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2018 Physician Fee Schedule Cuts Outpatient Payments

The calendar year (CY) 2018 Medicare Physician Fee Schedule (PFS) final rule includes a 20 percent cut to payments for new off-campus, provider-based departments (PBDs), and makes changes to physician payment and quality programs.

America’s Essential Hospitals sharply criticized the PBD payment cuts in a statement shortly after the Centers for Medicare & Medicaid Services (CMS) published the final rule Nov. 2.

Acting under Section 603 of the Bipartisan Budget Act of 2015 (BBA), CMS last year finalized a policy to pay new off-campus PBDs through the PFS at a rate half that previously paid through the Medicare Outpatient Prospective Payment System (OPPS). The CY 2018 rule reduces the cut further — to 40 percent of the OPPS rate. That cut does provide some relief from the agency’s initial plan to reduce the rate to 25 percent of OPPS.

The final rule also includes these provisions of interest to essential hospitals:

  • Payment update — CMS will adjust the annual physician payment rate by 0.41 percent in CY 2018;
  • Telehealth services — For CY 2018, CMS finalized the addition of five services to the list of telehealth services for which Medicare providers can be reimbursed. Additionally, CMS eliminated the GT modifier for distant site practitioners providing a telehealth service, stating that it is redundant with the place of service code finalized in CY 2017;
  • Evaluation and management (E/M) services — CMS had sought comment on updating guidelines for determining and documenting which E/M visit codes to bill for a patient office visit. The agency did not finalize any changes, but states it will work with stakeholders to revise the E/M guidelines to reduce unnecessary administrative burden;
  • Emergency department (ED) visits — Based on feedback that payment for emergency department visits might be undervalued due to increased patient acuity, CMS states it will evaluate the five ED E/M codes for appropriate valuation in future rulemaking;
  • Medicare Shared Savings Program (MSSP) — CMS finalized changes to the MSSP aimed at reducing burden and streamlining the program. Changes include revising the beneficiary assignment methodology, adding three chronic care management and four behavioral health integration codes, and reducing burden for stakeholders submitting an initial MSSP application or an application for use of the skilled nursing facility three-day rule waiver;
  • Quality Payment Program (QPP) and Physician Quality Reporting System (PQRS) —
    • The last program year for the PQRS was 2016. To avoid the 2018 PQRS downward payment adjustment, 2016 PQRS quality data must have been submitted by the final data submission time frame, January through March 2017. PQRS transitioned to the merit-based incentive payment system (MIPS) under the QPP, and the first MIPS performance period is January through December 2017;
    • To better align incentives and provide a smoother transition to MIPS data submission requirements, CMS finalized its proposal to reduce the number of required reported measures in the PQRS from nine to six. CMS finalized similar changes to the number of clinical quality measures physicians report for the Electronic Health Records Incentive Program; and
  • Patient Relationship Codes – CMS finalized certain Level II Healthcare Common Procedure Coding System (HCPCS) modifiers to be used on claims to indicate patient relationship categories. Voluntary reporting of these HCPCS modifiers will begin Jan. 1, 2018. CMS will work to help clinicians properly use these codes, and any related errors will not have payment consequences.

Contact Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Shahid Zaman is a senior policy analyst at America's Essential Hospitals.

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