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News | Physician Payment and Reimbursment

Medicare shifts payments toward primary care physicians in PFS final rule

News | Physician Payment and Reimbursment

Medicare shifts payments toward primary care physicians in PFS final rule

Many specialty physicians — and the hospitals that employ them — will see big Medicare payment cuts in January under a newly finalized payment rule.

The CY21 Medicare Physician Fee Schedule (PFS) final rule issued Dec. 1 includes a historic boost in primary care payments but also cuts for many specialists due to statutory requirements for budget neutrality in the program.

The rate change includes the first substantial payment boost to Medicare’s evaluation and management (E/M) codes — extensively utilized by various types of primary care physicians — since the early 1990s, according to CMS.

“It’s all about valuing the time that doctors are spending with patients — recognizing that we have patients with significant chronic disease, that these visits are taking a lot more time,” CMS Administrator Seema Verma said in a call with reporters.

Services boosted by the E/M code revaluations include:

  • End-stage renal disease monthly capitation payment services
  • Transitional care management services
  • Maternity services
  • Cognitive impairment assessment and care planning
  • Initial preventive physical examination and initial and subsequent annual wellness visits
  • Emergency department visits
  • Therapy evaluations
  • Psychiatric diagnostic evaluations and psychotherapy services

The E/M codes total about 40% of Medicare physician services but are more often used by providers that do not routinely provide procedural interventions or diagnostic tests, CMS stated in the rule. The E/M payment increases to physicians who primarily deliver office or outpatient services will be offset by a 10% decrease in the conversion factor, resulting in cuts to many specialties.

Anesthesiologists, critical care and emergency medicine providers, respiratory specialists, radiologists and lab pathologists will be among the practitioners facing the biggest Medicare payment cuts under the policy, according to the American Hospital Association (AHA).

Some see potential for adverse effects

While the increase in E/M payments was broadly supported by provider groups, some worried about the effects of the offsetting cuts for specialty physicians.

The E/M revaluation and the associated changes made to ensure budget neutrality will “significantly strain the finances of hospitals and health systems,” AHA warned in a letter to CMS. “These facilities are already buckling due to the PHE [public health emergency]; the agency’s proposal would further jeopardize access to care for numerous patients.”

Verma said the cuts to specialty physicians would be offset by the $175 billion in ongoing disbursements made through the CARES Act Provider Relief Fund (PRF), as well as $106 billion in Medicare advance payment loans.

“The issues around the pandemic are hopefully short-term, and those are being addressed by the [PRF], but changes we are making today, while going into effect, will have a long-term impact” in terms of balancing physician payments, Verma said. 

AHA said the changes will have a disproportional impact on hospitals and health systems since they most directly employ providers or contract for their essential services.

AHA also expressed concern that many health plans tie their fee schedules to the Medicare PFS, which could compound specialty physician payment losses.

ACO changes draw concern

CMS also included several changes to the Medicare Shared Savings Program’s quality performance standards and quality-reporting requirements. The changes are designed in part to reduce reporting burdens and allow providers to focus on patient outcomes. For performance year 2020, CMS will provide automatic full credit for CAHPS patient-experience-of-care surveys.

Changes for agreement periods starting Jan. 1, 2022 — for both continuing and new ACOs — include:

  • Allowing for a decrease in an ACO’s repayment mechanism amount if a higher amount is not needed for its new agreement period
  • Revising the methodology for calculation of repayment mechanism amounts
  • Allowing eligible ACOs that renewed their agreement periods beginning on July 1, 2019, or Jan. 1, 2020, to decrease their repayment mechanism amounts under certain circumstances

But some value-based payment advocates worried that the new ways of measuring quality and the new benchmarks for performance are too complex to take on during the COVID-19 pandemic.

The National Association of ACOs (NAACOS) said the delayed release of the physician payment rule also “gives ACOs little time to assess and prepare for such changes before the rule goes into effect.”

The group urged the incoming Biden administration to reconsider the changes to the program.

Additionally, NAACOS urged allowances for ACOs that may not be able to report 2020 quality data in early 2021, “given the surges in cases of COVID-19 we are currently seeing across the country.”

CMS also revised the regulations specifying the adjustment to program calculations for episodes of care for treatment of COVID-19.

CMS finalized, with modifications, regulations specifying the expanded definition of primary care services for purposes of determining beneficiary assignment. The expanded definition, which includes telehealth codes for virtual check-ins, e-visits and telephonic communication, will apply when the assignment window for a benchmark or performance year includes any months during the COVID-19 PHE.

An added provision specifies that the additional primary care service codes will be applied to all months of an assignment window that includes any months of the PHE.

About the Author

Rich Daly, HFMA Senior Writer and Editor,

is based in the Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

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