Press release




Starting next year, the Medicare program will pay physicians more for the time they spend talking with Medicare beneficiaries about their health care and will pay for a broader range of preventive services.  The changes, which will become effective January 1, 2007, are included in the Medicare Physician Fee Schedule (MPFS) final rule released today by the Centers for Medicare & Medicaid Services (CMS).

CMS projects that it will pay approximately $61.5 billion to over 900,000 physicians and other health care professionals in 2007 as a result of the payment rates and policies adopted in this rule.  This new spending figure reflects current law requirements to reduce payment by 5 percent to account for the combined growth in volume and intensity of physician services.

“The rule we are announcing today will pay physicians more for the time they spend talking with their patients about their health care,” said Leslie V. Norwalk, CMS Acting Administrator.  “We believe that this emphasis on personalized care will lead to better outcomes for patients, and more efficient use of health care resources.”

The hallmark of this rule is a stronger emphasis on the physician-patient relationship.  The final rule increases significantly the work component for the RVUs for the face-to-face visits (evaluation and management or “E&M services”) during which the physician and patient discuss the patient’s health status and the steps that can be taken to maintain or improve the patient’s health.  For example, the work component for RVUs associated with an intermediate office visit, the most frequently billed physician’s service, is increasing by 37 percent.  The work component for RVUs for an office visit requiring moderately complex decision-making and for a hospital visit also requiring moderately complex decision-making are increasing by 29 percent and 31 percent respectively.  Both of these services rank in the top 10 most frequently billed physicians’ services out of more than 7,000 types of services paid under the physician fee schedule.

The increases in the work component for E&M services are the result of a comprehensive review of the values CMS has placed on the physician work involved in providing a service.  Medicare law requires that this review be conducted at least every five years.  Consistent with longstanding practice, CMS worked with the Relative Value Update Committee (RUC), which operates under the auspices of the American Medical Association, to review work relative value units for over 400 services.  The RUC recommended the proposed E&M increases, and many of the specialty societies commented favorably on them in their comments on the proposed MPFS rule.

“We believe this increase in the work component will encourage physicians to spend more time with their patients, assessing their health status, and educating them about how to live longer, healthier lives,” said Ms. Norwalk.

Beginning January 1, Medicare will expand its preventive services benefits, as provided for in the Deficit Reduction Act of 2005 (DRA).  Medicare will pay for preventive ultrasound screening for abdominal aortic aneurysms (AAA) for at risk beneficiaries as part of the Welcome to Medicare physical.  AAA refers to a weakening in the wall of the large artery that takes blood from the heart to the body.  Caught early, there are a number of treatment options, but if the AAA ruptures, it can be fatal.  AAA affects 6-9 percent of men over 65 and is the 10th leading cause of death for men over 55.  The screening will be available to men aged 65 to 75 who have smoked at least 100 cigarettes in their lifetimes, individuals with a family history of AAAs and any other individuals recommended for screening by the United States Preventive Services Task Force.

The rule expands the number of beneficiaries who qualify for bone mass measurement due to long term steroid therapy.  For these beneficiaries, the rule reduces the dosage equivalent required for eligibility by one-third, from an average of 7.5 milligrams per day of prednisone for at least three months to 5.0 milligrams.

The final rule also exempts the colorectal cancer screening benefit from the Part B deductible, eliminating a potential financial barrier to using this benefit.  Colorectal cancer is the second leading cause of cancer deaths, and survival is closely related to the stage of the disease at diagnosis.  The five-year survival rate when the cancer is detected early approaches 90 percent.  Unfortunately, approximately 65 percent of patients present with advanced disease.  Once the lymph nodes are involved, chances of survival drop to a range of 35 to 60 percent and with metastatic disease, less than 10 percent.

“CMS believes that paying more for screening services to detect and treat health problems early will improve the quality of life for Medicare beneficiaries while saving money for both the beneficiaries and taxpayers,” said Ms. Norwalk.

