Physicians and Medicare Raise in 2016

Physicians and Medicare Raise in 2016Accidents and PIP May Be The Way To Go

The law that repealed Medicare's sustainable growth rate (SGR) formula for physician pay called for an annual raise of 0.5% from 2016 through 2019 as part of a transition to value-based reimbursement.


When Congress passed the law in April, some leaders of organized medicine noted that the modest raise lagged behind the inflation rate, but said it was better than nothing. It was certainly better than the disastrous 21% pay cut that the SGR formula would have triggered in 2016. Medical societies sold their membership on the legislation, called the Medicare Access and CHIP Reauthorization Act (MACRA), in part by saying it would stabilize Medicare rates for several years.

However, the promised raise of 0.5% turned into a 0.3% pay cut in the fine print of the final 2016 Medicare fee schedule released last week. The reason? The Affordable Care Act (ACA) and several other laws that set Medicare reimbursement policy trumped MACRA.

Organized medicine isn't taking it too well.

"Physicians were told that they would get an increase, and they're not," said Wanda Filer, MD, president of the American Academy of Family Physicians (AAFP). "It's a morale breaker."

In its 2016 fee schedule, the Centers for Medicare and Medicaid Services (CMS) walked through the math that produced the tiny pay cut in 2016. It involves the fee schedule conversion factor, a dollar amount that gets multiplied by the relative value units (RVUs) assigned to thousands of physician services. A mid-level office visit (CPT billing code 99213) with an established patient, for example, is worth 2.04 RVUs. The current conversion factor is roughly $35.93. Multiplying 2.04 by that amount yields a national payment amount of $73.30.

MACRA duly increases that conversion factor by 0.5%. However, CMS math also lowers the conversion factor by 0.02% to reflect a RVU "budget neutrality adjustment," a routine bookkeeping exercise. That adjustment alone would not have wiped out the MACRA increase and then some. The real culprit was an additional 0.77% decrease that CMS introduced because it did not meet a certain cost-savings target.

That savings target originated with the ACA, which requires CMS to periodically identify and adjust RVUs for physician services that are underpaid or overpaid, with an emphasis on overpaid. These misvalued services, or misvalued codes as they're often called, typically arise when advances in medical technology shorten the time and expense needed to perform a service while the payment rate remains the same.

This ACA provision was the prelude to a law called the Protecting Access to Medicare Act (PAMA) of 2014, which told CMS to fix enough misvalued services to reduce Medicare fee-for-service spending on physician services by 0.5% each year from 2017 to 2020. On the heels of PAMA, the Achieve a Better Life Experience (ABLE) Act of 2014 moved the start date up to 2016, and increased the savings target to 1.0% for that year.