2018 Medicare Physician Fee Schedule Proposed Rule Summary

July 17, 2017

On July 10, 2017, the Centers for Medicare & Medicaid Services (CMS) released the 2018 Medicare Physician Fee Schedule (PFS) proposed rule with comment period.  CMS also issued a fact sheet on the proposed rule.  CMS is accepting comments on the proposed rule through September 11, 2017.  The final rule is expected to be released in early November. 

Below is an overview of some of the proposals included in the proposed rule.  However, AMA still will continue to review the proposal and provide more detailed analyses in the coming weeks.  There are a number of positive policies being proposed, and the AMA will work with the Federation as we prepare our comments to submit to CMS.

Highlights of the 2018 PFS Proposed Rule

Request for Information (RFI) on CMS Flexibilities and Efficiencies

CMS invites public comment on ideas for regulatory, subregulatory, policy, practice and procedural changes to improve the health care system by reducing unnecessary burdens for clinicians, other providers, patients and their families.  CMS will not respond to the RFI comment submissions in the final rule that will be issued in November, but will consider the input in developing future regulatory proposals and sub-regulatory guidance.  The AMA has had extensive discussions with the Administration about regulatory relief and we welcome this positive step by CMS.  

Physician Payment Update & Misvalued Codes Target

The Medicare Access and CHIP Reauthorization Act included annual updates of 0.5 percent from July 2015 through 2019.  Later, the Protecting Access to Medicare Act of 2014 (PAMA) set an annual target for reductions in the PFS from adjustments to relative values of misvalued codes.  The Achieving a Better Life Experience (ABLE) Act of 2014 accelerated those targets, setting the target at 0.5 percent for 2017 and 2018.  CMS estimates the 2018 net reduction in expenditures from proposed adjustments to relative values of misvalued codes will be 0.31 percent.  Since this does not meet the misvalued code target of 0.5 percent, CMS will impose a -0.19 percent reduction to PFS payments.  Nonetheless, it is estimated that the 2017 conversion factor will be increased to 35.99 (2017 conversion factor was 35.89), based on the budget neutrality adjustment and the 0.5 percent update factor. 

Physician Work and Practice Expense

CMS has proposed valuation for 2018 based almost entirely on recommendations of the RUC. Rather than propose alternative values, CMS instead asks for comments on a number of their questions or observations during review of the RUC recommendations. We will work extensively with the specialty societies to address these questions to ensure finalization of the RUC recommended values. CMS included the following statement on the RUC in the Fact Sheet that accompanies the NPRM:

"Recommendations from the American Medical Association- Relative Value Scale Update Committee (RUC) are critically important to this work. For CY 2018, CMS is proposing the values for individual services that generally reflect the expert recommendations from the RUC without as many refinements as CMS has proposed in recent years."

Professional Liability Insurance 

CMS proposes to use updated premium data in computing the professional liability insurance relative values, causing minor redistribution between specialties. CMS also plans to utilize the RUC and specialty recommendations related to expected specialties for low volume codes, a change long advocated by the RUC. 

Focus on Payment Policy to Address Opioid Addiction 

CMS has created new codes and higher payments to recognized drug delivery implants utilized by physicians in addressing opioid addiction. Additionally, CMS created a new method to compute practice expense to increase payment for behavioral health services, noting the importance of these counseling services in combating the opioid crisis. 

2018 Potentially Misvalued Codes List 

Each year, CMS proposes a list of potentially misvalued codes for review by the RUC and possible adjustment.  CMS seeks comments on the best approach for developing screens for potentially misvalued codes.  CMS requests feedback on whether CPT codes for emergency department visits should be reviewed under the misvalued code initiative.  

