What Do the Proposed Changes to the Medicare 2021 Physician Fee Schedule Mean for Your Practice? ~ A PDS Article

Posted on October 19, 2020

On August 3, 2020, CMS released the proposed rule for the 2021 Physician Fee Schedule (PFS) for the Public Comment Period. Every year, practices can expect to see small changes to the RBRVS scale and the expected budgetary modifications to the RVU Conversion Factor, but the 2021 proposed changes to the PFS are significant.

RVU values for some of the highest volume codes were increased substantially. However, to maintain budget neutrality, the RVU conversion factor utilized to determine the approved payments to providers for services rendered was decreased at a proportional level. These changes could have significant impacts not only on practices with high Medicare and Medicaid patient panels, but also practices that rely heavily on the CMS RVU calculations for anything ranging from provider productivity reporting and benchmarking, to utilizing RVUs to determine physician compensation. The proposed changes are significant enough that practices should start modeling these changes immediately to be able to plan for the impact they will have on their bottom line.

On the positive side for physician practices, there was a revaluation of the RVU values for common Evaluation and Management (E/M) procedures – particularly the New and Established Patient Office Visit codes. In most practices, these are the most commonly billed codes by a fairly significant margin. The highest-level New Patient E/M Codes (99203-99205) increased by an average of approximately 10%. The Established Patient Outpatient E/M Codes increased by an average of 30% to 35%. Because these codes are so commonly billed in most practices and RVU values are universal across all patients, many providers will see significant RVU increases in their productivity reports.

These RVU increases are offset from a budgetary standpoint by CMS proposing to drop the RVU conversion factor for all codes from the 2020 value of $36.08 to $32.26 in 2021. This equates to approximately a 10.5% decrease.

To understand what this means, we will use an example of billing code 99213 – Established Patient Office Visit:

In 2020, the Work RVU value for this code was .97 and the Total RVU was 2.11.
When the 2.11 is multiplied by the 2020 $36.08 Conversion Factor, it led to an approved payment of $76.13.
In 2021, the Work RVU component for the same code increases to 1.3, and the Total RVU increases to 2.44.
When multiplied by the 2021 RVU Conversion factor of $32.26, the approved payment amount is $78.71 – an increase of $2.58.

Most codes, however, will not see similar increases.

For example, a New Patient Office Visit Level 5 – CPT Code 99205 – which does have an increase in the Work RVU component, will not see an increase. This particular code projects a decrease from the 2020 approved reimbursement of $211.07 to $199.37; the RVU increase is not enough to compensate for the decrease in the conversion factor. Of course, other codes, surgery, radiology, etc., will not see an RVU increase at all, so the reimbursement will decrease.

Modeling the Medicare Reimbursement impact can help practices better understand how this rule will affect their bottom line. By taking the utilization of the seven impacted E/M codes, modifying the RVU, and then repricing their Medicare Total RVU values – including the E/M increases – at the Proposed 2021 RVU Conversion Factor, a practice can predict the change in Medicare reimbursement that will be realized by the proposed changes. This may need to be done at a division, specialty, or even provider level depending upon the organization and the level of Medicare in the organization’s payer mix.

But the Reimbursement changes are not the only impact. The RVU changes are universal, regardless of payer. This will have an impact on Provider Productivity reporting and benchmarking. Depending upon the benchmarking service a practice uses, new benchmarks incorporating the E/M changes will not be available for 6-months to a year. As such, the provider’s RVU productivity compared to the benchmark may be artificially inflated by the E/M RVU modifications for all payers. Practices may want to adjust the benchmarks or productivity reports to take these changes into account.

RVU based physician compensation is also a key area to monitor when these RVU changes go into effect. Organizations will see RVU increases across the board for most physicians, even when reimbursement remains flat or decreasing. This can be a significant financial hit for many organizations. Often, there is not a lot that the organization can do about the compensation plan; however, modeling the expected compensation increase based upon each provider’s E/M utilization can be a huge benefit to finance and payroll departments looking to plan for the impending financial impact and adjust the budgets and projections accordingly.

The 2021 proposed rule for the Physician Fee Schedule is the most significant change in Medicare reimbursement in a single year that I have seen in my 20+ years in Healthcare. Organizations should take heed and look into the impact, model the expected changes, and plan now in case all of these changes are adopted so that they will not be caught off-guard.

Written by: Scott Everitt, MBA, VP of Healthcare Solutions at Practical Data Solutions

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