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KSM Blog | Katz, Sapper & Miller CPA

New Coding Changes May Give Physicians a Raise

Posted 1:45 PM by

Every year there are changes to current procedural terminology (CPT) coding that are generally minor text revisions, clarifications, code additions, and code deletions. While important for accurate coding, these annual changes don’t typically have a significant impact on provider compensation. 

But 2021 is different. Among other updates, the Centers for Medicare and Medicaid Services (CMS) is very likely to adopt sweeping changes to evaluation and management (E/M) coding. The work relative value unit (wRVU) components of many E/M codes are materially changing, and providers paid on production models indexed against wRVUs will likely see changes in compensation without corresponding changes in productivity. One notable change is the elimination of CPT 99201, the code used for a level one office or outpatient visit for a new patient. This code is being eliminated because the schema for visit levels has fundamentally changed to a more simplified system emphasizing medical decision-making and time. Many other E/M codes are seeing changes as well, including the following:

There are 140 codes that have wRVU adjustments. While most (65%) are upward, there are some decreases as well. These common procedures will have their wRVUs reduced:

Many other CPT codes will have their practice expenses and malpractice RVU components adjusted. In general, these changes are of a smaller magnitude and are overwhelmingly positive: 82% of the practice expense changes were positive, and 92% of the malpractice expense changes were positive.

Many provider compensation models rely on wRVUs as a measure of productivity to determine compensation. Therefore, an organization’s payroll could be significantly impacted by these changes. The impact will be greatest for office-based specialties. CMS estimates the wRVU totals for family medicine physicians will see a 9% increase and that internal medicine physicians will see a 2% increase. Nurse practitioners and physician assistants are likely to realize a 5% increase in their wRVU totals. We estimate that primary care providers in general will see a 10% increase in wRVUs due to these changes.

As required by statute, the aggregate changes to the Medicare Physician Fee Schedule (MPFS) must be budget neutral. To offset the increases in wRVUs, the national Medicare conversion factor is decreasing by nearly 11%. While the net effect is budget-neutral for CMS, it is certainly not budget-neutral for providers. Provider networks could be hit with the double whammy of decreasing or flat reimbursement along with increasing production-based provider compensation due to these two significant changes. Such a financial impact could be overwhelming for organizations on the heels of the financial losses incurred as a result of the COVID-19 pandemic.

Here are some compensation considerations for provider networks:

  • Don’t delay adoption of the 2021 MPFS. There are simply too many additions (telehealth) and deletions (CPT code 99201) to avoid it. Failure to adopt the 2021 schedule may create operational headaches, coding challenges, and likely lead to physician ire when performed services are not accurately reflected in productivity totals. Contractually, you may not have an option if provider contracts require use of the then-current MPFS for wRVUs.
  • Physicians and providers on a productivity-based compensation model may be contractually obligated to receive the higher wRVU credits. If each of the incremental wRVUs are compensable, then payroll could balloon with minimal new revenue.
  • Provider networks may be tempted to decrease the wRVU productivity conversion factor to maintain budget neutrality. An alternate approach might be to earmark the “new” monies to value-based elements or introduce a new activity measure such as patient panel size. Hopefully, supporting your physician base through the COVID-19 pandemic has created goodwill that can be realized.
  • Many employment contracts have minimum and/or bonus productivity thresholds. Some providers may more easily achieve their base and/or productivity thresholds and be eligible for bonus pay. Conversely, some physicians – particularly specialists – may see a net decrease in productivity due to the MPFS changes. For instance, CMS estimates the wRVU totals for cardiac surgery and pathology will decrease by 6%. Therefore, a physician performing near the minimum requirement might drop below the base threshold.
  • If a provider’s total compensation increases, they may move above a benchmark level indicating that compensation must be reviewed per an internal policy, creating additional administrative work for compliance, committees, or boards.
  • Practices with physicians and advanced practice providers could see increased competition over patient volume and the resulting productivity credit. Physicians that receive supervision credit for advanced practice providers could see their stipends increase to the extent it is indexed to wRVUs.

For organizations with physician and provider compensation based in whole or in part on wRVUs, there are not many options to mitigate the impact of these revisions. While it’s possible these proposed changes could be rolled back, it’s very unlikely. In the long-term, a robust compensation model with multiple inputs that supports value as well as productivity is recommended. In the past, CMS has been criticized for continuing a payment model that advantages procedural care at the expense of primary care. Perhaps these changes are one step along a path toward that goal.

The changes within the 2021 MPFS are complicated and nuanced. Being informed and well prepared is always the best course of action. Contact your KSM advisor or complete this form to discuss how your organization can better prepare for the future.

About Us
Katz, Sapper & Miller’s Healthcare Resources Group serves healthcare providers, including physicians, hospitals and health systems, surgery centers, and long-term care facilities. Our team of healthcare professionals has the scope and depth to meet client needs. Learn more.

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