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Welcome back to Regs & Eggs! After a short break (and a job transition from the American College of Emergency Physicians to McDermott+Consulting), your breakfast of regs and eggs will again be served weekly, fresh and hot, every Thursday.
And speaking of hot, it’s summertime, which means only one thing in regulatory land: reg season! Yes, this is health policy folks’ favorite (or most dreaded) time of the year, when the Centers for Medicare & Medicaid Services (CMS) releases thousands of pages of regulations that propose revisions and updates to Medicare payment rates and policies. We pore through, analyze and comment on these regs in painstaking detail, as they tend to have far-reaching implications not just for Medicare, but for the broader healthcare landscape as well. Medicare payment rates and policies often impact corresponding rates and policies used by state Medicaid programs and private insurance plans. So yes, these regs are a big, big deal in the regulatory and payment world!
To kick off Regs & Eggs at McDermottPlus, I would like to provide a preview of one of the largest annual proposed regulations: the Medicare physician fee schedule (PFS). This year’s reg, which will impact payments for physicians and other clinicians starting in calendar year (CY) 2024, will be released imminently. Once released, it will go through a 60-day public comment period, after which CMS will revise the reg based on the feedback it receives and then issue the final reg on or around November 1, 2023—60 days prior to the start of the CY.
This massive reg is expected to include many different issues, some of which are more pertinent to specific specialties and provider types than others. While I won’t get into every major topic here, I do want to highlight some major issues that are on our radar here at McDermottPlus.
PFS Conversion Factor
As the great Yogi Berra said, “it’s déjà vu all over again.” The ongoing saga of yearly physician payment reductions will unfortunately continue in CY 2024. While Congress has enacted temporary partial fixes the last three years, its latest fix in the Consolidated Appropriations Act, 2023 (CAA, 2023), enacted at the end of last year, won’t quite cut it (no pun intended).
In the CAA, 2023, Congress provided a partial offset to an expected 2.5% reduction to the PFS conversion factor in CY 2024. Specifically, Congress paid for half of the reduction, 1.25%, but left the remaining half in place to trigger at the start of 2024.
| Year | PFS Conversion Factor Cut Without Congressional Intervention (A) | Congressional Fix (B) | Final PFS Conversion Factor Cut (A+B) |
| 2024 | -2.5% | +1.25% | -1.25% |
That’s a tough place to start from: a 1.25% reduction. Unfortunately, that’s just the beginning. CMS is required by law to ensure that any changes it makes to specific PFS codes do not increase PFS spending by more than $20 million. Since most changes to codes trigger this “budget neutrality” requirement, every year CMS makes an overall adjustment (usually negative) to the conversion factor. Thus, on top of the 1.25% reduction, CMS will likely make another cut based on budget neutrality. So, the question is: what policies will CMS introduce that will have a big budget neutrality impact?
The most significant policy that we are watching out for is a new add-on code for complexity that physicians and other clinicians can bill when treating more complex patients in the office or outpatient setting. CMS initially established this add-on code, G2211, in the CY 2021 PFS Final Rule. When finalizing this add-on code, CMS assumed that it would be billed 75% of the time that an office and outpatient evaluation and management (E/M) service was furnished. Since office and outpatient E/M services are the most heavily billed codes in the PFS, the high “utilization factor” of 75% carried significant budget neutrality implications. It was expected to redistribute around $3.3 billion and cause an overall 3.5% reduction to the conversion factor for 2021. Given the impact this conversion factor cut would have had, especially on the many physicians who don’t typically provide office and outpatient E/M services, the house of medicine convinced Congress to at least delay the implementation of the add-on code. In December 2020, Congress passed the Consolidated Appropriations Act, 2021, which delayed the code until 2024.
Because Congress simply delayed the introduction of the add-on code, the code will automatically go into effect in 2024 if CMS doesn’t act. Obviously, CMS does have the power to halt the implementation of the code, but it is unclear whether CMS will choose to do so given that the add-on code is expected to increase payments for primary care providers (who typically provide a lot of office and outpatient E/M services).
If CMS does go forward with implementation, the other major issue to look out for is CMS’s utilization assumption. The higher the utilization assumption, the larger the impact on budget neutrality and the larger the cut to the conversion factor. Let’s say that CMS goes forward with the code and proposes a utilization assumption of 75%, the same as it did previously. The cut to the conversion factor could be upwards of 4.75% (1.25% from Congress plus 3.5% from the budget neutrality adjustment). However, if CMS assumes a lower utilization assumption, the cut to the conversion factor could be lower—perhaps in the 3% range.
We will have to wait and see what CMS decides to do!
Split or Shared Services
Another major issue relates to split/shared services—or services delivered by both a physician and a non-physician practitioner in a facility setting (excluding critical care). Under Medicare, a service can only be billed by one clinician, and if non-physician practitioners wind up billing for a service, they only receive 85% of the total Medicare rate.
