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July 18, 2024 – The major calendar year proposed regs are now out, with thousands of pages of text to digest. Since a plethora of issues are embedded in these regs, including the Calendar Year (CY) 2025 Physician Fee Schedule (PFS) and the CY 2025 Outpatient Prospective Payment System (OPPS) proposed regs, we’ll be taking bites out of them over the next several weeks. Find our top takeaways on the PFS proposed reg here and our top takeaways on the OPPS proposed reg here.
This week, my colleagues Kristen O’Brien and Rachel Hollander, and I want to focus on a major paradox of the PFS proposed reg: although the Center for Medicare & Medicaid Services (CMS) proposes several new codes, the reg includes a positive budget neutrality adjustment. We’ll examine this paradox and explain its significance.
Adding new codes or modifying code values is the “bread and butter” of what CMS does in the PFS reg each year. CMS routinely assesses code values that are flagged as potentially misvalued and evaluates recommendations for new current procedural terminology (CPT) codes or CPT code changes from the American Medical Association (AMA) Relative Value Scale Update Committee (RUC). Besides opining on AMA RUC recommendations for CPT codes, CMS also has the authority to add or modify “G” codes in the PFS. While CPT codes are universally used by other payers in addition to Medicare, “G” codes are usually only used in Medicare. Thus, they are special Medicare codes that providers can only bill when treating patients with traditional Medicare (Medicare Advantage plans don’t have to cover these codes).
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 PFS conversion factor (CF). The PFS CF is the factor that turns relative value units, the building blocks of PFS codes, into a dollar figure.
In this year’s reg, CMS proposes to add several new G codes to the PFS. Therefore, we would expect to see a negative budget neutrality adjustment to the proposed 2025 PFS CF. In fact, we have come to assume that there will be a negative budget neutrality adjustment to the PFS CF, as there has been a negative budget neutrality adjustment almost every year in recent memory (at least for the last five years!). In previewing this year’s reg, we warned folks to expect at least a 2.9% PFS cut, because 2.9% is the amount that Congress provided in fixes for 2024 and which expires in 2025 without further congressional action.
However, in the proposed reg, CMS includes a budget neutrality adjustment of 0.05%! Instead of the expected 2.9% cut to the PFS CF, CMS proposed “only” a 2.8% proposed cut.
Yes, we know you are shocked (as we were!) But let’s regroup and examine why CMS proposed this positive budget neutrality adjustment, breaking the long-standing precedent of negative budget neutrality adjustments. The reason for this surprise is CMS’s proposed global surgical policy, which, if finalized, would lead to an overarching reduction in PFS payments and would counteract the increases in payments from new and modified codes.
Before describing this proposed global surgical policy, let’s briefly lay out some of the new codes CMS proposes:
In all, McDermottPlus has identified 22 newly proposed G codes that combined would increase PFS spending by about $105 million in CY 2025. Most of this additional spending (~$83 million) is due to two of the new G codes for reporting advanced primary care management services (GPCM2 and GPCM3).
Besides these new codes, CMS would also expand the usage of some existing codes, such as by:
We have not yet assessed the overall impact these proposed new codes and modifications would have on budget neutrality, but a major factor in that calculation is CMS’s assumptions around utilization. One could argue that the majority of these codes are for tailored clinical scenarios and would likely only be billed by certain specialties. Thus, the overall impact of these codes – driving a possible negative budget neutrality adjustment to the PFS CF – may not be as large as it would appear on the surface.
Payment for global surgical codes has a long history. While we won’t go over the whole history, here is the basic premise. Global surgical codes include all services provided during a specified period of days (0-days, 10-days, or 90-days) by a physician or another practitioner in the same group practice for a specific surgical procedure. The global package includes the surgical procedure itself, post-operative E/M visits and discharge services, pre-operative visits on the day of and/or prior to the surgical procedure, and other services during the post-operative period that are related to the surgical procedure.
For several years now, CMS and other agencies such as the Office of Inspector General for the US Department of Health and Human Services have raised concerns about the accuracy of valuation and payment for global packages under the PFS. In CY 2015, CMS finalized a policy to transition all 10- and 90-day global packages to 0-day global packages, which would allow any post-operative visit furnished after the day of the surgical procedure to be billed separately as standalone visits. However, CMS was prohibited from implementing this finalized policy by an amendment in the Medicare Access and CHIP Reauthorization Act (MACRA). (The MACRA amendment also required CMS to collect data, beginning in 2017, on the number and level of post-operative visits typically provided to patients during 10- and 90-day global periods and to use this and other data, beginning in 2019, to improve the accuracy of global package valuation.) Since 2015, CMS has initiated research contracts and implemented data collection processes related to this mandate, and has released multiple reports on the number of E/M visits furnished during post-operative periods and potential approaches to revaluing global packages.
