KPSGILL policy proposal · model legislation and model CMS policy

Physician payment: the update, and the redistribution

Two separate failures ride in one annual rule. The statutory update does not track the cost of running a practice, and the redistribution inside the fee schedule is decided without anyone having to publish who loses.

MODEL LEGISLATIONMODEL CMS POLICYOpen for critique

The problem

The fee schedule now carries two conversion factors and a downward efficiency adjustment applied to the work component of non-time-based services PROPOSED RULE. A temporary statutory update expires at year end, so a practice can face a net reduction while the rule describes positive updates. Meanwhile an efficiency adjustment moves money between specialties without any change in what a physician does for a patient.

Those are different problems with different fixes, and merging them is how the annual argument stays unresolved. The update is a legislative question about whether payment tracks cost. The redistribution is an administrative question about whether a reallocation must be visible before it happens.

Documentary baseline: the CY 2027 Physician Fee Schedule proposal as recorded here, with its two conversion factors, its efficiency adjustment, its same-day global-period provision and its 14 September comment date; and the interoperability rule’s reporting duties, which show what published metrics do to behaviour.

The recommendation

Drafting block — model language, not enactedModel statutory amendment to the Medicare physician payment update, with a companion CMS policy · drafted for United States, Medicare

§ 1. Update. The annual update to each conversion factor shall equal the change in a practice-cost index reflecting clinical wages, professional liability premiums, occupancy and clinical supplies, without an offsetting budget-neutrality reduction attributable to that update.

§ 2. Redistribution budget. In any year, the aggregate redistribution among specialties attributable to relative-value or efficiency adjustments shall not exceed a stated percentage of total physician spending. Adjustments exceeding that cap shall be phased.

§ 3. Impact publication. No relative-value or efficiency adjustment shall take effect unless the agency has published, at proposal, the estimated payment change by specialty and by practice size, and has responded to comments on that estimate.

§ 4. Evidence for an efficiency adjustment. An adjustment premised on efficiency gains shall identify the evidence of the gain for the affected service families, and shall not be applied uniformly across services for which no such evidence is offered.

§ 5. Small-practice floor. Where a published impact estimate shows a reduction exceeding a stated threshold for practices below a stated size, the adjustment shall be phased over not fewer than three years.

§ 6. Construction. Nothing in this section requires an increase in aggregate physician spending, and nothing limits the agency’s authority to correct a misvalued service on evidence.

§ 3 is the operative provision. Most redistribution survives because its losers are identified only after the rule is final, in a table nobody was required to publish at proposal.

Who bears what

Physician

Cost-tracking updates and a visible redistribution. A practice can plan, and can comment on a number rather than on a methodology.

Patient

Access follows viability, particularly in primary care and in small and rural practices, which is where a 2–3 per cent redistribution decides whether a panel stays open.

Programme

Real cost under § 1. §§ 2 and 6 are drafted so the proposal cannot be read as a demand for unlimited aggregate growth.

Specialties gaining from redistribution

They carry the burden of § 4: an efficiency claim has to be evidenced for the services it is applied to.

Equity

Uniform adjustments are regressive by practice size; § 5 addresses that directly rather than through hardship exceptions.

Burden

Almost entirely on the agency, in the form of publication and response.

The strongest arguments against

  1. An inflation-linked update removes the fiscal discipline of the annual negotiation.
  2. A redistribution cap freezes misvalued services in place.
  3. Impact publication at proposal invites specialty lobbying over patient need.
  4. The small-practice floor entrenches inefficient practices.

Answers

  1. The annual negotiation has produced temporary patches for a decade. Discipline that arrives as an expiring one-year fix is not discipline.
  2. § 6 preserves correction on evidence, and § 2 phases rather than prohibits.
  3. The lobbying happens now, on worse information, after the fact. Publication at proposal moves it into the comment record where it can be answered.
  4. It phases a reduction; it does not prevent one. A practice that cannot survive a three-year transition was not viable at the previous rate either.

Metrics. Net payment change versus practice-cost index by specialty and practice size; share of adjustments accompanied by service-level efficiency evidence; primary-care panel closures in the year following a redistribution. Sunset. Ten-year review of §§ 2 and 5. Open questions. What index, and who maintains it? Should the redistribution cap be a percentage of spending or of any single specialty’s revenue? Related: the prospective primary-care payment position, which this proposal is designed to be compatible with.