CMS finalized a policy in CY 2022 to determine who provides the “substantive” portion of the service and can therefore bill for it. CMS decided to phase in the policy, temporarily allowing clinicians to have a few different options for determining which clinician performed the substantive portion of the split/shared visit. Clinicians could pick one of the following:
However, going forward, CMS intended that only time would be used for the purposes of determining the substantive portion of a split/shared visit.
The American Medical Association and many other specialty societies strongly oppose using only time to determine the substantive portion of a split/shared E/M service and formally requested that CMS continue to delay the transition to the time-only policy. Time spent with a patient doesn’t necessarily dictate who provided the substantive portion of the service. Not only is time difficult to measure in some situations (imagine bringing a stopwatch into a patient encounter, especially one that takes place in the emergency department), but the time that a physician and a non-physician practitioner each spends with a patient isn’t really equivalent. If a non-physician practitioner spends 20 minutes with a patient taking a history and physical, and a physician spends 10 minutes making a diagnosis and coming up with a treatment plan, one could argue that the physician in fact provided the substantive portion of the service.
CMS is still thinking through these arguments and has delayed the transition to the time-only policy through 2023. CMS could delay the implementation again, or could go forward with the policy starting on January 1, 2024. The physician community is hoping for another delay.
Telehealth
During the COVID-19 public health emergency (PHE), CMS temporarily added numerous codes to the list of approved Medicare telehealth services. This list of approved services is updated annually. In previous PFS rules and through guidance, CMS has examined which of the codes should remain on the list for an extended period past the end of the PHE or permanently.
Most recently, in May 2023, CMS extended all the telehealth codes that it had temporarily added during the PHE through the end of CY 2023. In this year’s reg, CMS will decide which of these codes will remain on the list (and for how long).
The American College of Emergency Physicians sent a sign-on letter to CMS requesting that the agency extend the availability of the codes on the list through CY 2024, to align with congressional action in the CAA, 2023, that extended some of the COVID-19 waivers through the end of 2024. CMS could propose a blanket extension of all the codes through the end of CY 2024, or it could go through the codes with a fine-tooth comb, removing some of the codes from the list and keeping others on temporarily.
While most office-based codes are already permanently on the list of approved telehealth services, CMS receives evidence from the public each year to decide which other types of codes (not similar to an office visit) it should permanently add to the list. CMS’s decisions are based on an evaluation of peer-reviewed data that must prove that the service, when provided via telehealth, improves quality and reduces costs. This is an extremely high bar, and CMS rarely adds new types of services permanently to the list.
Another important telehealth policy that existed because of the PHE was payment parity. Many PFS services have two payment rates depending on whether they are provided in a facility setting (e.g., a hospital) or a non-facility setting (e.g., a clinician’s office). Before the PHE, CMS paid clinicians performing a telehealth visit the PFS’s lower facility-based payment rate instead of the higher non-facility rate. However, during the PHE, telehealth services were paid at the same rate as in-person services. Thus, if a clinician would have provided the service in a non-facility setting if the service had been delivered in-person, the clinician could bill for the telehealth service at the higher non-facility rate. CMS will continue this policy through the end of 2023. However, in this reg, CMS could decide to resume paying the lower facility rate for telehealth services starting in CY 2024. The Medicare Payment Advisory Commission has previously made that recommendation, so CMS does have a source to point to if it decides to move in this direction.
The Merit-Based Incentive Payment System
The 2024 performance period is a big year for the Merit-based Incentive Payment System (MIPS), the major quality performance program for physicians in Medicare. Because of the COVID-19 PHE, hardship exemptions have been in place for the 2019, 2020, 2021, 2022 and 2023 MIPS performance periods. Therefore, 2024 may be the first time some clinicians participate in MIPS in five years.
MIPS participation can have a significant impact on clinicians’ overall revenue. The maximum negative payment adjustment in 2025 (based on performance in 2023) is a reduction of 9% on clinicians’ Medicare covered professional services.
CMS is making MIPS more challenging each year. For the last two performance periods, 2022 and 2023, there has been a high-performance threshold (the point score out of 100 that clinicians need to achieve to avoid a penalty and receive a bonus) of 75 points. CMS could choose to keep the threshold at 75 points again in the proposed reg or propose to make it even higher in 2024. A higher threshold could be especially challenging for small and rural providers who may have claimed the COVID-19 hardship exemption the last few years and may not have the resources necessary to receive a high performance score.
CMS will also likely make some changes to a new reporting option in MIPS called the MIPS Value Pathways (MVPs). MVPs allow clinicians to report on a uniform set of measures on a particular episode or condition in order to get MIPS credit. This option just started in 2023, and CMS will probably make some tweaks to existing MVPs and propose new ones. CMS’s goal is to eventually sunset traditional MIPS and move completely to MVPs, but the agency has yet to lay out a timetable for doing so.
Well, that’s my preview of the PFS proposed reg! Before concluding, I would like to say that it is good to be back, and get ready for some more large helpings of Regs & Eggs during reg season!
Until next week, this is Jeffrey saying, enjoy reading regs with your eggs.
For more information, contact Jeffrey Davis.
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