Provisions in the 2016 Medicare physician fee schedule that will affect surgical practice: An overview

New payment policy and coding and reimbursement changes set forth in the 2016 Medicare physician fee schedule (MPFS) final rule took effect January 1. The MPFS, which the Centers for Medicare & Medicaid Services (CMS) updates annually, lists payment rates for Medicare Part B services and introduces and updates a number of other policies affecting physician reimbursement and quality measurement. On September 8, 2015, the American College of Surgeons (ACS) submitted comments related to the MPFS proposed rule. These comments provided feedback to CMS on a number of policies outlined in the final rule released October 30, 2015. Although the MPFS final rule introduces important payment and policy changes that affect all physicians, this article focuses on updates that are particularly relevant to general surgery and its related specialties.

Conversion factor and other payment updates

The conversion factor for 2016 is $35.8279—slightly less than the 2015 conversion factor of $35.9335. The 2016 conversion factor reflects a 0.5 percent upward adjustment specified under the Medicare Access and CHIP (Children’s Health Insurance Program) Reauthorization Act (MACRA), a budget-neutrality adjustment of –0.02 percent, and a –0.77 percent target recapture amount.

The target recapture amount was specified in the Protecting Access to Medicare Act of 2014, under which CMS established an annual target reduction in MPFS spending resulting from adjustments to misvalued American Medical Association (AMA) Current Procedural Terminology (CPT)* codes for 2017 to 2020. The Achieving a Better Life Experience Act of 2014 accelerated the application of the MPFS expenditure targets and set a 1 percent reduction target for 2016. Consequently, if the estimated net reductions in MPFS expenditures resulting from adjustments to misvalued CPT codes in 2016 fall short of the 1 percent target, then cuts equal to the shortfall amount must be made to all MPFS services. In the final rule, CMS adopted a methodology to implement this provision, including how net reductions in misvalued codes are calculated. Based on this methodology, CMS identified misvalued services that achieve a 0.23 percent in net reductions; because this drop does not meet the targeted 1 percent reduction, CMS is required to make a 0.77 percent reduction to all MPFS services in 2016.

Global codes

In 2014, CMS finalized a policy to transition all 10- and 90-day global codes to 0-day global codes; however, MACRA prohibited CMS from implementing that change. Nonetheless, MACRA does require that CMS collect data needed to value surgical services, such as the number and level of visits furnished during the global period, beginning January 1, 2017, and then use those data to revalue surgical services in 2019.

In its comments on the proposed rule, the ACS provided feedback to CMS about this policy, including recommendations on the types of data the agency could collect and how to acquire them, suggestions on how to value the individual components of the global surgical package, and other items and services omitted at present from the global surgical package but that could be added. CMS acknowledged the College’s suggestions, but the final rule provides no information regarding how the agency intends to collect data or revalue surgical services. The College will continue to work with CMS to encourage the agency to revise surgical codes in a way that is fair and accurate.

Lower gastrointestinal endoscopy services

In 2015, the AMA CPT Editorial Panel revised the lower gastrointestinal (GI) endoscopy code set, which required review of physician work values within the MPFS. The AMA/Specialty Society Relative Value Scale Update Committee (RUC) subsequently provided recommendations to CMS for valuing these services. For 2016, CMS finalized implementation of the new and revised CPT codes and finalized the RUC-recommended physician work relative value units (RVUs) for the base colonoscopy code (45378), resulting in a –9 percent change from 2015. CMS adjusted the value of the other colonoscopy codes using that RVU. (See related article.)

CMS considered the ACS’ comments and ultimately finalized payment rates more closely tied to the values that the RUC recommended. In its comments to CMS, the College opposed both the CMS-proposed RVU and RUC-recommended RVU for the base colonoscopy code. The ACS urged CMS to accept the RVU recommended by the specialties and then apply appropriate increments to the family codes. The College’s position was corroborated with a detailed discussion of colonoscopy as a lifesaving procedure and the subsequent effect of net savings for Medicare, the value of colonoscopy to patients and the health care system, and the importance of maintaining quality of care and Medicare beneficiary access to care.

