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.