Legacy Value-Based Payment Systems

One of the key goals of MACRA was to consolidate and streamline the Physician Quality Reporting System (PQRS), Meaningful Use (MU) and Value-Based Payment Modifier (VM) into a single system that was less onerous, more relevant, and administratively simpler.  In regulations to create the new Merit-based Incentive Payment System (MIPS), CMS made a number of favorable changes in the earlier programs but those changes do not affect payments until 2019.  The AMA and the Federation had therefore urged CMS to make retroactive modifications in the 2016 PQRS, MU and VM requirements to reflect the policies in the Merit-based Incentive Payment System (MIPS) and reduce the penalties for physicians in 2018.  CMS reacted with several positive proposals.   

PQRS and MU Quality Reporting

Previously in CY 2016 physicians were required to report 9 measures across 3 National Quality Strategy Domains, with one cross-cutting measure included.  In this rule, CMS proposes to revise CY2016 PQRS and MU quality reporting requirements to only require physicians to report 6 measures with no domain or cross-cutting measure requirements.   This proposal aligns the PQRS CY2016 and Meaningful Use quality reporting requirements with the new quality reporting requirements for physicians under MIPS.  However, web-interface criteria would remain the same.

In addition, CMS previously finalized in CY 2016 that groups of 100 or more eligible clinicians who participated in 2016 PQRS under the group reporting option (GPRO) were required to administer the CAHPS for PQRS survey. To align with the MIPS requirements, CMS is proposing to make the CAHPS for PQRS survey optional under GPRO for practices of 100 or more eligible clinicians in 2016.


CMS proposes to:

  • Hold all groups and solo practitioners who met 2016 PQRS reporting requirements harmless from any negative VM payment adjustments in 2018.
  • Halve penalties for those who did not meet PQRS requirements to -2 percent for groups with 10 or more eligible professionals, and to -1 percent for smaller groups and solo practitioners.
  • Reduce the maximum upward payment adjustment to 2 times an adjustment factor that is set at the rate needed to keep penalties and bonuses budget neutral. Drop its earlier proposal to publicly report 2016 value modifier data on its Physician Compare web site.

Patient Relationship Categories

The Medicare Access and CHIP Reauthorization Act directed CMS to create new patient relationship codes that physicians would be required to report on claims starting in 2018 for the purposes of determining which physician would be held accountable for a patient’s cost of care. Following the recommendations made by a CPT/RUC work group, CMS proposes 5 patient relationship categories that would be identified by modifiers rather than codes that physicians could voluntarily to use as an option to designate patient relationship categories on claim forms beginning January 1, 2018. 

Diabetes Prevention Program (DPP)

Addressing pre-diabetes is one of the AMA’s strategic focus areas, so we welcome CMS moving forward with the Medicare DPP.  CMS proposes payment for the Medicare DPP, with a maximum payment per beneficiary of $810 over 3 years for the set of MDPP core and maintenance sessions.  CMS also proposes a two-year time limit on Medicare coverage for ongoing maintenance sessions.  AMA comments on the previous CMS proposal had expressed concern that the proposed payment model was too restrictive in linking payments to patient adherence in attending sessions and health outcomes as measured by weight loss in a short period of time.  The new proposal attempts to address these concerns by providing more flexibility to DPP providers in supporting patient engagement and attendance and by making performance-based payments available if patients meet weight-loss targets over a longer period of time.  CMS proposes to delay the start date of the MDPP for three months until April 1, 2018.

Virtual DPP

CMS requests comments on the Agency’s intention to initiate a CMMI model to test and evaluate virtual DPP.  CMS did not include virtual DPP in the initial CMMI model that is the basis for the current proposed expansion.  Because CMS relied on CMMI waiver authority and tested an in-person DPP model, CMS is not statutorily able to include virtual DPP as part of the expansion.  Instead, it is expected that CMS will utilize the same CMMI authority to test and evaluate virtual DPP services.  CMS states that it intends to have a separate model test of virtual DPP that would run in parallel with the expanded model.  (On a procedural note, as a standard matter CMMI model proposals are not included in the annual proposed or final PFS, but under a separate notice process.)  On a related note, under this proposed expansion CMS does allow for virtual make-up sessions for MDPP that is generally delivered in person and also notes that there are programs that are a combination of in-person and virtual DPP. 

