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December 2, 2020

The 2021 Medicare Physician Fee Schedule Rule: What you need to know

Daily Briefing

    CMS on Tuesday released its final rule to update the Medicare Physician Fee Schedule (MPFS) for calendar year 2021, which, among other provisions, will boost payments for some physicians, reduce payments for others, and expand the list of telehealth services that Medicare covers.

    The 2021 Quality Payment Program proposal: The 3 key updates to know

    The rule, which CMS administrator Seema Verma called "the most significant updates to E/M codes in 30 years," was delayed by a month as CMS focused on urgent issues related to the Covid-19 epidemic, Modern Healthcare reports. The rule takes effect on Jan. 1, meaning health care organizations have less than a month to adjust to the changes while also dealing with their own Covid-19 response efforts.

    Payment-rate updates

    CMS said the final rule includes several "standard technical proposals involving practice expense, including the implementation of the third year of the market-based supply and equipment pricing update, and standard rate-setting refinements to update premium data involving malpractice expense and geographic practice cost indices."

    As required by law, CMS finalized a budget neutrality adjustment that accounts for changes in relative value units (RVUs)—including changes in evaluation and management services and codes—that are converted into PFS payments rates. Based on the changes, CMS set the final PFS conversion factor for 2021 at $32.41, down $3.68, or 10.6%, from 2020's conversion factor of $36.09.

    Jefferies analysts previously said the payment-rate adjustments would reallocate Medicare payments in a way that benefits general practitioners, family practice providers, and NPs, but that reduces payments for some specialties.

    Further, CMS finalized a proposal to rebase and revise the market basket for federally qualified health centers (FQHCs) to a 2017 base year, meaning the proposed FQHC market basket update for 2021 will be 2.4%. After accounting for the 2021 multifactor productivity adjustment of 0.7%, CMS said the payment update for FQHCs is 1.7% for 2021.

    E/M coding changes

    CMS in the final rule said it will align "E/M visit coding and documentation policies with changes laid out by the CPT Editorial Panel for office/outpatient E/M visits" beginning Jan. 1, 2021.

    The agency finalized revaluation of several code sets that will increase the value of ED visits, end-stage renal disease capitated payment bundles, maternity care bundles, and more.

    CMS also continued its efforts to simplify billing and coding requirements for office and outpatient visits by finalizing revisions recommended by the American Medical Association (AMA) and other organizations. CMS said those revisions—which would take effect Jan. 1, 2021—will save clinicians about 2.3 million hours of work each year.

    Telehealth expansions

    CMS in a release said it is currently covering 144 services via telehealth under the federally declared public health emergency (PHE) in response to America's coronavirus epidemic, and that between mid-March and mid-October, more than 24.5 million Medicare beneficiaries received a service via telehealth.

    The final rule adds more than 60 services to the list of telehealth services that Medicare will cover beyond the PHE. The agency added some of those services to the Medicare telehealth list on a Category 1 basis, because the services are similar to others already included on the list. The services that CMS added to the list on a Category 1 basis include:

    • Cognitive Assessment and Care Planning Services CPT Code 99483;
    • Domiciliary, Rest Home, or Custodial Care services CPT Codes 99334 and 99335;
    • Group Psychotherapy CPT Code 90853;
    • Home Visits, Established Patient CPT Codes 99347 and 99348;
    • Prolonged Services HCPCS Code G2212;
    • Psychological and Neuropsychological Testing CPT Code 96121; and
    • Visit Complexity Associated with Certain Office/Outpatient E/Ms HCPCS Code G2211.

