Oncology Business News®
May 2012
Volume 1
Issue 1

The CMS Fee Schedule: Impact on Oncology


There are several issues in the Centers for Medicare & Medicaid Services 2012 fee schedule that are of concern to oncologists.

With the passage of yet another “doc fix” to the Medicare conversion factor in February 2012, Congress averted a threatened 27.4% cut in Medicare physician payments for the year. The solution is only temporary, and Congress will have to address the issue of Medicare payment formulas again at the end of 2012. In the meantime, though, there are several issues in the Centers for Medicare & Medicaid Services (CMS) 2012 fee schedule that are of concern to oncologists.

“Although the conversion factor is always going to be a concern, there are also reductions looming for medical and radiation oncology due to the reductions in work RVUs [relative value units], malpractice RVUs, and practice expense [PE RVUs] numbers,” said Matthew Farber, director, Provider Economics and Public Policy at the Association of Community Cancer Centers.

“Overall, if you look at the numbers that CMS put out, not counting the conversion factor, medical oncology will face a roughly 0% update, but will see a 2% reduction next year once CMS finishes the four-year transition of the practice expenses,” said Farber.

“Radiation oncology and radiology will face a much larger reduction of 4% this year, and that will increase a few more percentage points next year.” Freestanding radiology and radiation clinics will face a 4% to 6% reduction.

Misplaced value codes

One of the potentially biggest issues for oncologists is the misvalued code list. In the past, if CMS felt there was a misplaced value that was either overpaying or underpaying for a service, it would ask the Relative Value Scale (RVS) Update Committee (RUC), a panel of physicians and others that reviews codes for CMS, to evaluate the data and the work value.

Usually, the RUC reviews a select number of codes every four or five years. However, this year, the RUC is reviewing every code with more than a $10 million spend associated with it. A number of these codes affect oncology, including the most commonly used chemotherapy administration code, 96413. The concern is that the RUC will find that the work associated with administering chemotherapy is less than the amount currently reimbursed.

“Any time you shine a light on something, you are concerned that the RUC will find that the work value has decreased, and therefore, it would reduce the work RVU, and the reimbursement would go down,” Farber said.

RUC reviews do not always result in a reduction, however. The work RVUs could increase for many chemotherapy administration codes because oncologists face risk evaluation and mitigation strategy (REMS) issues, as well as drug shortages, which take time to manage.

“Doctors, pharmacists, and other staff members are spending more time obtaining the drugs or being educated about the drugs, which is essentially unreimbursed time,” Farber said. “We would argue that extra work is being done, and it is not being captured by any of the reimbursement categories. If the RUC decides that we are correct, maybe it will associate some time due to REMS with these drug codes and give a higher RVU reimbursement, but we don’t know what will happen. I certainly don’t want to create any false hopes.”

Practice expenses

Some changes to the Medicare fee schedule are already in effect, such as changes to PE RVUs numbers. Until last year, CMS had been using data from 2000, even though the cost of doing business had increased substantially over the years. Starting in 2011, CMS began using 2006 data.

In addition, 2012 is the third year of the four-year transition to the PE RVUs calculated using the Physician Practice Information Survey (PPIS) data. The 2012 PE RVUs are a 25%/75% blend of the previous PE RVUs and the new PE RVUs developed with the PPIS data. However, Congress mandated that the PPIS was not representative of oncology, Farber said, so different survey data were used to determine reimbursement for medical oncology. As a result, the reductions to medical oncology were not as steep as they would have been if oncology PE RVUs depended on PPIS.

Evaluation and management

For the most part, evaluation and management (E/M) codes have been increased for 2012—another change in effect already. These codes are based on the time the physician spends with the patient, the amount of information being discussed, and the difficulty of that information: A primary care physician providing aspirin for a headache receives a different amount than an oncologist discussing a treatment plan or a change in treatment for someone with a tumor.

“That oncology discussion would be a higher code, and the reimbursement would be higher. Many E/M codes are billed in primary care, but there are also quite a few in medical oncology,” Farber said, including the initial patient consultation, follow-up care, and treatment plans.

