On July 8, 2013, CMS proposed devastating Medicare payment reductions for freestanding radiation oncology centers, to be implemented on January 1, 2014. A chart setting forth the current and proposed relative value units for the most common radiation oncology codes is attached. (Please note that the dollar figures provided are based on national average rates and assume that Congress will once again act to delay application of the SGR and will instead maintain the current conversion factor in 2014). This proposal is subject to public comment, and we will be sending further instructions and talking points for you to use in commenting on this proposal in the near future.

CMS did not make available all of the information necessary to determine the reason for these extraordinary reductions; however, initial analysis suggests that the reductions that exceed 20% may be attributable to a CMS proposal to “cap” Medicare payment for services performed in physicians’ offices at hospital rates. Medicare payment for a number of conventional radiation treatment codes, IMRT treatment planning and hyperthermia TC services are substantially higher in non-hospital than in hospital settings, and these codes would incur extraordinary reductions in 2014 under CMS’ proposal. Therefore, it appears likely that at least some portion of the draconian reductions in Medicare payment for these services may be attributable to the hospital outpatient “cap.” (Ironically, on the same date that it released the 2014 proposal, CMS also released proposed 2014 HOPPS rates, which are substantially higher that current HOPPS rates. It is unclear whether or how CMS would implement its “cap” on PFS allowances if the new higher HOPPS rates are adopted.)

Please note that, while CMS proposes to decrease Medicare payment for codes whose payment exceeds hospital rates, the agency does not propose to increase PFS rates for the even greater number of codes whose payment is substantially lower than those paid to the hospitals. Overall, when all codes are taken into account, freestanding facilities are already paid 12% less than they would be paid under the hospital outpatient payment methodology.

A second factor that likely reduces the payments proposed by CMS relates to its calculation of the Medicare Economic Index. Based on these calculations, CMS is proposing to increase the portion of the overall Physician Fee Schedule “pie” dedicated to physician work relative value units and reduce the aggregate amount spent on practice expense relative value units. Because radiation oncology TC services are comprised almost exclusively of practice expense relative value units, this shift has a disproportionate adverse impact on radiation oncology centers.

We will continue to analyze the proposed PFS rates to determine the source of the proposed reductions, but believe that Congressional action may be necessary to stop these cuts. Stay tuned for further information.