Margaret Braxton

Managing Director, Payer Strategy and Regulatory Research

CMS Strengthens Primary Care in 2024

Medicare Physician Fee Schedule while Specialists see Relative Cuts

On November 2, CMS issued the Medicare Physician Fee Schedule (MPFS) final rule for Calendar Year (CY) 2024, cementing policies first introduced earlier this year. The payment rule sets payment rates for physician offices, hospitals, ASCs, laboratories, and other care settings by establishing both the payment conversion factor and the value of each procedure billed to Medicare. The rule also makes adjustments to Medicare value-based care programs, i.e., the Quality Payment Program and the MeritBased Incentive Payment System (MIPS).

For payment calculations, CMS finalizes the methodology used to reimburse Medicare payment for doctors and physicians each year, including legislative requirements. In 2024, federal law requires a negative 1.25% payment adjustment in addition to the standard budget neutrality adjustment applied each year, which results in a new conversion factor that is 3.37% lower than 2023. The conversion factor is multiplied by the relative weight of each service code billed by physicians including time and medical decision-making, practice expenses, and malpractice expenses to determine payment. The 2024 conversion factor continues a long-term trend in declining physician payments that was temporarily reversed by Congress during the pandemic. Driving these changes are requirements that CMS must balance the payments for all Current Procedural Terminology (CPT) codes to be neutral to the overall Medicare budget, which was greatly affected by the addition of a new office visit add-on code. The effect on doctors is a gap between healthcare inflation, measured by the Medicare Economic Index (MEI), and actual Medicare reimbursement. The MEI is projected to increase 4.6% in 2024 compared to 2023, as advocacy groups continue to point out that budget neutrality translates into cuts when compared to year over year trends for labor and supplies costs.

There are a multitude of coding changes that CMS makes each year through the MPFS when re-evaluating the time and effort spent by clinicians for performing each service, known as Relative Value Units (RVUs). For CY 2024, CMS is emphasizing primary care by introducing an evaluation and management (E&M) add-on code for patients seen for ongoing general health services and complex conditions. This year, CMS determined that ~38% of office visits require additional value in the resources required to care for patients with complex, chronic conditions and created the add-on code G2211 to account for this time spent on patients. CMS estimates that based on their updated utilization estimates, the redistribution for other payments caused by adding this code will be lower than originally expected, which had caused Congress to delay its implementation in 2021 due to the high impact to other specialties. Surgery groups continued to oppose the introduction of this code because of the downstream impacts to payments in other, non-office care settings. Looking at the total impact of RVU changes across different specialties, CMS estimates the combined impact of changes made in the MPFS each year based on the most commonly used codes by provider type and the total allowed charges:

Table 1: Total Financial Impact of 2024 Coding Changes for Select Provider Specialties

 

In the rule, CMS is also bolstering behavioral healthcare by adjusting the reimbursement methodology for in-person psychotherapy services provided in a clinic. CMS was concerned that these codes have been consistently undervalued over time because the RVUs are calculated only by estimates of the time spent with a patient, unlike surgeries and other procedures. CMS decided to value these codes similarly to E&M office visits with additional complexity modifier codes because they also represent care for patients with ongoing, long-term care needs. This change to the work RVUs creates an additional 19.1% increase for most general psychotherapy codes (e.g., 90832, 30 minutes of psychotherapy with a patient) spread out over the next 4 years. These changes are in addition to adjusting other behavioral health codes to reflect that Marriage and Family Therapists and Mental Health Counselors are now eligible to become Medicare certified providers. CMS explained in the rule that the ongoing mental health and substance abuse crisis in the US, workforce shortages, low salaries, and the risk of burnout created the need for this substantial payment change.

Other substantial policy changes bolstered primary care and health equity. CMS introduced new payments for caregiver training which is common in cancer treatment plans. They also created new standalone G codes for both social determinants of health assessments, community health integration, and principal illness navigation services, i.e., connecting patients who are newly diagnosed with serious illnesses such as cancer with clinical support. Clinicians were also supportive of CMS clarifying how to split billing of one office-visit code performed by two clinicians. These represent positive developments the expanded role of primary care doctors and also recognition of unpaid family caregivers. 

For large-scale value-based care programs in Medicare, i.e., the Shared Savings program and Merit-based Payment Incentive System (MIPS), CMS focused on encouraging providers to participate in their programs: 

• Tweaking the benchmarking methodology for Accountable Care Organizations (ACOs), 

• Applying a cap to downward adjustments by geographic region, 

• Standardizing interoperability quality measures across each program, 

• Changing the methodology of beneficiary assignment to increase recognition of physician assistants and nurse practitioners, and 

• Maintaining the current threshold for bonus payments (rather than increasing it as proposed). 

Combined, these changes advance CMS’s goal of boosting primary care clinicians who act as a patient’s first contact with the health system and must account for complex comorbidities and social risk factors that mediate patients’ health outcomes. CMS is still hindered by budget limitations in the Medicare program and temporary fixes by Congress during the pandemic that are now expiring, in addition to other cuts that have been temporarily delayed until 2025. Physician payments for Medicare services are still disconnected from inflationary pressures unlike other areas of Medicare like home health and hospital services that account for changes in medical inflation each year. Because of the burden this places on certain specialties, providers must negotiate higher reimbursement with commercial insurers to make up for the differences private and public reimbursement across both Medicare and Medicaid. Providers should evaluate how the factors that CMS uses to calculate reimbursement will change in 2024 and anticipate how long-term trends in Medicare payment affect their business in the absence of a permanent solution by Congress.

Join SCALE Community

We are excited for you to share in the benefits of SCALE community’s healthcare focus materials. If you are not currently a member sign up now to get unlimited access to all our materials.