CMS issued the proposed 2013 Medicare Physician Fee Schedule on July 30, 2012. The complete document package of approximately 700 pages is available on both the CMS website and at For this article, I will not summarize all 700 pages, but I would like to hit three of the most significant issues:

1.   27% proposed Physician Fee Schedule Decrease

2.   Multiple Procedure Payments Reduction Policy (MPPR)

3.   Mandatory DME Face-to-Face Encounters

1.   27% Sustainable Growth Rate 2012 Physician Fee Schedule Reduction

Without a doubt, the most important and controversial item in the 2013 Medicare Proposed Physician Fee Schedule is the pending 27% decrease mandated by the Sustainable Growth Rate (SGR) formula. 

Although everyone should recall the genesis of the SGR problem, a little history might be in order. The SGR is the Medicare budget balancing methodology, incorporated in the Medicare Physician Fee Schedule (MPFS) as adopted in 1989. The SGR reimbursement “brake” was added in 1998; it was based upon yearly and cumulative spending targets and was designed to keep Medicare spending within those budgets using the following formulas:

  • First, each medical procedure was composed of three relative value units (RVUs), i.e., a work relative value unit (WRVU), an overhead expense RVU, and a malpractice expense RVU. The expense RVUs can vary nationally, but the WRVUs are nationally consistent. 
  • The sum of the RVUs is multiplied by a Medicare conversion factor, expressed in dollars, to create the total payment for each medical procedure. 
  • The initial conversion factor was established by Congress when the MPFS was adopted.
  • The SGR reduces the conversion factor if utilization increases faster than projected by imposing a decrease in the value of the conversion factor and therefore a decrease in the Medicare Physician Fee Schedule. 

Since utilization has increased dramatically over projections almost from the very beginning, the SGR has regularly mandated a Medicare Physician Fee Schedule decrease. Since 2002, Congress has just as regularly postponed the statutory mandated fee decrease. The result has been similar to what happens when you fail to make the minimum balance payments on your credit card; the problem just keeps getting proportionately worse. In the beginning, some of the mandatory decreases were as little as 1.5%, but postponing these decreases for the last 10 years has resulted in a proposed 27% fee schedule decrease to balance the Medicare budget for 2013. 

Each time Congress has postponed the decrease, and the President has signed the legislation adopting the postponement, the problem has been kicked forward one year. The current postponement expires on December 31, 2012, and the chance of there being any permanent fix to this problem in an election year prior to the election is less than remote.