Bevy of changes make figuring out 2014 Medicare payments more complicated

Some years, it is relatively simple to project how your Medicare payments will change for the services rendered. When the only factor in Medicare’s complicated payment formula that changes is the conversion factor, the percentage change in your payment is identical to the percentage change in the conversation factor.

Unfortunately, 2014 is not one of those years, which will make it difficult to estimate with exact precision how much your Medicare revenue will shift next year.

We’ll attempt to explain why this is the case, in as simple a way as possible. First, let’s assume that the currently proposed 20.1% cut to the conversion factor is eliminated by legislation, and that this legislation reinstates the 1.0 minimum floor for all work practice expense. Of these two, the first is virtually certain, and the second has been a longstanding component of physician payment fixes.

If those two things were to happen, then overall payment changes would in a typical year be relatively minor. Essentially, the conversion factor would be marginally different than in previous years to account for other regulatory changes.

There are two big reasons why 2014 will be different, likely regardless of the legislative outcome. Those two reasons are tweaks to the Medicare Economic Index (MEI) and the Geographic Price Cost Indices (GPCIs).

1. MEI change
The Medicare Economic Index is a formulation that essentially measure how the prices change of the formulation of work, practice expense and malpractice that goes into the payment for each physician service.

The biggest change being made in 2014 is that the MEI will be more heavily weighted toward physician work, while practice expense will go down and malpractice will remain the same. In 2013, a physician payment consisted of 48.266 percent physician work, 47.439 percent practice expense and 4.295 percent malpractice.

In 2014, a payment will consist of 50.866 percent physician work, 44.839 percent practice expense and 4.295 percent malpractice. The biggest change is that the expense of non-physician practitioners will be shifted to physician work instead of practice expense.

To implement this change, CMS will weight practice expense RVUs downward and shift the conversion factor upward slightly to compensate. For your practice, this means that if the services you provide are practice expense heavy, this change by itself would decrease your 2014 payments. If your service mix is work heavy, this change by itself would increase your 2014 payments. PE-RVUs, virtually across the board, will appear lower.

2. Geographic Price Cost Indices (GPCIs)
As you likely know, Medicare’s payments are adjusted based on 89 different payment localities. The purpose of this is to attempt to weight payments based on the cost of doing business in different parts of the country. Put simply, the same service pays more in Manhattan, N.Y., than in Manhattan, Kansas, because it costs the provider more to furnish the service in Manhattan, N.Y.

Periodically, these values are updated based on changes in the cost of doing business in different parts of the country. Because Medicare payment changes must typically be budget-neutral, when one part of the country wins, it typically does so at the expense of another part of the country.

Note: These changes are different, as noted above, from the annual effort in Congress to set a minimum 1.0 GPCI work floor. Unless extended, that change is set to expire on Dec. 31, 2013, and will reduce payments to any area that typically has a work GPCI of less than 1.0.

These GPCI alterations will happen independently of that change, and can result in pay swings, positively or negatively, of 1% or so to physician payments.

We’ve included a side-by-side comparison of GPCI-values along with this story. If you look at your area and see lower numbers (such as in Marin County, Calif.), it means this will have a downward impact on your payments next year. When you see higher values (such as in Ft. Lauderdale, Fla.) it means your payments will be affected favorably.

Note: For consistency, we adjusted any work GPCI for 2014 that was below 1.0 up to 1.0, as has been legislatively done in the past. Should Congress not legislatively make that change, virtually all 1.0 GPCIs for 2014 will be revised downward.