2021 Medicare Physician Fee Schedule Updates - Do You Really Need to Worry?

by  Jared Staheli

Why the Panic?

When the proposed Medicare Physician Fee Schedule came out last year, it caused a bit of panic. In a time where healthcare organizations were facing issues related to COVID, this seemed like a really big problem: CMS proposed and then later finalized a 10.2% decrease in the conversion factor (36.0896 to 32.4085), which is one piece of what determines the overall level of reimbursement (Relative Value Unit [RVU] * conversion factor = fee). This never meant that everyone was facing an across-the-board pay cut of 10.2% for every service, since conversion factors work in conjunction with RVUs to determine an overall fee. Some RVUs (e.g., most E/M services) increased while others decreased to make up for the increases. However, even though things weren't necessarily going to be as bad as the headlines conveyed, justifiable outcry from professional organizations led CMS to reduce the severity of the drop. The Consolidated Appropriations Act of 2021 became law on December 27, 2020 and changed the decrease in the conversion factor to only a 3.3% decrease (36.0896 to 34.8931).

To understand the rationale behind these changes, know that CMS has a longstanding goal of re-balancing payments towards primary care providers and away from specialists and surgeons. By increasing the RVUs associated with the E/M services performed more often by primary care providers, even with the drop in the conversion factor, these services would be reimbursed at a higher rate (see "How Are Payments for E/M Services Changing?" below). Then, to enable budget neutrality, cuts had to be made elsewhere, and given the aforementioned goal of reimbursement re-balancing, those cuts were focused on specialists, particularly surgeons.

However, due to COVID-19 necessitating the prohibition of many elective services, which disproportionately affected specialists and surgeons, the finances of these providers took a serious hit. The postponement of these steeper cuts will enable greater financial security for these providers and their practices as the country recovers from the public health emergency. Moving forward, it is important to keep in mind that these budget cuts will likely still come to pass and they include a proposal to reduce payments to the following surgery specialties by the following amounts:

• General surgery 7%
• Cardiovascular surgeons: 9%
• Thoracic surgeons: 8%
• Vascular surgeons: 7%
• Neurosurgeons: 7%
• Ophthalmologists: 6%