The Centers for Medicare & Medicaid Services (CMS) released the final rule of the 2007 Medicare Physician Fee Schedule, which includes the rules on the five-year review and revisions to the practice expense. Highlights of the major provisions include:

2007 Conversion Factor: $35.9848 (Includes the five percent payment reduction – CMS had estimated a 5.1 percent pay reduction in the proposed rule.)

Five-year Review/Work RVUs: The final rule adopts the Relative Value Update (RVU) Committee’s recommendations that increase the work component for the RVUs for face-to-face evaluation and management services (E&M) visits. For example, the work component for RVUs associated with an intermediate office visit is increasing by 37 percent. The work component for RVUs for an office or hospital visit that requires moderately complex decision-making will both increase by 29 percent and 31 percent.

Budget Neutrality: Despite objections by the medical community, CMS is applying the budget neutrality (BN) factor to the work RVUs. The work RVUs will be reduced by approximately 10 percent. The AOA, AMA and other physician associations called on CMS to apply the budget neutrality factor to the conversion factor. CMS argues that applying the BN to the work RVUs will not reverse the improved accuracy of the values that have been assigned to the E&M services, nor would it distort the relativity of the RVUs. Realizing that other payors use the fee schedule rates, CMS is publishing the RVUs without the BN adjustment.

Geographic Practice Cost Index: The Medicare Modernization Act established a floor of 1.0 for the work Geographic Practice Cost Index (GPCI) for any locality where the GPCI fell below 1.0 for purposes of payment for services furnished on or after Jan. 1, 2004 and before Jan. 1, 2007. Beginning Jan. 1, 2007, the 1.0 floor expired and the work GPCI reverted to the fully-implemented value. The Geographic Adjustment Factor (GAF) for several pay localities will drop as a result.

Practice Expense: The final rule adopts a new methodology for determining practice expense RVUs, as in the proposed rule, and will be phased in over a four-year period.

Preventive Services: Medicare expands its preventive services benefits. Medicare will pay for ultrasound screening for abdominal aortic aneurysms. The rule expands the number of beneficiaries who qualify for bone mass measurement. The rule also exempts colorectal cancer screening from the Part B deductible.

Imaging Services: The final rule caps payment rates for imaging services under the physician fee schedule at the amount paid for the same services when performed in hospital outpatient departments. The rule also finalizes a policy of reducing, by 25 percent, the payment for the technical component of multiple imaging procedures on contiguous body parts.

Specialty Impact: With the exceptions of family practice, endocrinology, emergency medicine, infectious disease and pulmonary disease, all other specialties will face reductions ranging from one to 18 percent. Radiology specialties are among the hardest hit. Also, general practice will see a three percent reduction, general surgery will experience a six percent reduction and internal medicine will undergo a one percent reduction.