The Medicare law includes a statutory formula that will require CMS to implement a minus 5.0 percent update in payment rates for physician-related services.  This is slightly less than the 5.1 percent reduction in the proposed rule.  This formula compares the actual rate of growth in spending to a target rate, which is based on such factors as the growth in number of Medicare fee-for-service beneficiaries and statutory or regulatory changes in benefits.  If the actual rate of spending growth exceeds the target rate, the update is decreased; if it is less, the update is increased.  Every year beginning with 2002, in response to rising spending, the statutory update formula would have operated to impose payment cuts.  The negative update went into effect in 2002, but for 2003 to 2006, Congress intervened and temporarily suspended the requirements of the formula in favor of specific, statutory updates.

CMS is working with physician organizations, the AQA Alliance, the National Quality Forum, and others to develop quality measures, in order to identify and support higher-quality care.  Earlier this month, CMS posted on its website a pool of potential quality measures for physicians to report as part of the Physician Voluntary Reporting Program.  More information about this program, including the potential measures can be found at:

In order to promote best practices in cancer treatment, CMS in 2005 and 2006 conducted a pay for reporting demonstration for oncology services.  An extension of this oncology demonstration remains under consideration.

The final rule adopts a new methodology for determining practice expense (such as office overhead) RVUs, as in the proposed rule, but will phase in the changes over a four year period.  This methodology will be more transparent than the existing methodology, allowing specialties and other stakeholders to predict the effects of proposals to improve accuracy of practice expense payments.

This rule also codifies in regulation a DRA provision that adds diabetes outpatient self-management training and medical nutrition therapy services to the list of covered and separately payable services included in the Federally Qualified Health Center benefit, making these services more available to beneficiaries in underserved areas, whether rural or urban.

Consistent with requirements of the DRA, 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 final rule includes a list of codes to which the outpatient prospective payment system (OPPS) cap would apply.  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.  CMS will apply the multiple imaging reductions first, followed by the OPPS imaging cap, if applicable.

The final rule also includes further guidance on how drug manufacturers should address particular issues related to their reporting requirements.  In 2005, as required by the Medicare Modernization Act, CMS implemented a new method of paying for Part B drugs, such as those administered by a physician in the office.  This new methodology is based on the manufacturer’s average sales price (ASP), plus six percent.  The rule finalizes manufacturer reporting requirements and addresses a number of technical ASP issues such as the treatment of bona fide service fees in the context of the ASP calculation and the definition of nominal sales.

Additional provisions in the final rule include:


  • Amending the public consultation process for developing payment amounts for new clinical laboratory tests.
  • Adopting supplier standards for independent diagnostic testing facilities (IDTFs).
  • continuing the temporary intravenous immune globulin preadministration-related services fee into 2007.


The final rule does not finalize the proposals to (1) amend the reassignment regulations to clarify that any reassignment pursuant to the contractual arrangement exception is subject to program integrity safeguards that relate to the right to payment for diagnostic tests; and (2) amend the physician self-referral regulations to place restrictions on what types of space ownership or leasing arrangements will qualify for purposes of the in-office ancillary services exception or the physician services exception to the physician self-referral prohibition.  CMS will issue final regulations on these proposals at a later time after further consideration.

“CMS remains committed to addressing arrangements that may encourage over utilization of diagnostic services,” said Ms. Norwalk.  “However, we want to be careful that we do not interfere with legitimate group practice arrangements that enable Medicare beneficiaries to receive medical services at one location.”

Also included in the MPFS final rule are final regulations affecting ambulance payment policy under the ambulance fee schedule.  This final rule will improve the accuracy of payments for ambulance services and incorporate changes in geographic adjustments based on the most recent census data.  The final rule announces an Ambulance Inflation Factor (AIF) for CY 2007 of 4.3 percent.  In addition, the final rule further clarifies the definition of the types of facilities that can be included as origin and destination points for "interfacility" transport for Specialty Care Transport purposes.  It also clarifies that ongoing patient care services performed by a health care professional will be included in the services that can be paid at a Specialty Care Transport level.

The final rule will go on display at the Federal Register today at 5:00 p.m. and will be published at a later date.  The rule will be effective for services on or after January 1, 2007.  The rule can be found at

For further information, please see fact sheets on Preventive Services, Physician Participation, and Imaging Services at

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