Fact Sheets


For Immediate Release: Thursday, October 30, 2008
Contact: CMS Media Relations



On October 30, 2008, the Centers for Medicare & Medicaid Services (CMS) issued a final rule for the Medicare Physician Fee Schedule (MPFS) for calendar year CY 2009.  The final rule establishes payment rates and policy changes that will go into effect for services furnished by physicians and non-physician practitioners (NPPs) to people with Medicare on or after January 1, 2009.  The final rule also includes policies on other subjects including changes to payment rates for end-stage renal disease facilities, and improvements to enrollment and billing rules.


This fact sheet addresses the provisions of the MPFS CY 2009 Final Rule, including the 1.1 percent increase in physician payments for CY 2009, required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA).  Separate fact sheets are available that summarize:  (1) the significant MIPPA changes for physicians and other providers that are being implemented in this final rule, and (2) the payment incentive programs for physician who report quality data and for those who acquire and use a qualified system to transmit prescriptions to pharmacies electronically.




The MPFS CY 2009 final rule continues an initiative of the Administration to transform the Medicare fee-for-service program into a prudent purchaser of health care services, paying for quality of care, not just quantity. 


Since 1992, Medicare has paid for the services of physicians under the MPFS, a system that pays for covered physicians’ services furnished to a person with Medicare Part B.  Under the MPFS, a relative value is assigned to each of more than 7,000 types of services to capture the amount of work, the direct and indirect (overhead) practice expenses, and the malpractice premiums typically involved in furnishing the service.  For each of these components of the service, the relative values are adjusted for geographic practice cost differences.  The higher the number of relative value units (RVUs) assigned to a service, the higher the payment. 


The geographically adjusted RVUs for a particular service are multiplied by a fixed-dollar conversion factor to determine the payment amount for each service.  CMS updates the conversion factor annually using a statutory formula that was intended to constrain the rapid growth in spending for physicians’ services by setting a target rate of spending for a year, and then adjusting the update in subsequent years to keep actual spending over time in line with the target.  Since 2002, the formula has yielded a negative update to the conversion factor, and every year since 2003, Congress has enacted legislation to prevent the negative update from taking effect for the year.


In the Tax Relief and Health Care Act of 2006 (TRHCA), Congress authorized CMS for the first time to make an incentive payment to eligible professionals who satisfactorily report certain quality data under the Physician Quality Reporting Initiative (PQRI).  While providing a financial incentive in certain years to eligible professionals to be aware of the quality measures during treatment decisions, this program will also provide valuable information as Medicare moves toward paying for quality of care, not just quantity of services.  The program was expanded based on provisions in the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA).  The MPFS CY 2009 final rule includes additional improvements to the program for purposes of reporting data on quality measures in 2009 and incentive payments for such reporting.





Payment Changes:


Final Update for Physician Fees for Services in CY 2009:   The final rule updates the fee schedule conversion factor by 1.1 percent, as required by the MIPPA.  The MIPPA update supersedes the update that would have resulted from formula specified in the Medicare law which includes application of a  the sustainable growth rate (SGR). 


Identification of Misvalued Services:  In the 2009 PFS NPRM, CMS identified methodologies that the American Medical Association Relative Value Update Committee (AMA RUC) could undertake to assist in identifying potentially misvalued services including reviewing: the fastest growing procedure codes; the Harvard-valued codes; and (3) the direct inputs for the Practice Expense (PE) Relative Value Units.


The RUC began its review of potentially misvalued codes using various criteria, including codes with site of service anomalies and high intra-service work per unit time (IWPUT), and has provided its initial recommendations to CMS.  In this final rule, CMS is accepting the valuation recommendations (although some only tentatively) for these codes for CY 2009.  However, in the coming months, CMS plans to continue to review these codes and may propose additional changes to the relative values assigned to these codes in future rulemaking. 


CMS will continue to work with the AMA RUC and the specialty societies in reviewing these issues and developing alternative approaches for identifying misvalued codes.  In addition, CMS plans to continue its review of services that could be bundled or made subject to a multiple procedure payment reduction. 


Telehealth Services:  The final rule incorporates the requirement in section 149 of the MIPPA that, effective for services furnished on or after January 1, 2009, CMS add three new facility types to the list of authorized telehealth originating sites: a hospital-based or CAH-based renal dialysis center (including satellites), a skilled nursing facility (SNF), and a community mental health center (CMHC).


The final rule also adopts the proposal to add new HCPCS codes specific to the telehealth delivery of follow up inpatient consultations. The new codes will enable practitioners to bill for follow-up inpatient consultations delivered via telehealth.  These codes are intended for use by physicians or NPPs when an inpatient consultation is requested from an appropriate source (e.g. the patient’s attending physician).  The codes are not intended for use in billing for the ongoing evaluation and management of a hospital inpatient. 


This provision effectively restores follow-up inpatient consultations to the list of Medicare covered telehealth services.  They had been included prior to 2006, but ceased to be on the list of Medicare telehealth services, when the CPT Editorial Panel of the American Medical Association (AMA) deleted the specific codes for follow-up inpatient consultations and advised practitioners to report follow-up inpatient consultation using more general codes (i.e. codes describing subsequent hospital care)  CMS did not add these more general codes to the list of Medicare telehealth services because, in addition to follow-up inpatient consultation, the subsequent hospital care codes could be used to report services involving the on-going (day to day) management of a hospital inpatient, which CMS believed would not be appropriately furnished via telehealth.



