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Recalibrating Medicare reimbursement

Proposed CMS guidelines spell disaster

By Kit Crancer and Zachary Brunnert

 long-term goal of the current administration has been to increase reimbursement rates to primary care providers. Under the latest Medicare Physician Fee Schedule (MPFS) from the Centers for Medicare and Medicaid Services (CMS), primary care and other clinicians who charge for evaluation and management (E/M) services are set to see significant, and much needed, reimbursement increases. In fact, the new fee schedule recognizes that E/M codes have been chronically underpaid for decades, and primary care is set to receive an increase of around 12% in reimbursement over the current fee schedule. Unfortunately, due to a statutory provision requiring “budget neutrality,” any reimbursement increase to one type of clinician essentially requires a decrease to another provider type. In the case of the newest CMS fee schedule, some medical specialists are set to see their Medicare payments slashed by as much 11%. In good times, an 11% cut would be difficult to swallow, but in the current health emergency it’s unsustainable.

The background

COVID-19 has already created substantial challenges for health care providers. For the first time, clinicians faced government-mandated restrictions on their ability to care for patients. As restrictions on elective procedures blanketed the country and patient volumes dropped precipitously, mammography screenings nearly ceased with a 90% reduction, most clinics were forced to furlough large swaths of employees, and, in many cases, close facilities entirely. Now, as specialty providers gear up to treat the backlog of patients whose care had been delayed, they face potential double-digit reimbursement reductions from CMS that will have clear implications on other forms of reimbursement.

​All health care providers are under extreme financial stress.

Annually, CMS issues their MPFS, which provides for the payment of over 10,000 physician/licensed clinician services and sets the Relative Value Units (RVU). In formulating reimbursement, CMS calculates a geographical practice cost index (GPCI) for every payment locality, the Resource-Based Relative Value Scale (RBRVS), and the Conversion Factor. The RBRVS is calculated for each CPT code based on physician work, practice experience, and malpractice insurance costs. Using the geographically adjusted RVU, the Conversion Factor is used as a multiplier to determine the Medicare-allowed reimbursement rate. These annual calculations are bound by budget neutrality requirements, meaning increases in certain codes must be offset by reductions in others. The proposed CMS rule states that if revisions to the RVUs cause expenditures for the year to change by more than $20 million, adjustments shall be made to ensure that expenditures do not increase or decrease by more than $20 million. Typically, large-scale payment methodology changes receive significant scrutiny by providers, but with clinicians working to address a backlog and treat patients during a pandemic, these significant reimbursement changes seem to be flying under the radar.

What is in the MPFS

During the rule-making process last year, CMS signaled their intention to move forward with the adoption of a new reimbursement methodology and coding structure, increasing payments for evaluation and management codes (E/M) while reducing payments to specialists like radiologists by 8%. This change set out to eliminate the blended payments for certain levels of E/M codes, and to break them out for each of the five levels.

At the beginning of August 2020, CMS issued the calendar year 2021 MPFS proposed rule, which is set to become effective on Jan. 1, 2021. Contained in this rule is the finalization of provisions previously outlined in the CY 2020 MPFS and sets the conversion factor at $32.2605, a $3.83 or 10.6% decrease from the previous fee schedule. This is estimated to reduce payments to radiology by 11%, interventional radiology by 9%, cardiac surgery by 9%, physical therapy by 9%, and radiation oncology and radiation therapy by 6%. Others, mainly specialties that focus heavily on office visits, are set to see rates boosted substantially.

Adding complexity and confusion is the efforts by the CMS to also bundle some types of payment codes. This is requiring extreme process and treatment changes for many who are also affected by the budget neutrality rate cuts.

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Impacts to providers and patients

These unsustainable reductions come at a time when all health care providers are under extreme financial stress. Coupled with elective procedure restrictions and fear that COVID-19 will impact volumes, these proposed reductions to Medicare reimbursement will not just cause ripples through the health care system, but disruptive waves that will impact the stability of the health care system for providers and patients alike and likely cause further consolidation of the health care system.