Advance care planning

Beginning this year, CMS recognizes and makes a separate payment for advance care planning (ACP) services, specifically CPT code 99497 (ACP including the explanation and discussion of advance directives such as standard forms, by the physician or other qualified health professional; first 30 minutes, face-to-face with the patient, family members, and/or surrogate) and CPT code 99498 (ACP; each additional 30 minutes). CPT guidelines assert that ACP may be billed on the same day or a different day as other evaluation and management services, as well as within global surgery services. CPT guidelines prohibit reporting ACP on the same date as select critical care services. For more information on billing for ACP services, refer to CPT coding guidance in the CPT 2016 manual. It is important to note that ACP services are, by definition, voluntary, and Medicare beneficiaries may decline to receive them.

In its comments to CMS, the College supported separate payment for ACP services. The College noted that general surgeons typically engage in these types of discussions with patients before an operation and urged CMS to allow surgeons to use these codes in addition to the global surgical codes. CMS proposed and finalized the RUC-recommended values for these codes.

“Incident to” billing

To ensure that “incident to” services furnished to a Medicare beneficiary are consistent with the requirement that physicians personally furnish the services for which they are billing, CMS clarifies that physicians who bill for “incident to” services must also provide the care or directly supervise its delivery. For example, if the physician supervising the “incident to” service is someone other than the physician who is treating the patient more broadly, only the supervising physician may bill Medicare for “incident to” services.

“Incident to” services are services or supplies furnished to a patient as an integral, albeit incidental, part of a physician’s professional services in the course of diagnosis or treatment of an injury or illness. “Incident to” services can only be provided in the physician’s office and are billed with the physician’s National Provider Identifier.

Nonphysician practitioners (NPPs) often render care that is “incident to” procedures and services that surgeons provide. To bill for the NPP, the surgeon must have seen the patient first at a previous encounter and established the plan of care.

Changes to the Stark Law

CMS finalized two new exceptions to the physician self-referral statute (Stark Law). The first allows hospitals, federally qualified health centers, and rural health clinics to pay a physician to assist with the employment of an NPP. Without this exception, payments from these hospitals to a physician to assist with a physician’s employment of NPPs would violate the Stark Law. The exception applies to payments to physicians who employ NPPs to furnish only primary care services, not specialty care services. This new exception is intended to recognize the increasing role that NPPs play in meeting primary care needs and to expand access to primary care services, especially in rural areas.

In its comments on the proposed rule, the ACS advocated for extending this exception to arrangements in which hospitals compensate physicians who employ NPPs who provide specialty care (not just primary care). Because NPPs do not have a specialty designation, it is sometimes unclear whether they are providing primary care, specialty care, or primary care services related to physician-provided specialty care. Most importantly, however, the College said the physician self-referral statute should not be used to support one specialty over another. In the final rule, CMS responded that the agency finds no compelling need to include other specialties in this exception.

The second new Stark Law exception protects timeshare agreements, under which a hospital or local physician practice may, on a limited basis, ask a specialist from a neighboring community to provide specialty services in a space owned by the hospital or practice. Without this new exception, such arrangements violate the Stark Law. The ACS supported this exception.


The Physician Quality Reporting System (PQRS) is a Medicare quality pay-for-reporting program that originally provided payment incentives to eligible professionals (EPs) who voluntarily reported data on quality measures for covered services furnished in a specified reporting period. In 2015, however, PQRS transitioned to a program that penalizes EPs for nonparticipation. Lack of participation in PQRS in 2016 will result in a 2 percent payment penalty that will be applied in 2018.

EPs can participate in the PQRS program by reporting on individual measures, or, alternatively, on measures groups. Similar to 2015, EPs can report measures for the program through claims, a traditional registry, electronic health records (EHRs), or a qualified clinical data registry (QCDR). CMS finalized several key changes for PQRS in 2016, described as follows.