While CMS has not taken action on these codes specifically since 2015, some inaction has caught the ire of some stakeholders. In CY 2021, CMS finalized a major increase to the office and outpatient E/M codes (the office visits that are the most billable services in Medicare). However, while the global surgical periods include E/M services, CMS made the deliberate decision not to increase the values of these E/M services. Thus, while CMS did not actually cut payments during the global surgical period, in effect many stakeholders saw the lack of action as a payment reduction.
In this year’s proposed reg, CMS actually proposes a payment reduction. CMS proposes to revise the “transfer of care” policy for global packages to address instances where one practitioner furnishes the surgical procedure and another practitioner furnishes related post-operative E/M visits during the global period. CMS also proposes to develop a new add-on code that would account for the resources involved in the post-operative care provided by a practitioner who did not furnish the surgical procedure.
While the transfer of care modifier policy proposed for CY 2025 is limited to 90-day global package services, CMS states that it will continue to assess and monitor for potential future opportunities to improve its payment approach for global packages more broadly. CMS seeks comment on whether it should propose these changes for the 10-day global packages in future rulemaking.
Under current PFS policy, transfer of care modifiers must be appended to the relevant global package code when billing for services that are within the scope of the global package only when the proceduralist and one or more other practitioners who are not in the same group as the proceduralist formally document their agreement to provide distinct portions of the global package. Based on an analysis of Medicare fee-for-service claims data, CMS states that these formal transfer of care modifiers are rarely used and, when they are, it is often with respect to certain ophthalmologic procedures (for example, cataract surgery). The transfer of care modifiers include:
For services furnished in 2025 and subsequent years, CMS proposes to require use of the appropriate transfer of care modifier for all 90-day global surgical packages when a practitioner plans to furnish only a portion of a global package and when there is a formal, documented transfer of care under current policy or an informal, non-documented but expected transfer of care. Under the proposed policy, practitioners performing the surgical procedure but not intending to furnish the post-operative portions of the 90-day global services would append the -54 modifier, which would reduce the payment they receive for that service.
For certain global surgical codes, CMS estimates that the transfer of care modifier would be used 20% of the time. CMS believes this is a “conservative estimate” given the frequency of post-operative care transfers for these services. CMS proposes to apply the payment reduction associated with modifier -54 to the utilization estimate for the 20% of cases where it believes modifier -54 will be used. CMS provides the following example in the proposed rule: CPT code 27447 is a high-volume knee replacement procedure where the post-operative portion of the total payment is 21%. CMS proposes that there will be a postoperative transfer of care 20% of the time for CPT code 27447. In those 20% of cases, there will be a corresponding 21% payment decrease.
CMS proposes a new HCPCS code, GPO1C, to capture the additional practitioner time and resources of follow-up post-operative care provided by a practitioner who did not perform the surgical procedure. CMS proposes a total non-facility relative value unit of 0.27 for this code, which corresponds to a proposed CY 2025 payment rate of $8.74 based on the proposed CF of $32.36. CMS believes this new code would be billed during the 90-day post-operative period following the surgical procedure when the patient is seen for a related office/outpatient E/M visit. The practitioner billing this new code would be different from the practitioner who furnished the surgical procedure. CMS estimates utilization of the new code would total about 40,000 claims in the first year. CMS anticipates that uptake of the new code would be low initially, consistent with the uptake of other new services the agency has finalized under the PFS.
CMS believes that the global surgical policy, if finalized, would result in expanded use of the transfer of care modifiers and, consequently, a reduction in PFS spending for the affected services. The proposed reduction in PFS spending associated with this policy would be redistributed across the PFS via an increase in the budget neutrality adjustment. In other words, CMS would “save” money by reducing payment for 90-day global surgical services and would redistribute those “savings” across all other services paid under the PFS via a positive budget neutrality adjustment to the CF.
It remains to be seen what stakeholders will think about this global surgical policy and whether CMS will finalize it as proposed, modify it, or decide not to finalize it in the final reg. Let’s suppose that CMS decides to modify the policy (by phasing in the reduction) or to not finalize the policy at all (while we cannot make any conjectures at this point about what CMS may or may not do, we do want to point out CMS’s track record, described above, of ultimately deciding not to take any action on global surgical payments). If CMS goes down that road, the positive budget neutrality adjustment would likely be eliminated and, as in previous years, there would likely be a negative budget neutrality adjustment to the CF. Put plainly, the final cut to the PFS CF could be more than 2.8%.
Stakeholders have until September 9, 2024, to comment on all aspects of the PFS proposed reg. CMS will issue the PFS final reg on or around November 1, 2024. While we won’t know the final cut to the CF until then, even the proposed cut of “only” 2.8% would likely lead stakeholders to again turn to Congress to try to mitigate overall physician payment cuts. Any action by lawmakers on this issue is unlikely to be addressed until the end of the year, and the appetite to continuously patch physician payments remains unclear.
Until next week, this is Jeffrey (and Kristen and Rachel) saying, enjoy reading regs with your eggs.
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