How CMS Is Changing Physician Payments in 2021 – Update

Thoughtware Alert Aug 06, 2020
Wealth advisor assisting in the health care field.

On August 4, 2020, CMS posted the proposed Medicare Physician Fee Schedule (PFS) for calendar-year (CY) 2021. The proposed 2021 PFS changes include documentation and code selection updates, updates to work RVU (wRVU) values, an update to the conversion factor, extension of reimbursement for telehealth services, quality reporting factors related to Accountable Care Organizations (ACO), and various other specialty-specific updates. This article will focus on the wRVU and conversion factor updates. For more information related to the proposed rule, see the CMS fact sheet.

Conversion Factor Update

CMS made good on its promise in the final 2020 PFS to increase its reimbursement to primary care practitioners through an increase in the wRVU credit assignments to certain evaluation and management codes. Many of the updates in the proposed PFS focus on increasing wRVU value for certain services to better reflect their value and time involvement. However, as the PFS is required to be budget neutral, the effect of CMS’ wide-reaching increase in wRVUs is a mandatory offset in the overall per-unit reimbursement rate (the conversion factor) for RVU payments. This amount has generally been flat over the last 10 years, usually ranging from $34 to $36.

The specific proposed change in the draft rule is from $36.09 in CY 2020 to $32.26 in CY 2021, a decrease of $3.83 per RVU. Similarly, the conversion factor for anesthesia services is decreasing from $22.20 to $19.96, a decrease of $2.24.

Proposed Code Changes & wRVU Increases

CMS announced its plan to remove code 99201 from the new patient visit code range and increase the wRVU values for the remaining new patient and established patient visit codes as outlined in the tables below:

CPT Code chart 1

CPT Code chart 2

The gross average increase in wRVU values is 8 percent, or 0.17 wRVUs, for the set of new patient codes and 28 percent, or 0.33 wRVUs, for the set established patient visit codes.

In addition to the above changes to E&M codes for new and established patient visits, CMS proposed increases to other wRVU values that encompass similar characteristics or have historically been set in relation to these codes. Specialties of specific note in this regard include obstetrics, nephrology, psychiatry, internal medicine, gerontology, emergency medicine, therapy services, and psychotherapy. See Attachment 1 for a detailed chart of the specific affected CPT codes.

Telehealth-Approved Services

As part of its response to the COVID-19 crisis, CMS allowed certain services to be delivered by telehealth and still paid. The proposed rule for CY 2021 includes a continuance of payments for certain approved telehealth services. Some of these payments are already approved on a permanent basis, while others will last at least through CY 2021 and the COVID-19 crisis.

Quality Payment Programs

As is typical, CMS is proposing various changes to the quality reporting, which will affect federally qualified health centers, ACOs, and other involved organizations. These changes focus on MIPS quality measurements, payments, and other requirements. These changes are generally beyond the scope of this alert, but as usual, operations and quality leaders will want to review specialty-specific changes in measures, reporting, and similar areas. For more information related to these changes, see CMS’ Quality Payment Program fact sheet.

Effect of PFS Change

For independent groups, the proposed PFS changes will have a generally positive effect if there’s a high use of affected codes per the above chart and Attachment 1. For all other independent groups, such as most surgical specialties, the net impact will be unfavorable due to the approximate 10 percent reimbursement reduction associated with the general change in the conversion factor.

For hospital employers of physicians, the overall financial effect is more complicated. We know that many employment and other service arrangements use the PFS and its wRVU assignments as a key point of reference for compensation related to personal performance of services. This means that an increase in wRVU values for these codes also will have a direct reimbursement effect for Medicare reimbursement, and it will have a secondary and wider effect on contractual compensation for physician services paid in reference to the current-year fee schedule.

As it’s often the case that contractual services compensation amounts paid on a per-wRVU basis exceed the conversion factor, an increase in wRVU values may have the effect of increasing provider subsidies. The effect of these changes should be analyzed to maintain compliance with fair market value and should likewise be evaluated for commercial reasonableness, as total compensation may already be stated at “market” in reference to prior-year fee schedules, which have been largely stable over the last several years.

The overall financial effect will therefore depend on both the CY 2021 PFS and your organization’s compensation structure. To promptly take action as necessary, we recommend analyzing work effort and your compensation arrangement to evaluate various scenarios. With a decreasing conversion factor, many providers, such as family medicine, will experience an increase in compensation while the practice sees a smaller increase or even slight decrease in reimbursement.

CMS often makes significant changes between draft and final rules. However, we recommend careful analysis, as the final rule generally is posted 60 days before it takes effect, on November 1 of each year typically. In this year’s draft rule, Medicare is signaling that it may only have an opportunity to meet the mandatory minimum of 30 days’ notice to a final rule. In either event, if contractual action is needed to manage the effect, beginning analysis 30 or 60 days prior to the rule taking effect may not be enough time to take appropriate actions.

We’ll continue to monitor this situation and send updates as they become available. We are hosting a webinar to review the proposed changes on August 10—register to attend the webinar live for CPE credit, or watch the archived video afterward. Subscribe to BKD Thoughtware® to receive notifications and get the most up-to-date information.

If you have questions or would like to speak to one of our physician industry specialists, reach out to your BKD Trusted Advisor™ or use the Contact Us form below.

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