Radiation changes

Radiation oncology faces several decreases this year and next, according to Farber. Imaging is a crucial component of oncology. Oncologists use advanced imaging techniques to diagnose cancer, evaluate treatment, and stage tumors.

A billing for advanced imaging contains two components, a professional component and a technical component. A couple of years ago, CMS reduced the payment for the technical side of serial studies done at the same time. For instance, if a patient needed a CT scan of the head and neck, the abdomen, and the pelvis areas, that would be three studies, and an office would bill for technical and professional services for three studies. CMS reduced the payment on the second and third study by 50% because there were efficiencies in technician time in doing all three studies at the same appointment.

In the 2012 proposed rule, CMS also wanted to decrease the physician time by 50% for subsequent studies. Radiation oncologists argued that doctors spend the same time studying each image, and that there were fewer efficiencies in reviewing the tests than in administering them.

“The person reviewing the test still has to look at the results, write a report, talk to the treating physician, provide a diagnosis, and compare the current test with previous studies,” Farber said. “CMS sort of listened.” In the final rule, the proposed reduction was changed from 50% to 25%”—another change now in effect.

Medicare Fee Schedule Definitions


Relative Value Units

Work RVUs

Relative level of time, skill, training, and intensity to provide a given medical service


Practice expense RVUs, the business cost of maintaining a practice, including rent, equipment, supplies, and nonphysician staff costs


Malpractice RVUs, payment for professional liability expenses


Geographic Practice Cost Indices

Geographic adjustment made to payment based on practice location. There are 89 physician payment localities.


Conversion Factor

A scaling factor used to convert geographically adjusted RVUs to a dollar payment amount.

Formula for Calculating 2012

Physician Fee Schedule Payment

2012 Non-Facility Pricing Amount =

[(Work RVU x Work GPCI) +

(Transitioned Non-Facility PE RVU x PE GPCI) +


2012 Facility Pricing Amount =

[(Work RVU x Work GPCI) +

(Transitioned Facility PE RVU x PE GPCI) +


Conversion factor

The conversion factor is always the biggest concern of physicians every year, but since 2003, Congress has enacted yearly patches to prevent huge cuts to Medicare physician payments. For 2012, Congress passed a temporary delay in the scheduled cuts, which expires at the end of the year. Although the freeze is always welcome, most doctors wish Congress would just fix the problem.

“With this brief reprieve from the massive 27% cut to Medicare payments, Congress now has to enact a real and fiscally responsible solution to this sorry cycle of scheduled cuts and short-term patches that compromises access to care for patients and drives up costs for taxpayers. Members of Congress need to use this time to work in a bipartisan manner to provide long-term stability for seniors, military families, and the physicians who care for them,” said Peter W. Carmel, MD, president of the American Medical Association (AMA), in a statement after Congress enacted a temporary delay in December 2011.

There is bipartisan agreement that the problem needs a permanent fix, but it would be expensive. Because Congress has put off the cuts, the problem has compounded: What was just a 2% to 5% cut is now 27.4%. According to the Congressional Budget Office (CBO), the cost to freeze cuts for two years is $39 billion for 2012. Furthermore, a freeze in 2012 would increase the size of the next scheduled cut to physician payments to an estimated 32%.

One solution, supported in a statement in late January by nearly 70 medical societies, including the American Society of Clinical Oncology and the AMA, is to eliminate the sustainable growth rate (SGR) formula that drives Medicare physician pay cuts. However, the CBO estimates that eliminating the SGR and freezing Medicare rates for a decade would cost approximately $300 billion over that time period. That estimate includes an increase in the premiums that traditional fee-for-service Medicare recipients pay; eliminating the premium increase brings the cost to $375 billion, according to the CBO. With this year’s “doc fix” now in place, however, it remains to be seen what changes—if any—Congress will make for 2013 and beyond.

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Sam Brondfield, MD, MA