Blog Post January 18, 2019 Unintended Consequences of CMS’s Proposed E&M Collapse: Performance and Compensation Authors Amy Strauss Maria Hayduk Jim Donohue Josh Halverson In its final Medicare Physician Fee Schedule rule released on November 1, 2018, CMS outlined future plans to implement material changes as to how new and established office visits (i.e., evaluation and management [E&M] codes) will be reimbursed. More specifically, the rule states that beginning in 2021, certain E&M visits will experience a collapse of Medicare reimbursement into a single blended payment rate. The ruling is set for implementation in CY 2021, as outlined below. Several components from the finalized rule are still being refined due to concerns raised during the open comment phase of the proposal. As it is written now, the implications for WRVU-based compensation design will be significant. The change will result in an increase in payment for acuity levels 2 and 3 and a reduction for acuity level 4, disincentivizing the care of highly complex patients. The replacement of current payment differentiation by acuity level for 99212–99214 (established patient visits) and 99202–99204 (new patient visits) with single blended ratesRequirement of significant supporting documentation of medical necessity and rationale for use of each code selectionUndefined add-on codes and potential for extended visit codes, which will provide supplemental reimbursement for more complexity and specialized careNote: The proposed rule includes the addition of G codes to account for some level of complexity, which is currently undefined. This will mitigate some of the reduction in payment levels for level 4 codes In the current state, five codes exist to account for levels of complexity and acuity and the level of care and time required to manage the patient’s needs. The current codes, as referenced below, are well defined in practice, but there is some inconsistency around utilization. The CMS proposal to collapse the visits is intended to further standardize the utilization and simplify documentation, although it inherently removes the differential and adjustment to account for complex patient care, particularly for providers who see a wide range of patients with a wide range of wellness. Assuming the current conversion factor, the proposed reimbursement would change as such noted below:As the revised rule is written now, there is concern that the CMS proposal will disincentivize providers from treating highly complex and “sicker” patients since the extra time and effort required to manage and treat those patients will not be directly reflected in the reimbursement and productivity levels of the provider. The consolidation of the E&M codes may lead to physicians feeling pressured to reduce patient-facing time and care to avoid the realization of the inherent discount. The impact of the collapse is significant to the measurement of individual provider performance, particularly those who are primarily office-based. Many compensation plans are largely composed of a formula that monitors and tracks individual or team productivity. The productivity component relies heavily on the capture of all physician encounters, adjusted for complexity, as the criteria to measure volume. Utilizing CPT-level data obtained through ECG’s Physician Compensation Survey, the proposed ruling would significantly impact current WRVU production, and consequently compensation, assuming practice patterns stay consistent. While the table below does not include the impact and potential mitigation to WRVU changes of the new G codes, anticipated shifts in compensation per WRVU and WRVUs would be experienced at a rate of the following: The total impact may be net neutral for a balanced medical group; however, the shifts within each of the specialties and even within each of the providers are a substantial change to the current state. For example, rheumatology experiences the most significant decrease in WRVUs at 8%, which could result in a compensation decrease of equivalent levels, assuming compensation rates remain stable. While market benchmark rates will eventually reflect the WRVU changes, they likely will lag two to three years, during which time the consideration of compensation as to productivity may unravel. The change in the capture of E&M coding may force a long-term shift from volume to value in a market that is not quite ready for change. The immediate implication is a disconnect and sudden change in the measurement of volume, also impacting the key driver of providers’ compensation formula. This change will affect providers in the independent private practice space and employed/integrated medical groups alike. Navigating the change will require significant preparation and guidance around market-driven compensation formulas through the proposed implementation in 2021. If your provider compensation plans are largely dependent on WRVUs, we recommend that by late 2019, medical groups begin the process of updating these plans to better accommodate the 2021 change and to avoid the unintended consequences.