Physician Office-based Labs

CMS is soliciting comments on the initial data collection and reporting periods under the new private-payer-based Clinical Laboratory Fee Schedule (CLFS). This new private-payer-based system was created by the Protect Access to Medicare Act of 2014 and requires laboratories performing clinical testing services, including certain physician office-based laboratories, to participate in an extensive data collection and reporting exercise. This exercise requires reporting of rates paid by private payers for clinical laboratory tests and the associated volumes of tests paid at those rates over a 6 month period of time. The proposed rule notes that feedback from reporting laboratories indicated an inability to report during the time allotted under the final rule implementing the PAMA lab provisions. The Agency is soliciting comment on laboratories experiences reporting with the goal of refining the CLFS and data collection/reporting processes in the future.

Proposed Payment Rates under the Medicare Physician Fee Schedule for Nonexcepted Items and Services Furnished by Nonexcepted Off-Campus Provider-Based Departments (PBDs) of a Hospital

In the CY2017 Ambulatory Surgical Center / Hospital Outpatient Prospective Payment System (OPPS) interim final rule, CMS finalized that they would establish payment policies under the PFS for 2017 by scaling the OPPS payment rates by 50 percent. 

In this rule, CMS proposes to set payment rates for services provided at nonexcepted off-campus PBDs at 25 percent of the OPPS payment rate for 2018.  CMS states they are focused on ensuring they do not overestimate appropriate overall payment for these services in order to eliminate the Medicare payment incentive for hospitals to purchase physician offices, convert them to off-campus PBDs, and bill under the OPPS for the items and services they furnish there. 

Evaluation and Management (E/M) Guidelines

CMS calls for a multi-year effort to revise the Evaluation and Management Guidelines to accompany a desire to reduce administrative burden to physicians. CMS suggests a focus on eliminating guidelines related to history and physical examination, with greater importance placed on medical decision making and time spent performing the service. 

Appropriate Use Criteria (AUC)

The Protecting Access to Medicare Act (PAMA) required CMS to create a program that effective January 1, 2017 would have denied payment for advanced imaging services unless the physician ordering the service had consulted appropriate use criteria.  CMS previously had delayed implementation until 2018 but now in response to pressure from the AMA and a number of specialties, the agency is proposing to further delay the requirement until January 1, 2019.  This first year of reporting would be regarded as an opportunity for testing and education and would not affect payment to the physician providing the image.  Those who wished to begin testing earlier could participate in a voluntary reporting period expected to begin on July 2018. 

Medicare Shared Savings Program (MSSP)

CMS proposes to reduce document submission requirements for MSSP Accountable Care Organizations (ACOs) by eliminating the requirement to submit supporting documents or narratives unless CMS requests the materials. 

Digital Medicine

CMS is seeking general comments on whether to make separate payment for CPT codes that describe remote patient monitoring.  CMS asserts that these are not telehealth services (and thus not constrained by the same telehealth statutory restrictions) and provides that these services involve the interpretation of medical information without a direct interaction between the practitioner and beneficiary.  CMS provides that as a result, these codes are paid under the same conditions as in-person physicians’ services with no additional requirements regarding permissible originating sites.  CMS also seeks comments on a number of specific codes related to ECG, blood pressure and glucose monitoring. 


CMS seeks comments on a number of codes related to telehealth.  The agency is also proposing to eliminate the requirement for modifier for telehealth services.  CMS maintains that because a valid POS code is required on professional claims for all services, and the appropriate reporting of the telehealth POS code serves to indicate both the provision of the service via telehealth and certification that the requirements have been met, it is unnecessary to also require the distant site practitioner report the GT modifier on the claim. Therefore, CMS proposes to eliminate the required use of the GT modifier on professional claims.  CMS is seeking information regarding ways that CMS might further expand access to telehealth services within the current statutory authority and pay appropriately for services that take full advantage of communication technologies.

Terri Marchiori
Director, Federation Relations
330 N Wabash
Chicago, IL 60611
P: (312) 464-5271

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