Individual measure reporting

For individual measure reporting via the claims- and registry-based options, CMS continues to require the reporting of nine measures covering at least three National Quality Strategy (NQS) domains for 50 percent of the applicable Medicare Part B fee-for-service (FFS) patients in order to avoid a penalty. Of the measures reported, if the EP sees at least one Medicare patient in a face-to-face encounter, the EP must also report on at least one measure contained in the cross-cutting measures set specified by CMS. The EHR-based reporting mechanism remains unchanged from 2015, and EPs may continue to report nine measures covering three NQS domains. The ACS Surgeon Specific Registry (SSR) was approved for PQRS reporting under the individual measure reporting option for 2015 and will be available in 2016 pending CMS approval.

Measures group reporting

A PQRS measures group allows EPs to report on a set of related measures determined by CMS. Measures groups can only be reported through a CMS-approved traditional registry. The reporting requirement for the measures group option for 2016 remains the same as 2015. EPs must report one measures group for 20 patients—the majority (at least 11) of whom must be Medicare FFS patients. One PQRS measures group is relevant to general surgeons: the General Surgery Measures Group (see Table 1).

Table 1. 2015 PQRS General Surgery Measures Group

Measure number (NQF/PQRS)

Measure title

NQS domain


Documentation of Current Medications in the Medical Record Patient Safety


Preventive Care and Screening: Tobacco Use: Screening and Cessation Intervention Community/Population Health


Anastomotic Leak Intervention Patient Safety


Unplanned Reoperation within the 30 Day Postoperative Period Patient Safety


Unplanned Hospital Readmission within 30 Days of Principal Procedure Effective Clinical Care


Surgical Site Infection Effective Clinical Care


Patient-Centered Surgical Risk Assessment and Communication Person and Caregiver-Centered Experience and Outcomes

The College website features a user-friendly interactive flowchart that provides an overview of the Medicare quality programs.


In addition to the claims, EHR, and registry-based reporting options, EPs may report to PQRS with the QCDR reporting option. A QCDR is a CMS-approved entity that collects medical and/or clinical data to track patients and diseases for purposes of improving quality of care. A QCDR differs from a traditional PQRS registry in several ways. This option was created to provide an opportunity for EPs to simultaneously use existing high-quality clinical registries for quality improvement to meet PQRS reporting requirements. QCDRs can offer more flexibility for participating in PQRS than other reporting options, allowing EPs to report on a variety of measure types, including those from the Consumer Assessment of Healthcare Providers and Systems Clinician and Group Survey (CG-CAHPS); measures endorsed by the National Quality Forum (NQF); current PQRS measures; measures used by medical boards or specialty societies; and measures used in regional quality collaboratives.

QCDRs must have the capacity to track outcomes, possess benchmarking capabilities, provide timely feedback reports at least four times a year, risk adjust when appropriate, and submit quality measures data on multiple payors (not just Medicare). QCDRs also are required to publicly report performance results, excluding measures in their first year of reporting. New for 2016, QCDRs will have the ability to submit quality measures for group practices as well as individual EPs.

For the 2016 QCDR reporting requirements, groups and individual EPs must report on nine measures selected by the QCDR, including at least two outcome measures that cover at least three NQS domains for 50 percent of applicable patients to which each measure applies (or, if two outcome measures are not available, report on at least one outcome measure and at least one of the following types of measures: resource use, patient experience of care, efficiency/appropriate use, or patient safety).

The Metabolic and Bariatric Surgery Accreditation and Quality Improvement Program (MBSAQIP) and the SSR (trauma measures) were both QCDRs in 2015 and will be available in 2016 pending CMS approval. QCDRs, MBSAQIP, and SSR participation give participants the option of reporting their data on quality measures to satisfy PQRS requirements.

