Policy Changes for Medicare Payments Under the PFS


On November 2, 2022, the Centers for Medicare & Medicaid Services (CMS) issued CY 2023 Physician Fee Schedule Final Rule (Final Rule), implementing certain updates and policy changes for Medicare payments under the Physician Fee Schedule (PFS) and changes to the Medicare Shared Savings Program (MSSP), effective on or after January 1, 2023. The final rule addresses, among other things, PFS payment rates, coding and revaluation of certain evaluation and management visits, updates to Medicare provider enrollment policies, and MSSP requirements.

The Final Rule implements policies to achieve a more efficient and equitable healthcare system. Changes to the PFS and payment policies ensure that payment systems updates reflect changes in medical practice and appropriate payment for services. Updates to the rules pertaining to provider enrollment enable CMS to take further action to prevent potentially fraudulent individuals and entities from entering and inappropriately billing Medicare. The changes to the MSSP further CMS’s overall value-based care strategy of growth, alignment, and equity.

CY 2023 PFS Conversion Factor

The Final Rule included the CY 2023 PFS conversion factor. CMS noted the 2023 conversion factor accounted for budget neutrality adjustment required by statute, an expiring temporary adjustment intended to mitigate the impact of previous coding changes and a zero percent update factor. In estimating changes in Medicare expenditures for PFS services, CMS compared payment rates for CY 2022 with payment rates for CY 2023 using CY 2021 Medicare utilization data.

The final CY 2023 PFS conversion factor is $33.06, which reflects a 4.48% decrease from CY 2022 and was slightly higher than included in the Proposed Rule. In commentary, CMS explained that the Protecting Medicare and American Farmers from Sequester Cuts Act required a 3% increase in PFS payment amounts for services furnished during 2022 and, further, that the increase should not be taken into account to determine PFS payment rates for subsequent years. CMS also accounted for the zero percent update factor required under the Medicare Access and CHIP Reauthorization Act (MACRA) and the statutorily required budget neutrality adjustment to mitigate the impact of additional coding changes included in the Final Rule.

Certain coding changes will also affect certain specialties. For example, the estimated CY 2023 anesthesia conversion factor is $20.6097, which was calculated using the same adjustments in addition to anesthesia-specific practice expenses and malpractice adjustments. The CY 2023 anesthesia conversion factor is also down from $21.5623 in CY 2022. In addition to providing a table of the CY 2023 PFS estimated impact on total allowed charges by specialty, CMS provided a more granular file showing the estimated specialty payment impacts by ranges of impact for practitioners within a specialty. The file is available on the CMS website here.

The preamble also provides an impact table breaking down payment changes by facility/non-facility. Notably, diagnostic testing payments for non-facilities will experience a 7% change, while diagnostic testing facility payments will only experience a 1% change. Non-facility internal medicine payments will experience a -1% change, while facility internal medical payments will experience a 7% change.

Evaluation and Management (E/M) Visits

CMS generally adopted the CPT framework issued by the American Medical Association’s (AMA) CPT Editorial Panel for PFS payment of Other E/M visits. CMS has engaged in a multi-year effort with the AMA and other interested parties to update coding and payment for E/M visits to better reflect the current practice of medicine and reduce administrative burden. In 2021, the AMA CPT Editorial Panel revised the office/outpatient (O/O) E/M visit code and CMS adopted most of these revisions in the CY 2021 PFS final rule. For CY 2023, the AMA CPT Editorial Panel has revised the rest of the E/M visit code families (except critical care services) to match the general framework of the O/O E/M visits. These E/M visit code families include inpatient and observation visits, emergency department visits, nursing facility visits, domiciliary or rest home visits, home visits, and cognitive impairment assessment (collectively, Other E/M).

CMS is now adopting most of these AMA CPT changes in coding and documentation guidelines for Other E/M visits. The revisions include redefining Other E/M code descriptors so that visit level will be selected based on the practitioner time spent with the patient or the level of medical decision-making. A history and physical exam will no longer be used to select visit level. Instead, a medically appropriate history and/or examination will be required. Also, CMS finalized Medicare-specific coding for prolonged Other E/M services. These prolonged services will be reported under one of three G codes (one for inpatient/observation visits, nursing facility visits, and home or residence visits).

Split (or Shared) E/M Visits

The Final Rule delayed implementation of the split (or shared) “substantive portion” policy until CY 2024. This policy determines which professional should bill for a shared visit by defining the “substantive portion,” of the service. A split (or shared) visit refers to an E/M visit performed by both a physician and non-physician practitioner (NPP) in the same group practice. In the CY 2022 PFS final rule, CMS finalized a policy for E/M visits furnished in a facility setting to allow payment to a physician for a split (or shared) visit where a physician and an NPP provide the service together (not necessarily concurrently) and the billing physician personally performs a substantive portion of the visit. For CY 2022, CMS finalized the definition of substantive portion as one of the three key components (history, exam or medical decision-making) or more than half of the total time spent by the physician and NPP performing the split (or shared) visit.

The CY 2022 PFS final rule established a phased approach with regard to defining the “substantive portion” as more than half of the total time of the visit. However, to allow for the changes in the coding and payment policies for Other E/M visits to take effect for CY 2023, CMS is delaying the implementation of the policy to define the substantive portion of the split visit based on the amount of time spent by the billing practitioner. Accordingly, for CY 2023, the substantive portion of a visit remains defined as any one of the following: history, exam, or medical decision-making, or more than half of the total time spent. The definition of substantive portion, as more than half of the time spent by the physician and NPP performing the split (or shared) visit, will now be effective beginning January 1, 2024.

