Industry Insights

Medicare’s 2014 Physician Fee Schedule Compared to 2013

January 2014

On November 27, 2013, the Centers for Medicare & Medicaid Services (CMS) released the final 2014 Medicare Physician Fee Schedule (MPFS) and its updated conversion factor. Under current law, providers paid under the MPFS would face significant cuts to reimbursement rates. Within the law governing reimbursement rates, a mechanism known as the Sustainable Growth Rate (SGR) automatically would have resulted in a significant decrease in Medicare reimbursement rates over the past several years. However, Congress has intervened each year to override the SGR so rates have been generally flat each subsequent year. The 2014 fee schedule update was no different.

On December 18, 2013, Congress passed a budget deal that resulted in a temporary pay fix through April 1, 2014. The pay fix results in a 0.5 percent update to the conversion factor. Absent the pay fix, the Medicare Part B conversion factor would have been cut by approximately 20 percent, but with the 0.5 percent update the conversion factor is set at $35.8228 through March 31, 2014. By April 1, Congress aims to develop a permanent fix to the flawed SGR—in fact, the SGR Repeal and Medicare Beneficiary Access Act of 2013 has passed the Senate Finance Committee, while a similar bill passed the House Ways and Means Committee; both are designed to do just that.

Fee schedule revisions involve more than an annual change to the conversion factor. They also involve changes in the three categories that make up total Relative Value Unit (RVU) for each CPT code:  physician work, practice expense and malpractice risk. If the conversion factor was allowed to plummet to $27.2006, virtually all physician fees would decrease. But with the temporary patch to the conversion factor, it might be unclear what changes are on the horizon for Medicare reimbursement for “bread and butter” services. The impact on revenue will depend on which CPT codes are used the most—which is probably a function of a physician’s specialty and, to some extent, his or her location.

There isn’t room to list the estimated impact to every CPT code in this article, but the following tables explain how some of the most commonly used codes will be affected from 2013 to 2014, using the patched conversion factor of $35.8228.

Winners & Losers

Using the updated conversion factor, many of the listed codes actually receive a boost when calculated using national values—that is, without regard to Geographic Practice Cost Indices (GPCI). From a dollar standpoint, the biggest winner on this list is 76830 – Transvaginal Ultrasound, the National Value for which is increasing from $76.21 to $127.89, a 67.8 percent increase. Interestingly, this service experienced a $51.73 decrease last year, so this would appear to be a correction. Other examples of procedures receiving boosts are 52601 – Prostatectomy, which rose 3.4 percent from $831.18 to $859.03; 27236 – Treat Thigh Fracture, which increased 1.6 percent from $1,208.50 to $1,227.29; 93307 – Tte w/o Doppler Complete, which increased 15.9 percent from $114.32 to $132.54; and 93320 – Doppler Echo Exam Heart, which increased 22 percent from $44.91 to $54.81. Other broad areas receiving at least slight increases include initial and subsequent hospital care, emergency department visits and domiciliary/rest home care for new and established patients.

Examples of procedures with significant dollar amount reductions include 27447 – Total Knee Arthroplasty, which took a 10.2 percent hit, decreasing $158.59 from $1,552.81 to $1,394.22; 27130 – Total Hip Arthroplasty, which decreased 4.1 percent from $1,454.48 to $1,394.94; 52332 – Cystoscopy and Treatment, which decreased 5.1 percent from $512.73 to $486.47; 45378 – Diagnostic Colonoscopy, which decreased 3.8 percent from $410.66 to $395.13; 31628 – Bronchoscopy/Lung, which dropped 2.8 percent from $392.29 to $381.15; and 93000 – Electrocardiogram Complete, which fell 8.3 percent from $18.37 to $16.84.

Strictly from an RVU point of view, the evaluation and management services getting a boost appear to be ones that could provide incentive to reduce admissions—Initial Observation Care, for example. Also receiving an RVU increase are Dopplers. This may be designed to reduce the cost of care that occurs when a disease has run its course undetected.

What does this mean to physician practices? As previously mentioned, this depends very much on the physician’s specialty, service mix and, to some degree, payor mix. If the physician’s practice demographics don’t include many Medicare patients, there could be less impact. However, it is common practice for commercial and managed care plans to key their reimbursement rates off of Medicare’s RVU system, so the impact could be more significant than it might seem at first blush. The only way to know for sure is to run the numbers.

If you need assistance in projecting the impact of the 2014 MPFS on your practice, please contact your BKD advisor.

* National Values

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