Published August 31, 2020

10 Takeaways From the Proposed 2021 Medicare Physician Fee Schedule and Possible Implications for Physician Productivity-Based Compensation Models

On August 4, the Centers for Medicare & Medicaid Services (CMS) announced the calendar year 2021 Medicare Physician Fee Schedule (MPFS) Proposed Rule. While it encompasses numerous proposed changes, if you employ physicians and compensate them on a productivity model, you’ll especially want to take note of several. PYA has identified the “Top 10” takeaways, which include five potential implications for physician compensation.

    1. The American Medical Association (AMA) has released, and CMS has adopted, guideline changes to the Office and Other Outpatient Services Evaluation and Management (E/M) codes (99202 through 99215), which will be effective January 1, 2021.
    2. Work relative value units (wRVUs) for those same 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%. And, 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%. These values were finalized in the 2020 MPFS, and, therefore, are expected to receive no changes in the 2021 final rule.
    3. When E/M codes 99205 and 99215 are billed based on time, CMS is proposing to allow an add-on code (99XXX) for every 15 minutes of supplemental work effort.
    4. An add-on code (GPC1X) will also be available to provide an incremental amount of wRVU credit (0.33 wRVUs) for management of complex or severe chronic conditions. This code is still being defined, so in analyzing potential revenue changes, the code should be applied carefully. Its application could also change upon finalization of the rule.
    5. These MPFS changes cumulatively result in overall positive relative value units for which CMS, by law, must create an offsetting adjustment. As proposed, the Medicare conversion factor will decrease by 10.6% to assist with budget neutrality associated with the wRVU and other fee schedule changes. This conversion factor decrease will impact all codes 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.
    6. The AMA’s goal in producing the new guidelines was to maintain historical physician coding utilization. However, there may be a percentage of cases coded as 99214 in 2020, that are now coded as 99213 in 2021, as a result of following the new guidelines. If this occurs, physicians on a compensation per wRVU productivity model could earn less, and physician employers may receive less reimbursement to cover overhead costs.
    7. If the AMA’s goal is met, and no code utilization changes are realized, physicians on a compensation per wRVU productivity model may earn more compensation, and employers may have less income/ greater losses. This may result when the employer pays more in incremental compensation to the physician than it receives in incremental reimbursement.
    8. Because of the proposed changes in E/M code wRVUs, and 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 in 2020.
    9. 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. The full impact of these changes may not be seen in benchmark data for potentially two years (from January 2020). A physician compensation benchmark survey available in 2022 is generally based on 2021 data.
    10. Utilizing 2020 physician compensation benchmark survey data (based on 2019 responses) without adjustment or consideration of the proposed MPFS impact in 2021 may lead to compensation that is above fair market value and 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 impact, and not be surprised by contractual or other changes that may need to occur on or before January 1, 2021. PYA will continue to monitor this subject 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.

Disclaimer: To the best of our knowledge, this information is correct at the time of publication. Given that the 2021 MPFS is not finalized, please be aware that some or all of this information may change or not apply when it is finalized. CMS will accept comments on the proposed rule until October 5, 2020. The final rule will likely be issued in late November or early December 2020.

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