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:

How Are Payments for E/M Services Changing?
In regards to the E/M changes made to office or other outpatient services, since selection of the level of service for codes 99202-99215 are now based on either time or medical decision making, some providers have discovered that they actually qualify for higher levels of service. Add to that the fact that reimbursement for E/M visits (except 99202 and 99211) have gone up, it stands to reason that E/M reimbursement may in fact offset losses elsewhere due to the conversion factor cut, though this will of course be heavily dependent on the specialty of the provider and the services offered. The following table shows the Medicare-allowed reimbursement amounts for office or other outpatient E/M services for 2020 and 2021:
  99202 99203 99204 99205 99211 99212 99213 99214 99215
2021 $73.97 $113.75 $169.93 $224.36 $23.03 $56.88 $92.47 $131.20 $183.19
2020 $77.23 $109.35 $167.09 $211.12 $23.46 $46.19 $76.15 $110.43 $148.33
YoY Change -$3.29 +$4.40 +$2.84 +$13.24 -$0.43 +$10.69 +$16.32 +$20.77 +$34.86

What Else Happened in the Consolidated Appropriations Act of 2021?

The Consolidated Appropriations Act of 2021 modified the 2021 Medicare Physician Fee Schedule (MPFS) as follows:

  • Included a 3.75% increase in MPFS payments for 2021: Reimbursement for some services went up and some went down.
  • Suspended the 2% payment adjustment (sequestration) through March 31, 2021: We hope that this will be held off again, but it is dependent on legislation.
  • Reinstated the 1.0 floor on the work Geographic Practice Cost Index through 2023.
  • Delayed implementation of the inherent complexity add-on code for evaluation and management services (G2211) until 2024: This delay also contributed to the increase in the conversion factor since CMS had budgeted $3 billion to pay for that service.

How will these changes affect your organization? Well, it all depends on your payer mix and the services performed in your practice. Now is the time to sit down with a spreadsheet, look at the numbers and assess the real potential impact - it might not be as bad as you thought. Look at your top billed codes overall and by payer. Plug in the numbers and see how these changes may affect your bottom line. Don’t forget that FindACode.com includes comprehensive fee information including zip code-specific information, workers compensation fees, and UCR fees (available by subscription) to enable a more comprehensive review.

2021 Medicare Physician Fee Schedule Updates - Do You Really Need to Worry?. (2021, February 11). Find-A-Code Articles. Retrieved from https://www.findacode.com/articles/2021-medicare-physician-fee-schedule-updates-36788.html

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