April 04, 2012 | | Comments 0
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March 2012 update to the Medicare Physician Fee Schedule

As expected, Congress finally passed legislation saving physicians from the drastic reduction in the Medicare Physician Fee Schedule conversion factor that was supposed to take place on January 1, 2012 and then postponed until March 1, 2012. Now that the Middle Class Tax Relief and Job Creation Act (MCTRJCA) of 2012 has been signed into law we can expect the conversion factor to remain at $34.0376 for the remainder of 2012.

In addition to the conversion factor, CMS also issued the Transmittal R1058OTN, “Emergency March 2012 Update (MCTRJCA) to the CY 2012 Medicare Physician Fee Schedule (MPFS) Database”, which includes other billing and payment information that providers should note.

Technical component of physician pathology services

The update includes a provision that allows certain pathologists and independent labs to bill for the technical component (TC) of physician pathology services furnished to hospital inpatients through June 30. For almost a decade, there has been discussion about letting this provision expire so that the program cannot pay twice for the TC of pathology services, but it has never been implemented.

Medicare therapy caps

With the passage of MCTRJCA, the exceptions process for Medicare therapy caps will continue. Providers of therapy services may report the KX modifier on claims when they know the services have exceeded the annual therapy cap but their medical record documentation supports the medical necessity of the services. CMS has indicated that we can expect to see additional changes this fall, such as the establishment of a monetary threshold that will require manual medical review of claims once the threshold is met and extra reporting requirements to include the NPI of the physician who is reviewing the therapy plan of care.

Medicare Physician Work Geographic Practice Cost Index

The Medicare Physician Work Geographic Practice Cost Index (GPCI) adjustment floor will remain at 1.0 for the remainder of 2012. That makes sense to me. I have to confess that I never understood the philosophy behind the GPCI adjustment for the physician work relative value units (RVUs). The purpose of the GPCI is to account for the differences in providing a service based upon geographic location of where the service is furnished. I understand there are differences in costs for practice expenses, overhead, and malpractice premiums, but I don’t understand why, based upon the 2010 data, the physician work RVUs would be adjusted by .986 for a service furnished in Indiana and 1.016 for the same service furnished in Philadelphia. Isn’t the physician work the same? There are still differences in 2012 for the physician work GPCIs, but the floor will not be less than 1.0.

Mental health add-on payments

The biggest surprise for me is the announcement that the 5% Mental Health Add-On Payments will be discontinued. Medicare pays for psychiatric therapeutic services differently than most other covered services. Medicare pays 80% of the allowance for most covered services and the patient is responsible for the remaining 20%. Historically, Medicare always paid 62.5% of 80% for psychiatric therapeutic services, which was a ridiculous way of saying that Medicare pays 50% and the patient pays 50%. Starting in 2010, Medicare increases their portion incrementally for psychiatric therapeutic services until finally in 2016 Medicare would pay 80% as they do for most other services.

The transition to increase Medicare’s cost for these services was to follow this schedule:


Medicare Pays

Patient Pays

2009 and before

62.5% of 80%


2010 and 2011



















At this point I have not seen any further clarification from CMS other than “the MCTRJCA discontinues the 5 percent Mental Health Add-On Payments effective March 1, 2012.” Since the 2012 cost share increase was delayed until March 1 pending legislation, which as it turns out discontinues this stipulation, I am assuming that for covered psychiatric therapeutic services Medicare will reimburse 55% of the allowance and the patient will be responsible for the remaining 45%. To be certain though, we need additional clarification from CMS.

Practitioners are advised to review the transmittal in its entirety for issues that may affect their practice.

Entry Information

Filed Under: CodingMPFS


Peggy Blue About the Author:

Peggy Blue is the lead instructor for HCPro's Medicare Boot Camp® - Physician Services Version course as well as an instructor for the Certified Coder Boot Camp® (covers physician and outpatient hospital coding) both live and online versions. Peggy has over 20 years of experience in the health insurance industry including extensive experience in the Medicare and TRICARE government programs.

Peggy serves as the technical advisor for "The Medicare Update for Physician Services" a bimonthly e-zine to help physicians, physician practice administrators, and those in roles that assist physicians stay up to date on the latest news from CMS and the OIG.

Prior to joining HCPro, Peggy oversaw the development, implementation, dissemination, and reporting of information related to Medicare professional services training efforts for Highmark Medicare Services. In that capacity Peggy has researched, resolved, and responded to issues and inquiries from the physician community in addition to congressional offices, medical societies, and professional associations. Peggy has delivered multiple presentations on Medicare legislation.

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