Crystal Balling the 2024 Medicare Physician Fee Schedule (PFS) Proposed Rule
It all begins with an idea.
With an anticipated release date of on or around July 1, the calendar year (CY) 2024 Medicare PFS Proposed Rule – which sets payment rates and policies for over 7,000 services provided by physicians and other qualified healthcare professionals – is expected shortly. While the proposed policies are kept under wraps, some educated prognosticating can be done.
Negative Physician Conversion Factor (CF) update. A negative update to the CF is anticipated for CY 2024. This will require Congressional action to reverse. While the level of the negative adjustment is unknown, estimates range up to 5.5%. This is in addition to the -2% Medicare Sequestration adjustment that applies to all Medicare payments. Congress has delayed the -4% PAYGO Sequestration adjustment through 2024.
Background: The Medicare CF is a dollar conversion factor used to calculate rates for services on the Medicare PFS. 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. Any estimated increases in spending of $20 million or more must be offset by cuts elsewhere. Historically the Centers for Medicare and Medicaid Services (CMS) has applied budget neutrality adjustments to the CF.
Although the Consolidated Appropriations Act of 2023 provided for a 1.25% update for CY 2024, this is less than the 2.5% update Congress approved for CY 2023. Additionally, sources of increased spending that could trigger the budget neutrality adjustment include implementing G2211 an evaluation management (E/M) code describing complex services (whose implementation Congress has delayed since 2021), and increased spending generated from other proposals and policies in the CY 2024 Medicare PFS.
Clinical Labor Updates May Negatively Impact Services with Expensive Equipment and Supplies. CY 2024 will be the third year in a four-year transition of updating the wages for clinical labor staff that is used in the calculation of PE RVUs. These wages were last updated in 2002. In general, wages increased and as a result, PE spending increased. This triggered adjustments to maintain 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 labor as a portion of their direct PE saw negative impacts. CMS estimated in the CY 2022 PFS Final Rule that once fully implemented the impact would range by specialty from +9% to -3% (Note, portable X-ray suppliers were an outlier at +9%, and most specialties with positive updates were in the range of +1 to +2%).
This has been viewed as a controversial policy by some office-based specialties who have raised concerns that this is just one in a series of cuts they have experienced in recent years and that this trend is just unsustainable. In response, on May 27, 2023, U.S. Reps. Gus Bilirakis (R-FL), Tony Cardenas (D-CA), Greg Murphy, MD (R-NC), and Danny Davis (D-IL) introduced the Providing Relief and Stability for Medicare Patients Act of 2023 (H.R. 3674). If implemented, the legislation would reduce the negative impact of this policy on certain services.
Background: An estimated 45% of physician payment is allocated to direct PE (e.g., supplies, equipment, and non-physician clinical labor) and indirect PE (e.g., administrative overhead, non-clinical labor, rent).
Another PE-related issue CMS could address in the rule is updating indirect PE. The agency has been struggling for several years with updating the data behind indirect PE. The current indirect PE component is based on data from the Physician Practice Information Survey of 2007-2008. CMS solicited comments in the CY 2023 PFS Proposed Rule on both data sources and methodologies for updating indirect PE. While the agency did not finalize any policies in 2023, they indicated that they would consider comments they received in future rulemaking.
Reimbursement for Telehealth in 2024. While traditionally CMS reimbursed telehealth at the lower facility rate, during the public health emergency (PHE) office-based physicians were reimbursed at the higher non-facility (or office-based) rate. The higher rates are largely due to increased PE associated with office-based procedures. It is unclear if CMS will continue this policy in 2024, but we should expect the agency to clarify this policy in the upcoming proposed rule.
In a report to Congress released on June 15, 2023, the Medicare Payment Advisory Commission (MedPAC) suggested that CMS should pay less for telehealth, and this is getting some attention. While the proposed rule is largely written, this recommendation could have an impact on CMS proposals as well as discussions on the Hill. Discussions on rate-setting for services beyond 2024 may also raise the issue if the cognitive work and intensity of telehealth services are the same as face-to-face services.
Background: During the pandemic, with the support of flexibilities issued by the Department of Health and Human Services, telehealth utilization increased dramatically, most notably in the first few months of the pandemic. While utilization eventually leveled off, telehealth continues to be popular with both patients and providers. With the end of the PHE and its associated flexibilities, Congress authorized an extension of many of the Medicare telehealth flexibilities through December 31, 2024.
Potential Other Issues. There are potentially other issues that the agency may address in the proposed rule.
New and Revised CPT Codes. Every year the rule includes proposed values for new and revised CPT codes which describe medical, surgical, and diagnostic services performed by healthcare professionals. The 2024 updates are the result of changes approved at the February 2022, May 2022, and September 2022 CPT Editorial Panel meetings and the corresponding RVS Update Committee meetings where data on the valuation of these codes are considered. Summaries of actions taken at these recent CPT Editorial Panel meetings – which can provide a peek into new and revised codes for 2024 --are available HERE.
Rebasing and Revising the Medicare Economic Index (MEI): Established in 1975, the MEI is a measure of practice cost inflation. In the 2023 final rule, CMS finalized technical changes to the MEI including changing the base year from 2006 to 2017 and updating other data components. While these changes were finalized in 2023, CMS did not use them for rate setting. CMS estimated that the impact of the MEI changes would vary by specialty. Specialties with greater work RVUs and lower PE would be negatively impacted by these updates while those with greater PE would be positively impacted. In the 2024 PFS Proposed Rule, CMS may seek additional comments or issue additional proposals.
Implementation of Inflation Reduction Act (IRA) Policies Related to Part B Drugs: While this is largely being handled outside of the PFS proposed rule process, it would not be surprising if there are elements or proposals related to the implementation of the IRA as it relates to Part B drugs found in the proposed rule.
Expansion of the Merit-based Incentive Payment System (MIPS) Value Pathways (MVPs). Launched in 2023, MVPs are a voluntary alternative to the traditional MIPS track of the Quality Payment Program. MVPs are a subset of measures and activities that can be used to meet MIPS reporting requirements. CMS finalized 12 MVPs in 2023, and it is expected that the program will expand in 2024 with CMS proposing additional MVPs. While CMS has backed away from a previous proposal to sunset the traditional MIPS program, the proposed rule may also include some insights into their plans for the future of the traditional MIPS program.
In other related news, CMS has hinted that they will release as part of the proposed rule a Request for Information (RFI) on partially capitated or hybrid payment in the Medicare Shared Savings Program.
Health Equity Proposals or RFIs: The Biden Administration has consistently and repeatedly identified health equity as a priority. CMS launched a framework to advance health equity in 2022, the Centers for Medicare and Medicaid Innovation announced a health equity initiative and embedded health equity components in recent models they have launched, and CMS has sought feedback on the issue in numerous regulations. Most recently, the FY 2024 Inpatient Prospective Payment System included an RFI on advancing health equity in safety net hospitals. It also included proposals for implementing measures that expand the collection, reporting, and analysis of standardized health equity data. It is anticipated that CMS will include health equity-related proposals in the CY 2024 PFS Proposed Rule.
The proposed rule is expected on or around July 1, 2023 (or June 30 which is a Friday). It is generally released at 4:15 pm ET and when released is posted HERE.
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