Medicare Provider and Supplier Enrollment/Medicare Enrollment Provisions

The Final Rule also updates Medicare enrollment provisions to expand the authority to deny or revoke enrollment based on Office of Inspector General (OIG) exclusion or felony conviction. Certain regulations codified in 42 CFR part 424, subpart P address, among other things, denial or revocation of provider or supplier enrollment based on OIG exclusion or felony conviction. Under these regulations, CMS determines whether to deny or revoke enrollment based on the conduct of certain people affiliated with the identified provider or supplier. The Final Rule expands the categories of parties listed to include “managing organizations,” “officers” and “directors” of the provider or supplier.

CMS added these parties to prevent these persons and entities from posing a program integrity threat to the Medicare program. CMS further clarified that the persons and organizations listed in these denial and revocation provisions include, but are not limited to, W-2 employees and contracted parties of the provider or supplier. Under these provisions, “managing organization” means an entity that exercises operational or managerial control over or that directly or indirectly conducts the day-to-day operations of the provider or supplier, either under contract or through some other arrangement. CMS defined “officer” as an officer of a corporation, regardless of whether the provider or supplier is a nonprofit entity. Finally, a “director” is defined as a director of a corporation, irrespective of whether the provider or supplier is a nonprofit entity.

Updates to the Medicare Shared Savings Program

CMS included updates to the MSSP in the Final Rule. The updates contemplated comments on the proposed rule, which sought to correct trends that CMS had identified in growth, equity, and alignment. Specifically, CMS identified observations that the number of beneficiaries assigned to Accountable Care Organizations (ACOs) had plateaued in growth and that certain minority groups are less likely to be assigned to an MSSP ACO than their non-Hispanic, White counterparts. Accordingly, CMS focused on equity to access ACOs to increase participation and worked to align policies between the MSSP and the Innovation Center’s ACO models.

Advance Investment Payments

Acknowledging the large upfront and annual cost of an ACO participating in the MSSP, CMS updated the regulatory guidance to provide an opportunity for advance shared savings payments in the form of advance investment payments (AIPs) to certain new, Low Revenue ACOs. The AIPs may be used to support the participation of the ACOs in the MSSP. For example, Low Revenue ACOs that are inexperienced with performance-based risk Medicare ACO initiatives and are new to the MSSP are eligible to receive the AIPs. CMS further explained that limited eligibility to Low Revenue ACOs will encourage the formation of new ACOs that would not otherwise participate in the program due to a lack of start-up funds.

AIPs are meant to address barriers to entry by providing the advanced payment of shared savings to assist in establishing new ACOs. AIPs may be used to staff an ACO, invest in the technical infrastructure needed to measure and improve patients’ health, provide care for underserved beneficiaries, and to address social determinants of health (SDOH). The Final Rule outlines the application procedure and includes guidance on the application procedure and the content of the application.

Provide Flexibility in the Progression to Performance-Based Risk

As CMS noted in previous guidance, the duration ACOs are permitted to stay in a one-sided risk model remains under consideration. Ultimately, the goal is for all ACOs to move to a two-sided model to effectively facilitate the shift to high-value care delivery, with both a downside and upside risk offering financial incentives for the ACO providers to provide quality care. However, there is concern that if ACOs are expected to shift from a one-sided model to a two-sided model too quickly, ACOs may opt not to participate in the program due to a concern of taking on too much downside risk too quickly. This shift would potentially lead to less participation in the program and may reduce the program’s potential to impact the quality of care provided to beneficiaries.

ACOs comprised of high-need beneficiaries who lack access would potentially take longer to see higher-quality results. Accordingly, CMS finalized the ability for ACOs to have greater flexibility under the one-sided model and to remain in the program under lower levels of performance-based risk while ultimately striving for increased program participation and including high-need beneficiaries with complex health and social needs.

Quality Performance Standard and Reporting

The quality performance standards were established with a focus on patient experience of care, care coordination/ patient safety, preventive health and at-risk populations, and the quality performance measures have been updated periodically. Responding to concerns that the quality program has created a “cliff of all or nothing” scoring, CMS proposed to modify its shared losses by receiving a shared loss rate based on a sliding scale instead of an automatic loss rate of 75%. Specifically, an ACO may not be eligible for the shared savings if a minor difference “between its Merit-based Incentive Payment System (MIPS) quality performance score and the quality performance standard required to share in savings at the maximum sharing rate for the applicable performance year.”

Additionally, the incentive for reporting electronically through MIPS and electronic clinical quality measures (eCQMs) was extended to align with the CMS Web Interface option for reporting. Finally, CMS established a health equity adjustment for ACOs that serve a more significant proportion of underserved individuals within their assigned beneficiary population and encourage all ACOs to treat underserved populations.

Modify ACO Benchmarking Methodology

In addition to focusing on health equity, the Final Rule includes revisions to the benchmarking methodology to financially incentivize long-term participation in ACOs by reducing the impact of the ACO’s performance and market penetration on its benchmarks. CMS intends to support building infrastructure for ACOs in rural and underserved areas.

Additionally, the intent is to justify the business risk for ACOs with beneficiaries that include high-risk and dually-eligible populations to participation; to reduce bias in regional expenditure calculations for ACOs electing prospective assignments; and finally, to expand opportunities for certain low-revenue ACOs participating in the BASIC track to share in savings.

Other Areas

CMS made policy changes in other program areas, such as the beneficiary assignment methodology, alleviating certain previous requirements to review marketing materials, revisions to the skilled nursing facility three-day rule waiver application, and clarifying claims data sharing requirements

For More Information:  Cy 2023 medicare physician fee schedule 7561611