The 2018 Physician Fee Schedule: Where We Are, How We Got Here, What's Ahead

Here are a few things that can be said about the 2018 Medicare physician fee schedule (PFS) recently released by the US Centers for Medicare and Medicaid Services (CMS):

1.  It's a mixed bag, in terms of adjustments to current procedural terminology (CPT) codes commonly used in physical therapy, with some values going up, and others being cut.

2. Physical therapy isn't the only profession that saw CPT code reductions: otolaryngolists, nurse anesthetists, and urologists, to name a few, are also bracing for cuts.

3. It could have been a lot worse - up to a 10% cut or more based on changes to the practice expense.

4. Statements 1-3 aren't much consolation when you're a physical therapist (PT) facing estimated average payment reductions between 1.3% and 2% (but again, this is hard to pinpoint: there will be increases, but in other cases decreases will be even worse).

 What happened?

Just a few months ago, the outlook was good for PTs when it came to the 2018 PFS. After a 2-year American Medical Association analysis of CPT codes that CMS believed may be potentially "misvalued," the proposed rule that emerged this summer was a clear win for the profession: the proposal contained no cuts to codes values, and even a few increases. From the perspective of the profession, the proposed rule adopted all of the positive recommendations from AMA—namely, no cuts and a few increases to work relative value units (RVUs)—and none of the damaging AMA’s Health Care Professions Advisory Committee (HCPAC) recommendations, which included adjustments to practice expense (PE) inputs that would affect payment. Things were looking good, and APTA, PPS, and its members advocated strongly for the rule as proposed.

 When the final rule was issued in November, things stopped looking so bright. Between release of the proposed rule in the summer and publication of the final version, CMS veered away from its typical process when it announced—without warning and without allowing opportunity for input from any stakeholders, including APTA and PPS—that it would reverse its decision, and instead of rejecting, it would adopt the recommendations related to PE inputs. The rule change has altered the payment landscape for PTs in ways that are still being worked out by APTA. The association has published a summary of the rule on its website (listed under "APTA Summaries and Fact Sheets").

Mapping the landscape

While it's true that the final rule will result in increases in some areas, some of the payment reductions that will go into effect next year will hit home for some PTs. What is known for certain is that a few of the most commonly used codes in physical therapy will see a drop, including manual therapy, therapeutic exercise, mechanical traction therapy, and aquatic therapy.

At the same time, other codes will increase—some significantly. Gait training therapy values will increase, as will neuromuscular reeducation, and therapeutic activities. The 3-tiered evaluation codes adopted by CMS in 2016 will also rise, in addition to orthotic management and training (first encounter), and prosthetic training (first encounter).

APTA is putting final touches on a calculator that will help members get a more precise estimate of the potential impact of the new rule, given their particular practice circumstances. The calculator is set to be released early next week.

"While it's clear that the CMS reversal from its proposed rule will result in drops to some of the codes used frequently by PTs, the bottom line effects of the new rule will vary depending on case mix and billing patterns," said Carmen Elliott, MS, APTA vice president of payment and practice management. "The overall 2% drop estimated by CMS doesn't take that variation into account. There will be some providers who will see reductions in payment of anywhere from 1% to 2%, but we anticipate that others could see overall increases."

How we got here

"This is frustrating, both in terms of the payment reductions as well as the way in which CMS surprised stakeholders with its reversal from the proposed rule. The cuts will be hard on some physical therapist practices," said APTA Vice President of Government Affairs Justin Elliott (no relation to Carmen Elliott). "It’s also true that the initial projections, long before the initial proposed rule, were far more bleak."

Justin Elliott is referring to the way CMS handles codes that it believes may be "misvalued"—often read as a euphemism for "overpaid." It's a complex, multi-year process overseen by the AMA's Relative Value Scale Update Committee (known as RUC) Health Care Professions Advisory Committee (HCPAC). The RUC HCPAC engages in dialogue with stakeholder groups, including APTA, thenconducts surveys of individual providers before issuing recommendations on how codes should be valued. The survey of PTs was conducted in October 2016.

When the process began in early 2016, indications were that overall, CPT codes commonly associated with physical therapy could see a double-digit cut. APTA staff and CPT advisors worked with the RUC HCPAC to move recommendations away from that potentially catastrophic change, and survey responses from PTs helped to reinforce the notion that current code values were not far off—at least in terms of averages across all codes.

Given where things seemed to be headed in 2016, the release of the final rule, though far less than ideal, does amount to a win—of sorts. And context is important: physical therapy wasn't alone in professions with codes on the CMS chopping block, with otolaryngologists, anesthesiologists, nurse anesthetists, urologists, and vascular surgeons all seeing overall code reductions between 1% and 2%, according to CMS estimates.

What's next?

According to Justin Elliott, "APTA is exploring all avenues to advocate against these cuts before they take effect on January 1, 2018."  He added "All options are on the table and every path is being evaluated for our response to CMS’s final rule."

Those advocacy efforts will require APTA, PPS,and its members to have a solid understanding of just how the CPT changes impact them during the coming year, according to Carmen Elliott, who said that the key to getting insight on the effects is for PTs to continue to code and document appropriately while they evaluate their case mixes and other factors. "The only way to truly understand the effects of these changes is for our coding efforts to remain consistent," she said.

At the same time, APTA President Sharon Dunn, PT, PhD, thinks that there's an even bigger picture to be considered.

"We can't yet say what the overall impact will be as a result of these code value changes, and we know that the effects will vary from provider to provider," Dunn said. "What we can say for sure is that these kinds of adjustments and recalculations truly underscore the need for health care providers to move toward value-based payment models that truly reflect the value of physical therapist services triple aim—improving the experience of care, improving population health, and reducing costs. The CPT code structure has 1 foot firmly planted in the outmoded fee-for-service world. That needs to change.”

PPS President Sandra Norby, PT, DPT is looking at both the trees and the forest. 

"Each of our members will be impacted differently by this final rule; however, we need to recognize and prepare to adjust to the reality of healthcare reimbursement that is moving from fee-for-service to value-based, patient-centered payment models.  As we move forward we will continue to advocate for the profession, private practitioners, and work to prepare our membership for this transition.”