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Navigating the physician compensation impacts from E/M office visit and 2021 Medicare PFS changes

MGMA Stat - July 1, 2021

RVUs

Reimbursement

Provider Compensation

Financial Management

Revenue Cycle

MGMA Staff Members
With half the year behind us, the impacts of revamped E/M outpatient office visit guidelines and the Centers for Medicare & Medicaid Services (CMS) 2021 Physician Fee Schedule (PFS) final rule on work RVUs (wRVUs) and physician compensation are becoming clearer for healthcare providers.

Perhaps most stark is the imbalance between the changes in some RVU values in relation to how physician compensation changed per the PFS updates. As Justin Chamblee, CPA, senior vice president, Coker Group, recently noted in his session at the 2021 Medical Practice Excellence: Pathways Conference, this change has been difficult for some physicians to understand.

“Even though for primary care physicians (PCPs), [CPT code] 99213 went up by roughly 30% in the wRVU value, the reimbursement didn’t change accordingly — realizing that their pay is not necessarily going to go up by 30% has been something that has been difficult for them to grasp,” Chamblee said.



In fact, the changes have already prompted some medical practices to revisit contracts to ensure their compensation models are in balance between the changes and physician expectations. A June 29 MGMA Stat poll found that 12% of medical practices say they have modified physician contracts due to 2021 E/M or PFS updates, while another 10% said they are considering it. The poll had 701 applicable responses.

Medical practice leaders who have updated contracts noted that the 2021 changes resulted in lower reimbursement. Several respondents noted that their contracts state they will use the current year’s wRVUs for compensation; many said they amended those agreements to continue using 2020 numbers of productivity calculations until new revenue contracts are in place, or they adopted some form of blended rate. Other practice leaders said they have modified bonus calculations; in once instance, a practice leader said bonuses were replaced with quality metric incentives.

Understanding the E/M changes

For a comprehensive look at the 2021 E/M coding changes, MGMA members can access the 2021 E/M Coding, Billing and Auditing Toolkit, which includes fee schedule analyzer tools, an outpatient office visit code FAQ, E/M audit worksheet, E/M quick reference and crosswalk guide.

Understanding the PFS changes

To understand the impacts, one should understand the mechanics of the changes in RVU values that were updated in the 2021 PFS final rule and the subsequent updates to Medicare spending via legislation at the start of the year.

How the shift to physician employment matters

Chamblee pointed to January 2007 — when the third five-year review of the Resource-based Relative Value Scale (RBRVS) was completed — as a similar sea change in how Medicare reimbursement is set. “A number of the E/M wRVU values were increased and, as a means of achieving budget neutrality, the reimbursement rate (or the conversion factor) was decreased,” Chamblee said.

But what’s new in 2021 versus 2007 is the uptick in physician employment. “Many more physicians are employed today by health systems than they were in 2007,” Chamblee said. With a higher percentage of employed physicians often compensated using wRVUs, “the ramifications in the industry are being felt much more significantly today than perhaps they did in 2007.”

The 2021 changes also had significant impact based on the delay in the release of the PFS final rule on Dec. 1, 2020, which “left many organizations [without] a formal plan as to what they’re going to do” in the coming year, as the final rule normally is released by Nov. 1. This shorter time frame to prepare for the new rule was compounded by other factors, such as the ongoing COVID-19 pandemic.

Measuring the impacts

The increase in various non-monetary values in the 2021 PFS final rule for E/M office/outpatient visits had to meet the provisions of the Budget Neutrality Act, which limits the ability of CMS to increase Medicare reimbursement. Rather than reducing several other CPT code values, the 2021 conversion factor was reduced.

“In essence, we saw an increase in a number of non-monetary values, and then a decrease in monetary value to allow for budget neutrality to occur,” Chamblee said. The nearly 10% reduction in the conversion factor — from $36.09 in 2020 to $32.41 in 2021 — then was modified by the Consolidated Appropriations Act of 2021, which pumped $3 billion more into funding physician services, mitigating some of the effects of the conversion factor decrease. That stimulus effectively updated the 2021 conversion factor to $34.89, or about a 3.3% decrease from 2020.

