MINNEAPOLIS, June 30, 2008—In the wake of the failure of the U.S. Senate to pass H.R. 6331, the Centers for Medicare & Medicaid Services (CMS) has issued an administrative order to stop the promised 10.6 percent Medicare physician reimbursement cut for 10 days.

This stop order gives Congress three days to act when they return from holiday recess on July 7.

Health & Human Services Secretary Michael Leavitt released this statement:

"Unfortunately Congress was not able to pass bipartisan legislation to avert the July 1 payment reductions to physicians. HHS will take all steps available to the Department under the law to minimize the impact on providers and beneficiaries."

Leavitt urged Congress to move quickly when it returns from the 4th of July recess to pass a bipartisan bill that President Bush can sign, similar to the Baucus-Grassley draft legislation.

"Once enacted," Leavitt said, "we will move promptly to re-process claims and take other steps necessary to ensure that providers and beneficiaries are not negatively affected."

The American Medical Association reminds physicians of several key facts as the three-day battle royal draws near:

• These cuts are not just about physicians. 
  They really will have an impact on patient care. Given the track record of payment updates over the past eight years, margins in physician offices are very small—too small to absorb another cut of nearly 11 percent. Many physicians are simply going to have to start turning away Medicare patients. In addition, these cuts affect thousands of other, non-physician health professionals who provide
  services to patients. 
• The problem is even worse in many rural states.
  Since the “floor” on geographic adjustments made to a portion of Medicare physician payments is also expiring on July 1. These states will experience additional payment cuts of between 1 and 3 percent. 
• These cuts are not just about Medicare, either. 
  Payments under TRICARE, which covers health care services for retired and active duty military personnel and their families, are tied directly to Medicare payment rates. So, access to care for these military service families is also being threatened. Some state Medicaid programs also tie their payment rates directly to Medicare.

CMS has described the process for claims paid under the Medicare physician fee schedule starting July 1:

CMS will work with Congress, health care providers, and the beneficiary community to avoid disruption in the delivery of health care services and payment of claims for physicians paid under the Medicare physician fee schedule, beginning July 1.

CMS has instructed its contractors to hold these claims for the first 10 business days of July, for dates of service in July. This should have minimum impact on provider cash flow because, under current law, electronic claims are not paid any sooner than 14 days (29 days for paper claims) after the date of receipt. Meanwhile, all claims for services delivered on or before June 30 will be processed and paid under normal procedures.

"After 10 business days," the CMS release says, "contractors will begin releasing claims into processing under the fee schedule which implements current law. This, of course, could result in claims being processed with the negative 10.6 percent update. If a new law is enacted which changes the negative 10.6 percent update, retroactive to July 1, CMS is prepared to automatically reprocess most of those claims which have already been processed."

Under the Medicare statute, Medicare pays the lower of submitted charges and the Medicare fee schedule amount. Claims with dates of service July 1 and later billed with a submitted charge at least at the level of the January 1-June 30, 2008, fee schedule will be automatically reprocessed if Congress retroactively reinstates the update that was in effect for that time period. Any lesser amount will likely require providers to re-submit a revised claim.

"To the extent possible, providers may hold claims in-house until it becomes clearer as to whether new legislation will be enacted or until cash flow becomes problematic, " the CMS statement says.

"This will reduce the need for providers to reconcile two payments (i.e., the initial claim and the reprocessed claim), and it will simplify provider billings of beneficiary coinsurance and payment calculations for payers which are secondary to Medicare."