    CMS also finalized the creation of a temporary third category (Category 3) of services for the Medicare telehealth services list. Category 3 will reflect services that the Trump administration added to the list under the Covid-19 PHE. Under the rule, Category 3 services will remain on the Medicare telehealth services list through the end of the year in which the PHE declaration ends. The services that CMS added to the list on a Category 3 basis include:

    • Domiciliary, Rest Home, or Custodial Care services, Established patients CPT Codes 99336 and 99337;
    • ED Visits, Levels 1-5 CPT Codes 99281, 99282, 99283, 99284, and 99285;
    • Home Visits, Established Patient CPT Codes 99349 and 99350;
    • Hospital discharge day management CPT Codes 99238 and 99239;
    • Nursing facilities discharge day management CPT Codes 99315 and 99316; and
    • Psychological and Neuropsychological Testing CPT Codes 96130-96133 and 96136-96139.

    CMS under the final rule also:

    • Clarified that Medicare telehealth rules don't apply to services that clinicians provide via telehealth technologies when they're in the same location as the patient, such as when a clinician uses telehealth technologies to avoid potential exposure to a patient infected with the coronavirus;
    • Clarified the types of clinicians who can provide brief online assessment and management services, virtual check-ins, and remote evaluation services via Medicare telehealth; and
    • Finalized a frequency limitation for subsequent nursing facility visits provided via Medicare telehealth of one visit every 14 days; and
    • Finalized a proposal to extend through Dec. 31, 2021, an interim final policy adopted under the PHE declaration to federal rules that allows direct supervision to include instances when a supervising physician or practitioner is overseeing other clinicians via interactive audio/video real-time communications technologies.

    In addition, CMS under the rule clarified Medicare payment policies for certain remote physiologic monitoring (RPM) services. For example, the agency clarified that:

    • Auxiliary personnel, including contracted employees, may provide certain RPM services if they are under a physician's supervision;
    • CMS will again require that an established patient-physician relationship already exist for RPM services to qualify for Medicare coverage once the PHE declaration ends;
    • Only non-physician practitioners (NPPs) and physicians eligible to provide E/M services are eligible to bill Medicare for RPM services;
    • Providers may obtain patients' consent at the time RPM services are furnished; and
    • Qualifying clinicians may provide RPM services to patients with acute conditions and those with chronic conditions.

    Updates related to professional scopes of practice

    CMS in the rule also finalized updates and clarifications regarding professional scopes of practice and related issues. For example, CMS under the rule will permanently allow CNMs, CNSs, NPs, and PAs—in addition to physicians—to supervise the administration of diagnostic tests within their state scope of practice and applicable state laws, as long as they maintain required relationships with collaborating or supervising physicians.

    CMS also extended some policies implemented under the PHE declaration that relate to services furnished by pharmacists and physical therapists, as well as certain flexibilities related to medical record reviews and verification. In addition, CMS clarified policies regarding Medicare payments for services provided by teaching physicians and resident "moonlighting" services.

    Other updates

    CMS under the rule also will:

    • Adjusted the Medicare Shared Savings Program to account for the Covid-19 epidemic, such as giving providers full credit for 2020 patient experience surveys;
    • Implement Sections 2002 and 2003 of the SUPPORT Act, which require initial preventive physical examines to include screening for potential substance use disorders and mandates that clinicians electronically prescribe certain scheduled drugs in accordance with applicable electronic prescription drug monitoring programs;
    • Make certain updates to Medicare's Diabetes Prevention Program Expanded Model;
    • Revise data reporting periods and the agency's planned phase-in of payment reductions for clinical diagnostic laboratory tests, as called for by recent federal laws; and
    • Update several policies related to Medicare payments for opioid use disorder treatment services provided by opioid treatment programs.

    CMS also finalized several updates to the Quality Payment Program (QPP). For a full breakdown of CMS' QPP updates, click here


    Several provider groups have raised concerns about the conversion factor reductions, saying they could financially harm health systems and medical groups that are working to combat the new coronavirus.

    Anders Gilberg, SVP of government affairs at the Medical Group Management Association, in a statement said, "The 10% decrease to the conversion factor and resulting reimbursement cuts to many specialties is deeply troubling during a time when COVID-19 cases are skyrocketing and practices are scrambling to stay financially viable. We are disappointed that CMS decided to not provide the stability that physician practices require to meet patient needs during this unprecedented public health emergency."