Changes to Medicare Payment for Part B Drugs

Section 112 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), altered the calculation used to compute payment under the Average Sales Price methodology for many Part B covered drugs and established a special payment rule for certain inhalation drugs administered through a piece of durable medical equipment (DME).  These provisions were effective April 1, 2008 and this rule serves to incorporate these changes into Medicare’s regulatory language.





Establishment of an Effective Billing Date for Physicians and Non-Physician Practitioners:  The final rule establishes the effective date of billing for physicians and non-physician practitioners as the later of: (1) the date of filing of a Medicare enrollment application that was subsequently approved by a Medicare contractor; or (2) the date an enrolled physician or non-physician practitioner first started furnishing services at a new practice location.  In addition, physicians and non-physician practitioners who meet all program requirements may bill retrospectively:


  • For services furnished up to 30 days prior to the effective date, rather than the 23 months allowed under current regulations; and
  • For services furnished up to 90 days prior to the effective date if the President has declared an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.


Submitting Claims after a Final Adverse Action or CMS Revocation:  The final rule provides that a physician or non-physician practitioner is not allowed to bill for services furnished after certain reportable events, including:


  • A Federal exclusion or debarment, or felony conviction;
  • A State license suspension or revocation; or
  • A practice location is determined to be not operational by CMS or its contractor.


For all other revocation actions, individual practitioners will be required to submit all outstanding claims within 60 days of the effective date of revocation.


Revised Reporting Responsibilities for Physicians and Non-Physician Practitioners:  The rule requires physicians and non-physician practitioners and physician and non-physician practitioner organizations to notify their Medicare contractor of a change of ownership, final adverse action, or change of location within 30 days of the reportable event. Failure to notify the designated contractor of a change related to a final adverse action or a change of location may result in an overpayment from the date of the reportable event.  


Beneficiary Signatures For Non-Emergency Ambulance Services:  This rule changes the requirements for beneficiary signatures for non-emergency ambulance claims.  Specifically, if no other individual is available and authorized to sign a non-emergency ambulance transport claim on behalf of a beneficiary who is physically or mentally incapable of signing, the ambulance provider or supplier will be permitted to submit the claim without the beneficiary’s signature, as long as specified documentation requirements are met. 




The Medicare statute requires CMS to adjust MPFS payments for services furnished in different fee schedule areas using geographic practice cost indices (GPCIs) to reflect different resource costs in an area compared to the national average.  In recent years, physicians in certain areas of the country have expressed concern that the configuration of certain localities no longer reflects the costs incurred by the physicians in certain subsections of those areas.  In response to these concerns, CMS contracted with Acumen, LLC, to analyze potential options for reconfiguring localities.  On August 21st, CMS posted an interim report on the results of this research on its web site and invited public comment on the information presented and suggestions as to possible alternatives.  The interim report can be found at:




Comments are being accepted until November 3rd and may be submitted electronically to the following address: MPFS@cms.hhs.gov.


The final rule does not change existing payment localities.  CMS continues to study the issue, and may propose revisions to the fee schedule areas used to calculate GPCIs and adjust payments under the MPFS in a future rulemaking proceeding.




For calendar year (CY) 2009, CMS is updating the wage data to complete the four-year transition to a wage index based on core-based statistical areas.  CMS is also reducing the wage index floor from 0.75 to 0.70 for 2009.


Effective January 1, 2009, section 153(a) of the MIPPA amended section 1881(b)(12) of the Act and required a 1 percent increase to the end stage renal disease (ESRD) composite rate component of the payment system and established a site neutral base composite rate for both hospital-based and independent dialysis facilities which, when applying the geographic index, shall reflect the labor share based on the labor share otherwise applied for renal dialysis facilities.


Although total drug expenditures for CY 2009 are projected to decline 1.8 percent (based on a projected price decline of 1.8 percent and a projected zero growth in per patient utilization), CMS is finalizing a zero percent update to the drug add-on payment.  The zero percent update to the drug add-on payment and implementation of the MIPPA one percent increase effective January 1, 2009 revises the drug add-on adjustment from 15.5 percent to 15.2 percent for CY 2009.



INCENTIVE PAYMENT AND SHARED SAVINGS PROGRAMS:  The proposed rule included a targeted exception to the physician self-referral law that would have permitted certain types of incentive payments or shared savings programs.  After reviewing comments, CMS has concluded that it needs additional information in order to finalize an exception that will allow the full array of beneficial, nonabusive incentive payment and shared savings programs, such as pay-for-performance and other quality-focused programs.  Therefore, CMS is not finalizing this proposal at this time, but is reopening the comment period to request further input from stakeholders on this provision for 90 days following publication of the final rule in the Federal Register with the intent of crafting an exception that is useful to the industry without posing a risk of patient or program abuse.




After reviewing comments on several provisions in the proposed rule, CMS decided not to adopt final language for CY 2009, but to continue working with physician groups and other affected parties with the possibility of revisiting these proposals in the CY 2010 rulemaking.  Among these proposals were:


  • A proposal to update every two years the costs of supplies currently priced at over $150; and


  • Proposals to improve the Competitive Acquisition for Part B Drugs (CAP) program.  Because CMS has delayed implementation of the CAP for CY 2009, and is seeking further comments from stakeholders, it is postponing action on the proposals pending possible further rulemaking.



The MPFS CY 2009 Final Rule with Comment will appear in the November 19 Federal Register and will be effective for services on or after January 1, 2009.  Comments on designated provisions are due by December 29, 2008, and CMS will respond in final rule at a later date.



For more information, see: www.cms.hhs.gov/center/physician.asp.





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