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New Medicare reform boosts pay for rural physicians

From the March ACP Observer, copyright 2004 by the American College of Physicians.

By Brett Baker

Q: Did Congress pass a law that improves Medicare payments to physicians for services performed in rural and other underserved areas?

A: Yes. The recently enacted Medicare Prescription Drug Improvement and Modernization Act of 2003 includes provisions that increase payments for physician services furnished in rural and other underserved areas.

A few provisions of the legislation improve payment for rural services in 2004 in addition to the 1.5% across-the-board payment increase for all physician services. (That increase was also mandated by the Medicare reform legislation.) Another provision in the law further boosts Medicare payments in 2005 in areas that have a poor physician-to-beneficiary ratio.

ACP supported the law's provisions that increase physician payments for services in rural and underserved areas. These provisions increased the overall pool of money allotted for physician services without a corresponding cut for services provided in urban and nonrural settings.

These provisions also account for some of the Medicare reform legislation's $11 billion increase in payments to providers, physicians and suppliers over the next five years.

Q: What will the law do to reduce regional differences in the costs assigned to physician work? Will there be a smaller gap between areas designated as "high cost" and "low cost"?

A: The legislation made important changes to the portion of the payment formula known as the geographic practice cost index.

The government applies the geographic practice cost index to the physician work component of the Medicare fee schedule to adjust for the relative practice cost differences in Medicare's 89 payment areas.

In 2003, 58 localities with relatively low operating costs had an index of less than 1.0. These values ranged from 0.881 for Puerto Rico to 0.998 for New Orleans.

In 2004, the Centers for Medicare and Medicaid Services (CMS), in accordance with the new law, increased the geographic practice cost index for each of these areas to 1.00. As a result, Medicare is paying more for physician services in these areas. For more information on how the increased rates will affect the pay of some physicians, see "How rural physicians will be helped by the new Medicare law."

The factor for the other 31 areas—where the value is already equal to or higher than 1.00—remains unchanged. Click here to see the impact of the new 1.00 work value for each of Medicare's 89 payment areas.

The good news is that when the CMS increased its geographic cost index for rural areas, the government did not take away money from other parts of the Medicare program to make up for the new increase. In other words, payment areas that already had a geographic practice cost index of at least 1.00 will not see their payments reduced to pay for the increases in other areas.

Q: Did the new Medicare law change the program that provides a 10% payment bonus for services provided in physician shortage areas?

A: The legislation makes it easier for physicians to collect the 10% Medicare incentive payment bonus in health professional shortage areas.

The new law requires carriers to automatically pay physicians the 10% payment bonus for services furnished in either rural or urban shortage areas. Before the law was passed, carriers merely notified physicians that these shortage areas existed and required physicians to take the initiative to collect the bonus. Doctors had to identify services furnished in a shortage area by appending a modifier to the procedure code when billing for services.

Q: How do I know if I should be receiving the 10% Medicare incentive payment bonus?

A: The U.S. Public Health Service defines shortage areas based on census data. Although shortage areas span entire counties in some cases, they typically represent only sections of counties. Physicians should use notice of shortage area designations provided by their Medicare carrier.

Q: Will Medicare make additional bonus payments in the future to physicians for services furnished in rural areas?

A: Yes. The Medicare reform law calls for a physician scarcity bonus payment of 5% between 2005 and 2007. Physicians who provide primary and specialty services in "scarcity" areas will receive a 5% Medicare incentive payment for services furnished between Jan. 1, 2005 and Dec. 31, 2007.

Medicare will pay a scarcity bonus to physicians in counties that account for 20% of Medicare beneficiaries. This law instructs the CMS to calculate a scarcity ratio—based on the number of active physicians per Medicare beneficiary—for primary and specialty physicians, to determine which counties make the bonus payment.

The CMS will also publish a list of areas that qualify as primary or specialty care scarcity areas in the annual update to the physician fee schedule for 2005-2007.

Brett Baker is a third-party specialist in the College's Washington office.

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Revised Work GPCI and Impact 1.0 Percent Work GPCI

