As required by law, at least every three years the Centers for Medicare and Medicaid Services (CMS) adjusts payments under the Medicare physician fee schedule to reflect local differences in practice costs. In the proposed 2017 Medicare physician fee schedule, CMS made nationwide updates to the geographic practice cost indices (GPCI) based on new wage, rent and malpractice expense data.

Unfortunately, according to CMS, the malpractice and practice expense GPCIs went down in nearly every region of California, which would result in a 0.48 percent GPCI payment reduction in all but a few regions of California. The California Medical Association (CMA) is urging CMS to review the data for accuracy, as physician office expenses in California have increased in recent years relative to the rest of the nation.

"California’s real estate market has experienced a remarkable recovery in most regions of the state over the last several years," CMA wrote in comments submitted to CMS last week. "We find it unfathomable that California physicians would be taking a pay cut in 2017 because practice expenses decreased relative to the rest of the nation."

CMA also urged CMS to reconsider the inappropriate weighting of the rent expense category, which was given only an 8 percent weight in the practice expense GPCI. "Office 'rent' is one of the largest and most expensive cost components for physicians, and we would argue that it should be given a much larger weight to more accurately reflect its impact on physician practice expenses," CMA wrote in its comments.

The proposed Medicare payment rule also begins to implement the California "GPCI fix," which will overhaul California’s outdated geographic payment localities. It transitions the payment localities to Metropolitan Statistical Areas, which is consistent with the way Medicare pays hospitals. The localities will be updated annually. This long-overdue fix updating California’s Medicare physician payment regions will raise payment levels for 14 urban California counties misclassified as rural, while holding the remaining rural counties permanently harmless from cuts after 2017. The transition to the new localities starts next year, with the higher locality payments being phased in over a six-year period starting in 2017.

Unfortunately, because of the overall GPCI practice expense and malpractice expense reductions, most California physicians will not see payment increases in 2017. However, without the CMA-led locality change, California physicians would be receiving an even larger payment cut. 

CMA has reviewed all of the implementation calculations and provided some minor corrections to ensure that the GPCI fix is implemented accurately. CMA will continue to work closely with CMS on the transition to the new California payment localities.

For more details, including a corrected payment impact chart by locality, see CMA's comments.

Contact: Elizabeth McNeil, (800) 786-4262 or emcneil@cmadocs.org.