Decreased Medicare rates will not be the only form of payment to providers that will be impacted. Many states across the country use these CMS rates as a factor in determining their fee-for-service rates, and some even directly peg to a specific percentage of the MPFS. Additionally, many states have moved to a managed care delivery system for their Medicaid beneficiaries, utilizing capitated per member per month payments. These rates are required to be actuarially sound, often set by just a handful of large actuary firms, most of whom heavily weight Medicare rates in making their determinations. Furthermore, these proposed reductions will result in continued downward pressure on provider contracts with commercial payers, as insurers consider government payer rates in contract negotiations.

Slashing payments to vulnerable specialty providers will also threaten access for patients, including those who are not direct Medicare beneficiaries. These reductions perpetuate the climate in which small physician offices increasingly struggle to keep their doors open. Market forces, paired with a pandemic and decreased reimbursement, have all resulted in community-based providers closing up shop. Many outpatient imaging centers and radiology groups have been forced to consolidate operations, leaving many patients with an absence in choice. Further reductions to reimbursement will only exacerbate this problem.

Additionally, as we have seen in the nursing home industry, reduced reimbursement in some states can lead to limiting of low-paying payer exposure by providers. As rates fall, and providers face increasing employment costs, many have no choice but to limit their contact with payers that do not reimburse at cost. This risks a growing segment of the population having fewer options when seeking health care services. As it pertains to many specialist services, when patients are often seeking timely answers or treatments, delays in care equate to denial in care.

​Some medical specialists are set to see their Medicare payments slashed by as much 11%.

Making an impact

Across the spectrum of specialty providers, a large grassroots effort is emerging as various coalitions are forming to prevent drastic cuts to reimbursement. Advocacy groups such as the American Medical Association (AMA), American College of Emergency Physicians, and many others continue to press CMS to prevent rate reductions, and to ask Congress to waive budget neutrality requirements for the latest fee schedule. This would allow for primary care and others to receive a much-needed reimbursement increase while also ensuring that specialists don’t have to endure draconian cuts.

While large industry organizations have engaged lobbying groups and consultants, these efforts are only as effective as their ability to activate a grassroots network of professionals and directly engage policymakers. This is where you come in.

Health care clinicians lending their voice to an industry advocacy movement is immensely helpful, greatly impacting the trajectory of the campaign to prevent draconian reimbursement reductions. As groups of surgeons, radiologists, social workers, pathologists, and other specialties come together, there are some simple steps clinicians can take to better ensure the success of this growing effort.

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First steps include:

• Finding out if the medical specialty or professional association retains a lobbyist or industry representative to provide “talking points” for use with Minnesota’s congressional delegation;
• Contacting members of Congress by email or phone to alert them to the devastation of these cuts, as there are many other issues now consuming the attention of Congress; and
• Providing both home and facility/office addresses as well as the number of employees in the practice, along with any other economic impact information available. At this unprecedented time, every job is significant to a responsive member of Congress.

Engaging elected officials and/or their staff doesn’t have to be complicated. It requires preparation (e.g., talking points), a respectful attitude that refrains from partisanship, and an effort to put the cuts into context based on an issue they may be passionate about, such as job loss or patient access. Because of security reasons, an email or phone call is likely most efficient, which requires that the request (“waive budget neutrality”) to jump out in the subject line or be explained almost immediately.

One resource, which the authors and others involved in health policy have been involved in developing, is the website DontCutDocs.com. We’d invite anyone interested in getting involved to make this site their first stop.

The gist

As CMS appears unlikely to unilaterally walk back large-scale reductions to many specialty providers, at a time when the financial stability of the health care system has been the most at risk, increased advocacy efforts are greatly needed to compel CMS or Congress to take action. The latest move by the CMS puts patients and providers in jeopardy, not just by the cuts to direct Medicare rates, but how these will reverberate throughout the provider’s payer mix. If we are to be successful in our campaign to mitigate these proposed reimbursement cuts, a broad and loud outcry and direct engagement will be needed by health care professionals so that policymakers across the country become aware of the issue and its long-term, negative consequences.

Kit Crancer is vice president of public policy and executive director of the CDI Quality Institute.

Zachary Brunnert is director of state legislative policy at the Center for Diagnostic Imaging.