Looking at some primary care and specialty care codes in the context of the changes, there were numerous improvements in reimbursement for primary care codes and decreases in some specialty codes with the adjustments to the RVU values in the PFS final rule and the stimulus’ impact on the conversion factor (Figure 1).



Chamblee noted that looking ahead to 2022, there is potential for net reductions in reimbursement across the board if a conversion factor similar to the original 2021 figure of $32.41 is in place, absent the boost from the recent stimulus (Table 1). For many of the E/M visit codes tied to seeing patients on a regular basis, the sizable increases in reimbursement — 28% to 30% for some codes — would drop by 9% to 10%.



On the non-E/M code side, wRVU values stayed flat or slightly decreased. Chamblee cautioned that by applying a similar reduction in the conversion factor absent the stimulus boost, the drop in reimbursement outpaces the decrease in wRVUs.

A broader look at specialties beyond those specific code examples offers another view of the impacts the stimulus bill had, per an American Medical Association analysis earlier this year (Table 2). As Chamblee pointed out, code mix and payer mix ultimately will determine how much these changes will continue to affect overall reimbursement for the remainder of 2021.



Chamblee encouraged practice leaders to be mindful of potential Medicare payment decreases for 2022 compared to these 2021 levels, absent an intervention similar to the stimulus bill that boosted payments.

The impact on physician compensation

Practice leaders in upcoming years may be trying to reconcile survey data that points to stable, rising compensation amid a stagnant or decreasing level of reimbursement, at least from an RVU standpoint and trends with the Medicare conversion factor, Chamblee said.

Depending on a given specialty and market variable, practice leaders need to understand the extent 2021 survey data used for setting physician compensation was impacted by the effects of the COVID-19 pandemic throughout most of 2020, with wRVUs inconsistent with historical levels. “If you think about it from a total cash compensation (TCC) per RVU standpoint, it’s going to reflect a higher rate per RVU,” Chamblee said.

In some cases, 2021 survey data for establishing compensation arrangements might not be as useful as 2020 survey data — based on pre-pandemic data from 2019 — for establishing what would be a more normal value for RVUs “as a foundation,” Chamblee said, and then use future-year survey data to understand where the market has moved.

Chamblee illustrated this concern with data from 2020 and the new 2021 wRVU values with an example from family medicine (Figure 3). “If we take the 2021 wRVU values and apply those carte blanche to existing compensation models, what we would see is compensation would increase at a greater percentage than collections,” Chamblee said. “For many organizations [that] would be untenable, and it may raise compliance questions” specific to fair market value.



Practice leaders will want to try to ensure compensation more closely reflects changes in collections “so that they’re moving in tandem,” Chamblee noted. In the example of orthopedic surgery (Figure 4), compensation remains relatively flat on account of the wRVU value remaining stable, yet — because of the reduced Medicare conversion factor — reimbursement drops.



Beyond the question of making ends meet if compensation is flat yet revenue is decreasing, Chamblee cautioned that there are compliance issues from a fair market value standpoint to keep compensation at the same level, suggesting that modifications to a compensation model’s variables may be necessary to align these changes.

“I think we can all agree that the Medicare PFS is undergoing some pretty significant changes, and this — coupled with the impacts of COVID-19 — has created a pretty bumpy road over the past six to 12 months,” Chamblee said.

Want to learn more?

For a detailed look at an example adjustment process for wRVUs and total cash compensation, read our member-exclusive feature on the E/M and PFS changes in the July issue of MGMA Connection magazine.

Do you have any best practices or success stories to share on this topic? Please let us know by emailing us at connection@mgma.com.

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Our ability at MGMA to provide great resources, education and advocacy depends on a strong feedback loop with healthcare leaders. To be part of this effort, sign up for MGMA Stat and make your voice heard in our weekly polls. Sign up by texting “STAT” to 33550 or visit mgma.com/stat. Polls will be sent to your phone via text message.

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