Carrier Number Loc. Number Locality Name Current 2004 Work GPCI Revised 2004 Work GPCI Percent Change
00831 01 Alaska 1.064 1.670 57.0%
00973 20 Puerto Rico 0.881 1.000 13.5%
00820 02 South Dakota 0.935 1.000 6.9%
00740 99 Rest of Missouri* 0.946 1.000 5.7%
00523 99 Rest of Missouri* 0.946 1.000 5.7%
00655 00 Nebraska 0.948 1.000 5.5%
00751 01 Montana 0.950 1.000 5.2%
00820 01 North Dakota 0.950 1.000 5.2%
00520 13 Arkansas 0.953 1.000 4.9%
00512 00 Mississippi 0.957 1.000 4.5%
00826 00 Iowa 0.959 1.000 4.3%
05130 00 Idaho 0.960 1.000 4.2%
31142 99 Rest of Maine 0.961 1.000 4.0%
00835 99 Rest of Oregon 0.961 1.000 4.0%
00650 00 Kansas* 0.963 1.000 3.8%
00740 04 Kansas* 0.963 1.000 3.8%
00884 16 West Virginia 0.963 1.000 3.8%
00952 99 Rest of Illinois 0.964 1.000 3.7%
00973 50 Virgin Islands 0.965 1.000 3.6%
00900 99 Rest of Texas 0.966 1.000 3.5%
00825 21 Wyoming 0.967 1.000 3.4%
00528 99 Rest of Louisiana 0.968 1.000 3.3%
00522 00 Oklahoma 0.968 1.000 3.3%
00511 99 Rest of Georgia 0.970 1.000 3.1%
00660 00 Kentucky 0.970 1.000 3.1%
05535 00 North Carolina 0.970 1.000 3.1%
00521 05 New Mexico 0.973 1.000 2.8%
31145 50 Vermont 0.973 1.000 2.8%
00880 01 South Carolina 0.974 1.000 2.7%
00590 99 Rest of Florida 0.975 1.000 2.6%
05440 35 Tennessee 0.975 1.000 2.6%
00910 09 Utah 0.976 1.000 2.5%
00510 00 Alabama 0.978 1.000 2.2%
31142 03 Southern Maine 0.979 1.000 2.1%
00630 00 Indiana 0.981 1.000 1.9%
00836 99 Rest of Washington 0.981 1.000 1.9%
00951 00 Wisconsin 0.981 1.000 1.9%
00904 00 Virginia 0.984 1.000 1.6%
00901 99 Rest of Maryland 0.984 1.000 1.6%
00824 01 Colorado 0.985 1.000 1.5%
31144 40 New Hampshire 0.986 1.000 1.4%
00900 31 Austin, Texas 0.986 1.000 1.4%
00900 28 Fort Worth, Texas 0.987 1.000 1.3%
00952 12 East St. Louis, Ill. 0.988 1.000 1.2%
00740 02 Metropolitan Kansas City, Mo. 0.988 1.000 1.2%
00883 00 Ohio 0.988 1.000 1.2%
00900 15 Galveston, Texas 0.988 1.000 1.2%
00865 99 Rest of Pennsylvania 0.989 1.000 1.1%
00954 00 Minnesota 0.990 1.000 1.0%
00900 20 Beaumont, Texas 0.992 1.000 0.8%
00900 09 Brazoria, Texas 0.992 1.000 0.8%
00832 00 Arizona 0.994 1.000 0.6%
00523 01 Metropolitan St. Louis, Mo. 0.994 1.000 0.6%
00590 03 Fort Lauderdale, Fla. 0.996 1.000 0.4%
00835 01 Portland, Ore. 0.996 1.000 0.4%
00833 01 Hawaii/Guam 0.997 1.000 0.3%
00953 99 Rest of Michigan 0.997 1.000 0.3%
00528 01 New Orleans, La. 0.998 1.000 0.2%
00801 99 Rest of New York 0.998 1.000 0.2%
31146 26 Anaheim/Santa Ana, Calif. 1.037 1.037 0.0%
31146 18 Los Angeles, Calif. 1.056 1.056 0.0%
31140 03 Marin/Napa/Solano, Calif. 1.015 1.015 0.0%
31140 07 Oakland/Berkeley, Calif. 1.041 1.041 0.0%
31140 05 San Francisco, Calif. 1.068 1.068 0.0%
31140 06 San Mateo, Calif. 1.048 1.048 0.0%
31140 09 Santa Clara, Calif. 1.063 1.063 0.0%
31146 17 Ventura, Calif. 1.028 1.028 0.0%
31146 99 Rest of California* 1.007 1.007 0.0%
31140 99 Rest of California* 1.007 1.007 0.0%
00591 00 Connecticut 1.050 1.050 0.0%
00902 01 Delaware 1.019 1.019 0.0%
00903 01 DC + Md./Va. Suburbs 1.050 1.050 0.0%
00590 04 Miami, Fla. 1.015 1.015 0.0%
00511 01 Atlanta, Ga. 1.006 1.006 0.0%
00952 16 Chicago, Ill. 1.028 1.028 0.0%
00952 15 Suburban Chicago, Ill. 1.006 1.006 0.0%
00901 01 Baltimore/Surr. Cntys, Md. 1.021 1.021 0.0%
31143 01 Metropolitan Boston 1.041 1.041 0.0%
31143 99 Rest of Massachusetts 1.010 1.010 0.0%
00953 01 Detroit, Mich. 1.043 1.043 0.0%
00834 00 Nevada 1.005 1.005 0.0%
00805 01 Northern N.J. 1.058 1.058 0.0%
00805 99 Rest of New Jersey 1.029 1.029 0.0%
00803 01 Manhattan, .Y. 1.094 1.094 0.0%
00803 02 NYC Suburbs/Long I., N.Y. 1.068 1.068 0.0%
00803 03 Poughkpsie/N NYC Suburbs, N.Y. 1.011 1.011 0.0%
14330 04 Queens, N.Y. 1.058 1.058 0.0%
00865 01 Metropolitan Philadelphia, Pa. 1.023 1.023 0.0%
00870 01 Rhode Island 1.017 1.017 0.0%
00900 11 Dallas, Texas 1.010 1.010 0.0%
00900 18 Houston, Texas 1.020 1.020 0.0%
00836 02 Seattle (King Cnty), Wash. 1.005 1.005 0.0%

 

Source: Federal Register, Jan. 7, 2004

Note: The "percentage change" column shows the percentage the 2004 work GPCI increased from the 2003 value. It is not meant to indicate that the actual Medicare payment for each physician service increased by that percentage in that locality.

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