significant deficit reduction bill resulting from months of Congressional debate surrounding a statutory increase in the Federal debt limit. The bill establishes procedures that would allow the debt limit to be raised by up to $2.4 trillion in exchange for certain deficit reduction measures.

Overall, according to the Congressional Budget Office, the Budget Control Act provides for deficit reduction of $2.1 trillion over the next 10 years. The deficit reduction occurs in two phases:

  • First, the bill would establish caps on so-called “discretionary” spending (i.e. non-entitlement spending) and increase funding for program integrity initiatives. These provisions would reduce the deficit by $917 billion over 10 years.

  • Second, the bill would establish a Joint Select Congressional Committee directed to achieve at least $1.2 trillion over 10 years (these cuts could include Medicare or other entitlement spending). The committee would be directed to report recommendations to the Congress by November 23, 2011 and the legislation must be enacted by Congress under special expedited procedures by December 23, 2011. If Congress does not enact the legislation, an administrative sequestration of spending would occur to all Federal accounts, including across-the-board cuts in Medicare (although the bill provides for a maximum 2 percent cut in Medicare spending). These are the only provisions relating to health care included in the debt limit agreement and the bill is silent on the question of the SGR (recall that Medicare physician payments are subject to a current-law reduction of about 30% under the SGR should Congress fail to act prior to December 31, 2011).

The Budget Control Act sets up the potential for significant cuts in Medicare, Medicaid and other so-called “mandatory” spending programs. Deficit reduction plans released prior to The Budget Control Act provide context for potential cuts.

Senate Finance Hearing on Deficit Reduction

The Senate Finance Committee held a hearing on July 26 entitled Perspectives on Deficit Reduction: A Review of Key Issues. Senator’s sought the advice of four economists on the best way to proceed in reducing the deficit. Much of the hearing discussed changes to the tax code and examining the budget as ways to reduce the deficit in the long-term. Witness Robert Greenstein, President of the Center on Budget and Policy Priorities focused on so-called “tax expenditures” as a potential area for deficit reduction, stating that the “tax code now has over $1 trillion a year in tax expenditures which substantially exceeds the cost of Medicare and Medicaid combined, the cost of Social Security, and it’s about double the cost of all non-security discretionary programs.”

Gang of Six

On Tuesday, July 19 the Gang of Six, a bi-partisan group of Senators, released a deficit reduction plan. The plan contained an initial $500 billion “down payment” (which does not explicitly include Medicare) as well as a requirement that Congressional committees report an additional $3.2 trillion in savings by year’s end. As part of this year-end package, the Senate Finance Committee would be required to report a plan to fully offset the SGR (cost: $298 billion) and find additional (unspecified) health savings of $202 billion.

Cantor Cuts

Around the middle of July, a list of proposed healthcare cuts was released and linked to the office of House Majority Leader Eric Cantor (R-VA). These cuts were reported to total $350 billion over 10 years. Among the cuts were proposals to (1) increase the equipment utilization assumption for expensive diagnostic imaging equipment to 90 percent and (2) require prior authorization for high-cost imaging services.

Senate Letter Opposing Imaging Cuts

On July 20 a bipartisan group of seven Senators sent a letter to President Obama urging that no cuts be made to Medicare reimbursements for imaging. As noted in the letter, diagnostic imaging has been cut several times since 2006 (e.g. the Deficit Reduction Act, the Affordable Care Act, and the CY 2010 Physician Fee Schedule). This action comes after payment cuts for imaging were found in the Korean free-trade agreement legislation (but later removed) and the aforementioned list of cuts released by Majority Leader Cantor.

Health Insurance Exchange Regulations

On July 15, the Health and Human Services (HHS) Department released two proposed regulations relating to the establishment of “health insurance exchanges” under the Affordable Care Act (ACA). The ACA provides subsidies for the purchase of certain “qualified health plans” in these health insurance exchanges. According to the Congressional Budget Office, 8 million Americans will receive health insurance coverage through these exchanges beginning in 2014 and that number will increase to 24 million by 2018.

The first proposed rule outlines a framework for States to build Affordable Insurance Exchanges. As indicated in an HHS Fact Sheet, the Proposed Rule includes standards for:

  • States that elect to establish and operate and Exchange;

  • Health insurance plans to participate in an Exchange;

  • Enrollment in health plans through Exchanges; and

  • Employers who opt to participate in the Small Business Health Options Program.

The second proposed rule is related to the temporary reinsurance and risk corridors, and the permanent risk adjustment established under the ACA. As an HHS Fact Sheet notes, these components include:

  • A permanent risk adjustment formula that would pay insurers higher rates for sicker patients, such as those with chronic conditions.

  • A three-year reinsurance program that would establish a nonprofit to handle temporary payments for insurers that cover patients with high medical claims in the individual market.

  • A three-year risk corridor program that would give insurers inside the exchanges more certainty by limiting losses and gains.

Subsequent Exchange related regulations, including a much-anticipated “essential health benefits” regulation, are expected to be released later this year. The essential health benefit regulation will provide further detail to the general categories of services health plans must provide pursuant to the ACA. The general categories include: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; pediatric services, including oral and vision care.

Varian Medical Systems ARIA® Software Certified

Varian Medical Systems ARIA software for electronic health records (EHR) and clinical management in radiation oncology has been certified by Drummond Group Inc. Drummond Group is authorized by HHS’ Office of the National Coordinator (ONC) to perform complete and modular EHR testing. Once tested, software is certified or rejected using criteria approved by the ONC. The certification allows clinics to use the software to qualify for federal funding under the HITECH Act. The Act was enacted as part of the American Recovery and Reinvestment Act of 2009 to promote the adoption and meaningful use of health information technology.

A Varian Medical Systems release states that “ARIA provides oncology clinics with software for managing the full spectrum of clinical, administrative, and financial activities. It incorporates a comprehensive oncology-specific [EHR] that enables clinicians to design a personalized care path for each patient, from initial diagnosis through follow-up.”


1 The Affordable Care Act changed the equipment utilization assumption for expensive diagnostic imaging equipment to 75 percent.

2. The MEI measures annual price changes in the cost of physicians’ time and operating expenses (i.e. inflation). In the CY 2011 PFS Final Rule, CMS rebased the MEI to reflect appropriate physicians’ expenses in 2006.

Andrew L. Woods

Liberty Partners Group


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