CMS proposes change in practice expense RVUs

June 23, 2006

Several stocks jumped yesterday on the release of what wire service reports called good news for freestanding radiation oncology centers: a change in Medicare reimbursement that was not as draconian as expected.

Several stocks jumped yesterday on the release of what wire service reports called good news for freestanding radiation oncology centers: a change in Medicare reimbursement that was not as draconian as expected.

As a result, Wall Street analysts cited boosts in the stock prices of radiation oncology product and service providers Varian, Radiation Therapy Services, and Hologic. The latter was included because of its high-profile mammography offerings. But in focusing solely on radiation oncology, those analysts were only partly correct. The good news goes beyond just freestanding radiation oncology service facilities to all diagnostic imaging outpatient service centers.

Two days ago, the Centers for Medicare and Medicaid Services issued a notice proposing changes to the Medicare Physician Fee Schedule. The thrust of the proposal is to increase pay for physicians who spend time evaluating and managing their patients. Buried deep in the proposal, however, is a gem of significance to freestanding oncology and imaging centers alike. It has to do with changes to the methodology used to calculate practice expense relative value units (RVUs), making that process more transparent and easier to understand. It also calls for RVUs to use data that has been collected by specialty societies and reviewed by the AMA/Specialty Society RVS (relative value scale) Update Committee (RUC).

Two points stand out in the notice. First, CMS is proposing to adopt a "bottom-up" methodology for calculating direct costs, involving the use of procedure-level data for clinical staff times, supplies, and equipment (emphasis added) that have been previously reviewed by the RUC. Second, RUC would use practice expense survey data for eight specialties: radiology, radiation oncology, and independent diagnostic testing facilities, as well as allergy/immunology, cardiology, dermatology, gastroenterology, and urology.

The proposed notice will appear in the June 29 Federal Register and comments will be accepted until Aug. 21. If adopted, the RVU revisions will be implemented for Medicare services on Jan. 1, 2007, while the practice expense revisions would be phased in over four years.

The changes, if adopted, would likely decrease reimbursement tied to equipment for imaging centers but not to the degree many had feared. In an interview with DI SCAN, a CMS spokesperson noted that rumors of more severe cuts may have surfaced earlier when the agency described the various methods under consideration for calculating practice expense RVUs. The method chosen and soon to be up for public comment promises to have less of an impact on centers, she said.

This is good news. But Bob Britain, vice president of medical products for the National Electrical Manufacturers Association, noted that the changes are in addition to, and not in place of, those due to hit Jan. 1 as a result of the Deficit Reduction Act of 2005. But even those cuts may be mitigated, he said.

Legislation that would delay implementation of the DRA as it relates to freestanding imaging centers is gaining support in the House and Senate. Ideally, Britain said, the DRA might be delayed long enough for physicians, industry, and CMS to reevaluate the entire payment system and come up with a better solution.