Medicare Mailing eRx Pay-Cut Letters to Physicians

October 18, 2011 — Physicians participating in Medicare should read their mail carefully over the next few weeks. There could be a letter warning them about a possible 1% pay cut next year because of their failure to meet the program’s e-prescribing requirements, the Centers for Medicare and Medicaid Services (CMS) announced today.

Anyone who opens such a letter may have enough time to beat a November 1 deadline to apply for a hardship exemption from the penalty, dubbed a "payment adjustment" by CMS.

Companies who process and pay Medicare claims on behalf of CMS began mailing out the letters Monday, said Michael Rapp, MD, JD, director of the Quality Measurement and Health Assessment Group in the CMS Office of Clinical Standards and Quality, during a conference call with providers today. The agency had intended to inform physicians about the e-prescribing penalty through a so-called Payment Adjustment Feedback Report that they could access at the CMS Web site, but the reports will not be ready to post until late November or early December. So CMS resorted to snail mail to get the word out, said Dr. Rapp.

The mailing should be completed by October 25, just days before the November 1 deadline to apply for an exemption from the penalty.

In addition, in the coming weeks Medicare help-desk personnel will telephone physicians who unsuccessfully attempted to comply with the eRx requirements to give them a head’s up about the penalty.

CMS will inform physicians only about the possibility of a penalty because the warning is based on a preliminary as opposed to a final analysis of claims data, said Molly MacHarris, a policy analyst in Dr. Rapp’s department at CMS, during the conference call.

Penalties Increase Over Time

In 2009, Medicare began paying bonuses to physicians and other clinicians who qualified as "successful" e-prescribers — that is, they reported electronically transmitting a certain number of prescriptions from their computer to a pharmacy computer. In 2011 and 2012, the bonus equals 1% of a clinician’s fee-for-service (FFS) charges. It drops to 0.5% in 2013, the last year of the incentive program.

Meanwhile, physicians who have not satisfied the complicated rules for e-prescribing this year face a 1% reduction in their FFS charges in 2012. The penalty increases to 1.5% in 2013 and 2% in 2014.

Not every physician is subject to the eRx penalty next year. Someone who was not licensed as of June 30, 2011, for example, need not do anything. Physicians who are subject to the penalty can apply for 1 of 6 exemptions, which cover situations such as practicing in a rural area that lacks high-speed Internet access. They can submit their exemption application at a CMS Web site called the Quality Reporting Communication Support Page. Medical groups participating in Medicare's Physician Quality Reporting System under the Group Practice Reporting Option must apply for a hardship exemption in writing. Either way, the deadline is November 1.

More information on the e-prescribing incentive program, and how to obtain an exemption, is available on the CMS Web site.

Review of California’s Department of Health Care Services Fiscal Year 2007 Payment Error Rate Measurement Universes

Review of California's Department of Health Care Services Fiscal Year 2007 Payment Error Rate Measurement Universes

Executive Summary

California's Department of Health Care Services (DHCS) was unable to reconcile the fiscal year (FY) 2007 Payment Error Rate Measurement (PERM) universes to the quarterly Forms CMS-64 and CMS-21. CMS developed the PERM program to comply with Federal requirements for measuring improper payments made in the fee-for-service (FFS), managed care, and eligibility components of Medicaid and SCHIP in FY 2007 and future years. The Office of Management and Budget requires CMS to include the PERM results in its annual accountability report.

We could not determine whether DHCS's managed care and FFS universes were complete and accurate. We were unable to reconcile the managed care and FFS universes to the Forms �CMS-64 and CMS-21.

CMS Regional Office officials stated that they had performed a reconciliation of the Forms CMS-64 and CMS-21 to the accounting records that DHCS used to support the Forms CMS-64 and CMS-21. However, those accounting records did not include the detailed claim information. DHCS officials stated that they could not reconcile the Forms CMS-64 and CMS-21 to the managed care or FFS universes, and the California State Auditor found that the Form CMS-64 was not traceable to individual claims.

We recommended that CMS (1) instruct DHCS to reconcile its PERM universes to the Forms CMS-64 and CMS-21 it submits to CMS and ensure that its universes are complete and accurate, (2) instruct DHCS to implement a payment system that produces information that is readily available, and (3) include steps in the California Financial Management Review to annually reconcile various expenditures on the Forms CMS-64 and CMS-21 to detailed claim information.

In its comments on our draft report, CMS did not agree to implement our first two recommendations and did not specifically address our third recommendation. Without reconciling the PERM universe to the Forms CMS-64 and CMS-21, CMS is unable to show that it has complied with the requirements to produce a statistically valid estimate of improper payments.

Complete Report

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Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.

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