Physician Compare

The Physician Compare website is designed to help patients locate and obtain information about Medicare-participating physicians. As previously finalized by CMS, the following information will be reported on Physician Compare this year: all group-level reporting mechanisms for groups of two or more; 2015 CAHPS measures for all groups of two or more who collect data via the CMS-specified certified CAHPS vendor; four 2015 PQRS measures reported by individual EPs in support of the Million Hearts Campaign; 2015 PQRS measures reported by individual EPs collected via registry, EHR, or claims; 2015 PQRS data and non-PQRS data collected from QCDRs; and all measures reported by the Medicare Shared Savings Program Accountable Care Organizations (ACOs). CMS notes that it will only post measures that it determines to be statistically valid and reliable, have a minimum sample size of 20 patients, have undergone consumer testing, and have been in the PQRS program for more than a year.

CMS also finalized its proposal to post Value Modifier (VM) cost and quality tiering data, including a notation of the payment adjustment information, an indication if the EP or group was eligible but did not report measures, and utilization data in a downloadable file in 2017 based on 2016 data. CMS chose not to finalize posting a green check mark on Physician Compare profile pages to indicate who received an upward adjustment under the VM. Also finalized for 2017 based on 2016 data, CMS will assign a five-star rating based on PQRS performance rates.

In its comments on the proposed rule, the College expressed concern that the agency’s rapid timeline for releasing these data without adequate testing could mislead and confuse the public and even inappropriately harm the reputation of physicians. CMS responded that it is using an incremental approach, and the policies finalized for 2016 are simply the next step.

Value-based payment modifier

The Affordable Care Act requires CMS to apply a value-based payment modifier to physician payments. The modifier started with physicians in groups of 100 or more in 2015 based on 2013 performance, groups of 10 or more in 2016 based on 2014 performance, and extends to all physicians and groups of two or more in 2017 based on 2015 performance. Application of the value-based payment modifier will result in Medicare payments to physicians that are differentially based on the cost and quality of care they provide.

2018 payment adjustment

In 2018, the value-based payment modifier will apply to all groups and individual physicians based on their quality and cost data from 2016. Similarly to previous years, in 2018 CMS will separate physicians into categories based on whether they successfully participate in PQRS. All physicians will be subject to quality tiering based on their performance with respect to quality and cost measures. Physicians in groups of two to nine EPs and solo practitioners have 2 percent of their payment at risk and could receive an upward, neutral, or downward adjustment under the quality tiering methodology. Physicians in groups of 10 or more EPs have 4 percent of their payment at risk and could receive an upward, neutral, or downward adjustment.

New for the 2018 adjustment, the value-based payment modifier will also apply to nonphysician EPs who bill under a group’s taxpayer identification number (TIN) based on the TIN performance. Nonphysician EPs have 2 percent of their payment at risk and could receive an upward or neutral adjustment but will be held harmless from a downward adjustment under the quality tiering methodology.

CMS increased the number of attributed episodes of the Medicare spending per beneficiary (MSPB) measure in the cost composite of the value-based payment modifier to increase its reliability. CMS proposed increasing the minimum number of episodes for inclusion of the MSPB measure in the cost composite of the value-based payment modifier from 20 to 100. However, as a result of public comments and additional testing, CMS decided that at least 125 attributed episodes will increase the reliability of the measure to be applied to the 2017 payment adjustment, based on 2015 data.

The ACS encourages surgeons to review their Quality and Resource Use Reports (QRURs), which are available for solo practitioners and group practices. QRURs provide information about the resources used and the quality of care given to Medicare FFS patients. More information about the 2014 QRUR, the most recent year available, can be found online. Instructions on how to obtain the report are available on the CMS website.

*All specific references to CPT codes and descriptions are © 2015 American Medical Association. All rights reserved. CPT and CodeManager are registered trademarks of the American Medical Association.

Cross-cutting measures are those that CMS considers to be broadly applicable to all physician specialties for those EPs who have at least one face-to-face Medicare encounter. For a list of the 2015 PQRS cross-cutting measures, visit Four additional measures were finalized for 2016 and can be found on Table 29 of the Medicare Program, Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2016 Final Rule,

Non-EPs who are subject to the VM include physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists.


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