On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act 2021 (Act) was signed into law. The Act modified the Calendar Year 2021 Medicare Physician Fee Schedule (MPFS). There are several changes from the Act and the 2021 MPFS that will have a significant impact for hospital systems that employ physicians and compensate them on a productivity model. PYA has identified the “Top 10” takeaways and recommends that healthcare providers focus on these as they respond to the new rule.
- The American Medical Association (AMA) has released, and CMS has adopted, guideline changes to the Office and Other Outpatient Services Evaluation and Management (O/O E/M) codes (99202 through 99215), which are effective January 1, 2021.
- Work relative value units (wRVUs) for those same O/O E/M services and certain other relevant services are increasing January 1, 2021. For example, the wRVU values for E/M codes 99202 through 99205 (new office visits) will increase by a range of 7% to 13%. Perhaps more notably, the wRVU values for E/M codes 99212 through 99215 (established office visits) will increase by a range of 28% to 46%.
- The implementation of an add-on code (G2211) which had been proposed was delayed by the Act until calendar year 2024. G2211 would have been billed to Medicare along with the O/O E/M codes and will provide an incremental amount of wRVU credit (0.33 wRVUs) when a provider is serving as the continuing focal point in the management of a patient’s single, serious condition or a complex condition.
- These MPFS changes cumulatively result in overall positive relative value units for which CMS, by law, created an offsetting adjustment. As finalized, the Medicare conversion factor will decrease by 3.3% (from $36.0896 in 2020 to $34.8931 in 2021) to assist with budget neutrality associated with the wRVU and other fee schedule changes. This conversion factor decrease will impact all codes in the MPFS and all specialties. Unless commercial payer contracts are tied to the current fee schedule, there are no known changes to the fees or rates for those payers at this time. State Medicaid payer reimbursement models linked to the MPFS will be affected.
- Similarly, the anesthesia conversion factor is being reduced by 2.9% from $22.20 to $21.56. However, based on CMS estimates the combined reimbursement change to anesthesia is expected to decline by 1%.
- No significant code utilization changes related to the O/O E/M codes are anticipated, therefore physicians on a compensation per wRVU productivity model may earn more compensation, and employers may have less income/greater losses absent any mitigating changes to physician compensation agreements. This will result when the employer pays more in incremental compensation to the physician than it receives in incremental reimbursement.
- Without any physician compensation adjustments, physicians who primarily bill E/M codes, and who are on a wRVU productivity model with a wRVU threshold, may meet that threshold faster, thus earning additional compensation for which they were ineligible for in 2020. Accordingly, some hospitals are considering an increase in the wRVU threshold associated with current physician compensation formulas.
- If 2021 wRVUs increase more than 2021 physician compensation, physicians may experience a decrease in compensation per wRVU compared to prior periods and current physician compensation benchmark data. For this reason, some hospitals are considering a decrease in the compensation per wRVU conversion factor to mitigate the 2021 MPFS’s impact on wRVU physician productivity compensation models.
- The full impact of these changes may not be seen in physician compensation and productivity benchmark data for potentially two years (from January 2021), and may be difficult to pinpoint with the simultaneous impact of COVID-19. A physician compensation benchmark survey available in 2022 is generally based on 2021 data. For this reason and others, where contractually permissible, certain hospitals are considering the use of wRVU values in the 2020 MPFS to compensate physicians on a wRVU productivity compensation model in 2021.
- Using 2020 physician compensation benchmark survey data (based on 2019 responses) without adjustment or consideration of the MPFS impact in 2021 may lead to compensation that is above fair market value and is commercially unreasonable. An assessment of fair market value and commercially reasonable compensation will depend on several different factors, including but not limited to, payer mix, local market dynamics, the percentage of E/M services to all services rendered by a physician, and many others.
Now is the time to think about what these potential changes to the MPFS may mean for the compensation of employed physicians. In doing so, your organization can strategically plan for the financial impact, and not be surprised by contractual or other changes that may need to be occurring now to remain compliant with fair market value and commercial reasonableness requirements. PYA will continue to monitor this subject, including any potential end-of-year legislative changes, and provide additional thought leadership.
PYA has extensive experience in physician compensation planning and strategy, fair market value compensation/commercial reasonableness, and preparing for the impact of E/M transition on coding and documentation. For more information regarding these matters, contact a PYA executive below at (800) 270-9629.