Key Insights from the CY 2024 Medicare Physician Fee Schedule (PFS) Proposed Rule
On July 13, 2023, the Centers for Medicare and Medicaid Services (CMS) released the calendar year (CY) 2024 Medicare Physician Fee Schedule (PFS) Proposed Rule. CMS proposes a 2024 Physician Conversion Factor (CF) of $32.7476. This is a reduction of 3.34% from the 2023 Physician CF of $33.8872. The change in value is driven by a 0% annual update, a negative 2.17% impact from budget neutrality adjustments, the expiration of the 2.5% statutory payment increase for CY 2023, and a 1.25% statutory payment increase for 2024. The agency notes that this reduction results from a formula they must abide by.
As a reminder, the Medicare CF is a dollar conversion factor used to calculate payment rates for Medicare PFS services. To calculate rates, geographically adjusted relative value units (RVUs) representing work, practice expense (PE), and malpractice costs are multiplied by the CF. By law, the Medicare PFS is budget neutral, so any increases greater than $20 million must be balanced by cuts elsewhere.
Addressing this payment reduction will require Congressional action. Providers were anticipating this cut and have been heavily lobbying Congress for a short-term solution to avoid a payment cut in 2024 and a more long-term solution for the physician payment system to bring greater stability to the fee schedule and annual updates that reflect the rising practice costs to the physician payment system. In general, there does seem to be bipartisan support for at least a short-term fix for 2024. A more long-term solution that addresses issues such as an annual inflationary update, updating the $20 million threshold for budget neutrality, and concerns related to the Quality Payment Program (QPP) remains more uncertain.
Beyond the conversion factor, some significant policy themes that impact clinician payment and beneficiary access to services of note include:
Specific policy proposals create specialty winners and losers.
Prioritization of health equity moves from quality measurement to payment for particular services.
The agency moves cautiously on addressing data needs, which provides some stability to the fee schedule.
Telehealth flexibilities are maintained throughout CY 2024.
CMS proposes updates to the QPP for 2024 but also seeks comments on its future.
Certain policy proposals create specialty winners and losers. Beyond the proposed negative adjustment to the CF, an across-the-board cut on all services, other policies can impact payment rates. Table 104 in the proposed rule illustrates the combined impact of relative value unit (RVU) changes for 2024. Of the 55 specialties listed in the chart:
32 specialties are projected to experience a negative effect from proposed RVU changes. This negative impact ranges from -2% (several specialties) to -4% (Interventional Radiology).
16 specialties are projected to experience a positive impact from proposed RVU changes. This positive impact ranges from +1% (several specialties) to +3% (Endocrinology).
7 specialties are projected to experience a neutral or 0% impact from proposed RVU changes.
Table 104 is available HERE, and Table 105, which breaks the impact down by site of service (non-facility and facility), is available HERE. Note that these tables are done in the aggregate, and the mix of services provided by a practice will determine the actual impact of proposed changes.
The agency has noted in the proposed rule that establishing an add-on code for complex patients, estimated to be reported with all office and outpatient evaluation and management codes 54% of the time, is a significant factor in this impact table. Additionally, CY 2024 will be the third year in a four-year transition of updating the wages for clinical labor staff used to calculate PE RVUs (direct PE comprises clinical labor, supplies, and equipment). Due to budget neutrality, codes with a higher share of labor as a portion of direct PE saw positive impacts, and those with a lower share of clinical labor as a portion of their direct PE saw negative effects.
Prioritization of health equity moves from quality measurement to payment for specific services. In response to the Administration’s Executive Order #13985, agencies across the government have issued policies to advance equity. Recent PFS and other payment rules have included health equity proposals. Generally, these policies have focused on data collection through quality reporting. This rule seems to go beyond these proposals and takes a big swing by proposing payment for several services addressing health disparities and advancing health equity goals and priorities.
These services include:
Payment for Caregiving Training Services will allow the practitioner to report training provided to the patient’s caregiver.
Payment for Social Determinants of Health Risk Assessment Services would be furnished as an add-on code to an annual wellness visit or with an evaluation and management visit.
Payment for Community Health Integration Services is the first PFS service that includes community health workers. Community health workers often link underserved communities to health and social services.
Payment for Dental Services would cover services before and during several cancer treatments.
This rule also includes enhancements to the agency’s behavioral health strategy and paying for complex primary care through an add-on code.
Table 107 in the proposed rule is described as an equity table. It describes beneficiaries by various health equity characteristics (e.g., race, disability) and their utilization of services by specialty. CMS seeks comment on this table.
