Medicare Reimbursement for Physician Services: The Current Status of Local Payment Policy

Abstract

Keeping up with the technical and academic advances in medicine of the past 2 decades has made studying the US government's physician reimbursement system a low priority for most physicians. However, in the current environment of declining physician reimbursement and increasing frequency of compliance audits by Medicare, it is important for all physicians to have a basic understanding of the Medicare payment process. A major component of the physician payment system occurs at the local level. Through local coverage determinations, state Medicare contractors make more than 90% of all Medicare coverage decisions. Federal law requires Medicare contractors to seek physician input into their coverage decision process through contractor advisory committees, and through these committees, physicians can have significant influence over the coverage decision process. Once local contractors have made their coverage decisions, the covered indications for a procedure or treatment are published for the provider community. At that point, it becomes the responsibility of physicians to know the covered indications for certain services, because contractors will deny claims for services that are not linked to covered indications. This review focuses on the basics of the local Medicare payment process, with emphasis on the development of local coverage decisions by contractors. This understanding will allow physicians to positively influence the local reimbursement process.