    AMA President Susan Bailey in a statement said, "The (American Medical Association) strongly urges Congress to prevent or postpone the payment reductions resulting from Medicare's budget neutrality requirement. Physicians are already experiencing substantial economic hardships due to Covid-19, so these payment cuts could not come at a worse time."

    However, in comments submitted on the proposed rule MedPAC noted that the policy change could help close the pay gap between primary care physicians and specialists (Minemyer, FierceHealthcare¸12/1; Brady, Modern Healthcare, 12/1; Brady, Modern Healthcare, 12/2; CMS release, 12/1; CMS fact sheet, 12/1).


    Advisory Board's take

    Our take on the MPFS Final Rule

    John Daniel 

    By Daniel Kuzmanovich and John League

    While it adds complexity and financial pressure for provider organizations in a year that's already been incredibly trying, much of the CY 2021 Final Rule that CMS issued yesterday is not unexpected. The broad finalizations in the rule were highly likely even before the results of the presidential election. 

    CMS has been transparent about two of its overarching goals and this rule accomplishes both of them:

    1. Control cost of care with value-based care models. The E/M code changes reward upstream medical services crucial to keeping patients out of higher cost settings and more expensive procedural care and reduce the payment for proceduralist physicians.
    2. Put patients over paperwork. The documentation changes included throughout the rule decrease the administrative burden on providers, especially those providing upstream services.

    The reason this rule has caused so much angst for health care executives isn't these goals, it's how CMS accomplished them while keeping legally mandated budget neutrality: a 10-ish% reduction of the conversion factor. This will likely come as a decrease in Medicare reimbursement for most provider organizations in a year where most hospitals and health systems have seen a 20% decrease in their operating margin on top of an enduring pandemic and economic recession. 

    But there is an "upside" for provider organizations: CMS in the rule expands telehealth and increases scope of practice for non-physician providers. CMS has continued to expand telehealth services incrementally, both those that will be reimbursed on a permanent basis, and those that will be reimbursed through the year in which the PHE ends. CMS has also steadily expanded the types of providers who can offer via telehealth services that are within the scope of their practice.

    The only genuine surprise in the telehealth provisions is the inclusion of audio-only evaluation and monitoring (E/M) services on an interim final basis. CMS has favored two-way, real-time, audio-visual interactions, having made audio-only visits reimbursable for the first time in response to the pandemic. The final rule creates new codes for audio-only discussion that is greater in length than existing virtual check-ins and should make it easier for patients to access such services.

    As provider organizations prepare for the final rule to take effect there are two key steps to take when the rule goes into effect:

    1. Determine their plan for physician compensation, if they haven’t already. There are two main options provider organizations should consider:
      1. Transmit the market: Follow the wRVU changes so that proceduralists see less and medical specialties see more. This option is more likely to be adopted by provider organizations working in a single market geography or provider organizations on a journey to greater risk-based contracting.
      2. Protect providers from market forces: Don’t follow the Medicare changes and pay providers based on previous wRVU productivity with a method for “settling up” later. This option is more likely to be adopted by larger organizations spanning multiple markets. 
    2. Assess how much will this affect their Medicare reimbursement. Given the financial strains many provider organizations are facing amid the Covid-19 epidemic, it's imperative for organizations to assess how the changes will affect Medicare reimbursement.  

    Looking forward, the rule raises seismic questions about health care's future that we'll continue to watch:

    • What will a potential Biden administration/CMS do a year from now?
    • Does this change inspire provider organizations take on greater risk-based payment in the near-term?
    • How does this Rule affect physician compensation models long-term?
    • Does the greater compensation and attention to upstream medical specialties change what disciplines aspiring physicians and physicians in training choose during their education? 

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