The agency’s continued work in this area, both in data analysis and program design, will likely continue in future regulations.
The agency moves cautiously on addressing data needs, which provides some stability to the fee schedule. The agency constantly needs to update the data used to establish work, practice expense (PE), and malpractice relative value units (RVUs) and set PFS rates. Because of the budget-neutrality nature of the fee schedule updating data for even one component in the complex formulas used to set rates can have a ripple impact across the fee schedule. For example, the recent update to clinical labor rates used to establish PE RVUs negatively affected those services whose PE had a more significant proportion of supplies and equipment versus clinical labor. Stakeholders have often raised concerns about these downward payment swings' detrimental impact on running a practice. An ongoing challenge for the agency is maintaining and updating data that is the basis for establishing PFS rates while minimizing its unexpected negative impact resulting from the application of budget neutrality.
In this proposed rule, the agency seems more cautious in updating data. The agency said they will continue to delay the implementation of the finalized, rebased, and revised Medicare Economic Index (MEI) data. The agency acknowledges that it would have significantly impacted PFS payments this year, but instead, they will consider it in future rulemaking. CMS is also soliciting comments on strategies to update PE data collection and methodologies for incorporating new data. The American Medical Association (AMA) will launch the Physician Practice Information Survey (PPIS). The PPIS is used to determine the distribution of indirect PE (rent, overhead, administrative staff, etc.) resources. The agency seeks comments on strategies for incorporating the new data, which will significantly impact PE, and comments to address any potential gaps in the PPIS data collection effort.
The eventual incorporation of all of this new data will have to be implemented in a budget neutral manner, which could mean a bumpy ride for PE valuation in the next few years.
Telehealth flexibilities are maintained throughout CY 2024. Once the public health emergency ended, the Consolidated Appropriations Act (CAA) of 2023 extended many flexibilities through December 31, 2024. The proposed rule implements these changes.
To the relief of many telehealth supporters, CMS went beyond what was in the CAA and extended the policy of the higher non-facility reimbursement rate for telehealth services that was established during the pandemic. This issue was not addressed in the legislation. CMS proposes to pay for telehealth services at the non-facility rate for services provided to people in their homes. CMS indicates they are doing this to protect access to mental health and other telehealth services. There was concern that if the agency did not maintain the non-facility rate, access to telehealth services could be reduced. The extension through 2024 provides Congress time to consider what telehealth will look like in the future. Currently, several bills are being considered.
In addition to legislation, telehealth practitioners and advocates should watch for new telehealth codes in 2025. The 2023 CPT Editorial Panel meeting summary indicates that 17 codes for reporting telemedicine office visits were approved for January 2025. It should be noted that these decisions are not finalized until the publication of the CPT book.
CMS proposes updates to the QPP for 2024 but also seeks comments on its future. Established in 2017 through legislation, MIPS and, more recently, MIPS Value Pathways (MVPs) have been the quality reporting program for clinicians not participating in alternative payment models. In the proposed rule, the agency notes that due to the COVID-19 pandemic, the QPP has been on pause in many ways, but it is now ready to refocus the program. The agency proposes several changes for CY 2024 but also seeks comments on a future pathway for the QPP.
For 2024, CMS proposes modifications to all four MIPS performance categories, increasing the threshold to avoid a negative payment adjustment and proposals on how quality data is publicly displayed on Care Compare. In addition to these proposals, the agency also released a request for information (RFI) on the future of the QPP. The agency seeks comments on the alignment of MIPS, MIPS MVPs, and the Medicare Shared Savings Program. The agency also seeks comments on making MIPS and MVPs more meaningful, how to incentivize participation better and reduce participants’ administrative burden.
Since its inception, MIPS has been criticized by many clinicians for its complexity, administrative burden, and for the reward of low positive adjustments for those who participate successfully. In a recent House Energy and Commerce Committee hearing, there was consensus among witnesses and members that the MIPS had failed to meet its goals, was overly burdensome, and potentially inherently flawed and beyond repair. While a complete replacement of MIPS shortly is unlikely, this context of making more substantial changes to physician quality reporting could help frame comments on the RFI.
The CY 20024 Proposed Rule, press release, and fact sheet are available on the CMS website. Comments are due on September 11, 2023.
For more information and questions, please contact:
Sheila Madhani, MA, MPH
Madhani Healthcare Consulting, LLC
Email: smadhani@madhani-health.com
www.madhani-health.com
Tel: (202) 679-2977