April 3, 2011
The Medicare fee schedule for 2011 was determined in mid December and we avoided a draconian 25% reduction in physician fee schedule payments that was slated to go into effect January 1, 2011. In lieu, of the 25% negative update that was scheduled to occur, Congress mandated that there be a 0% update in 2011. CMS announced that the conversion factor used to update payment for next year will be $33.9764 instead of the $36.8729 conversion factor that was in effect in 2010. The conversion factor is lower for 2011, because CMS is rebasing and revising the MEI, an inflation index for physician practice costs that is used as part of the formula to calculate annual updates to the Medicare physician fee schedule rates.
As part of the rebasing, CMS establishes new relative weights for physician work, practice expense (PE) and malpractice under the MEI. To offset the increased weights to practice expense and malpractice RVUs, CMS reduces the 2011 conversion factor by approximately 8% to achieve budget neutrality as required by law. The practical effect of this change would be an increase to payments for services with higher relative practice expense values and decreases to services with higher relative work values. For outpatient therapy services, this results in -2% impact because these services have higher relative work RVUs. To view the fee schedule click here.