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Restoring balance: 2021 E/M changes and the elephant in the room for medical practices

Insight Article - June 18, 2021



Provider Compensation

With half the year behind us, the impacts of 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. 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.

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.

This has happened before

For historical context, 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.

The significant difference between 2007 and 2021 is the uptick in physician employment in today’s healthcare industry. “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 Physician Fee Schedule (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 each year. This shorter time frame to prepare for the new rule also was compounded by other factors, such as the ongoing COVID-19 pandemic, which left many healthcare organizations working “to catch up with the changes” throughout the first half of 2021, Chamblee said.

Who calls the shots

The RVS Update Committee (RUC) establishes RVU values for new CPT codes, reviews existing code values every five years and provides RVU recommendations to CMS for setting the Medicare PFS. Its 32 members represent major national medical specialty societies.

Past complaints about the RUC’s composition has been an overrepresentation of specialty societies and underrepresentation of primary care. Viewed another way, Chamblee said, there is a perception of “an overrepresentation in recognition of procedural work, and perhaps an underrepresentation in recognition of cognitive work.” The 2021 changes — which were born from a CMS proposal in 2018 to collapse payment of office visits — are “a bit of a right-sizing” of the past concerns over specialty-dominant recommendations.

The RUC’s considerable influence on RVU values may change as value-based reimbursement chips away at the role of wRVUs in physician compensation, Chamblee noted, but there “will always be a need to measure what physicians are doing,” even as fee-for-service reimbursement ebbs.

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

A predicament for practice leaders looking to future years will 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.

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