On November 19, the Center for Medicare & Medicaid Services (CMS) published its final rule regarding revisions to the Medicare Physician Fee Schedule (MPFS) for calendar year 2022. The most notable revisions from the final rule are the:

  1. Reset of the physician fee schedule (PFS) and reduction of the conversion factor (CF)
  2. Extension of telehealth coverage
  3. Expanded scope of practice for advanced practice providers (APP)

Physician Fee Schedule and Reduction of Conversion Factor

The Consolidated Appropriations Act of 2021 applied a temporary payment increase to the PFS of 3.75%. As of January 1, 2022, this payment increase will expire, resulting in an overall decrease in the CF of $1.30 and a MPFS CF for CY 2022 of $33.59, decreased from the MFPS CF for CY 2021 of $34.89 (a decrease from the CY 2020 CF of $36.09). Based on this adjustment, employers with physicians on a productivity model, who do not adjust the compensation per work relative value unit (wRVU) rate for their physicians, may find that they will pay more in incremental compensation than they earn in incremental reimbursement under the 2022 MPFS. An issue compounded if an adjustment was not made in 2021 following the reweighting of wRVUs and reduction of the conversion factor. Work RVUs for Office/Outpatient evaluation and management services increased by a range of 7% to 13% for new patient visits and 28% to 46% for established visits under the 2021 MPFS. Increased wRVUs for the same work for many specialties will continue under the 2022 MPFS, and will impact compensation for those physicians paid on a per wRVU basis, while reimbursement is further declining.

There is some hope that physicians and organizations may receive another temporary reprieve. On December 10th President Biden signed the Protecting Medicare and American Farmers from Sequester Cuts Act into law. This bill eliminates sequestration in the first quarter of 2022 and reduces the impact from 2% to 1% in the second quarter, it eliminates pay-as-you-go cuts, and most importantly it institutes a temporary one-year increase of 3%, which mostly offsets the 3.75% temporary, one-year increase reference above. Follow AAPCP for the latest updates on this legislation.

Telehealth Coverage

Under the Final Rule, CMS finalized the telehealth services list that was temporarily added during the COVID-19 Public Health Emergency. The services will remain on the list of approved telehealth services through December 31, 2023, while CMS evaluates whether the services should be permanently added to the Medicare telehealth services list. In addition, CMS has amended the definition of interactive telecommunications systems for the provision of telehealth services when treating mental health disorders. Previously, this was defined as multi-media equipment permitting two-way, real-time interactive communication between a patient and a provider. The new definition will allow for communications equipment that includes audio only technology for the diagnosis, evaluation, and/or treatment of mental health disorders.

Advanced Practice Providers (APP)

Services and offerings from APPs continue to grow and evolve as APPs consistently help to address physician shortages in the healthcare industry. Beginning January 1, 2022, CMS has 1) revised the definition of a Split (shared) E/M visit to incorporate E/M visits split (shared) by a physician and APP in the same practice, and 2) approved direct payment to physician assistants for professional services personally rendered under Medicare Part B.

Physician Compensation in 2022

There are several unprecedented external factors simultaneously affecting physician compensation at this time. The COVID-19 pandemic affected overall patient volumes, which impacted annual physician wRVUs and collections. This, in connection with the MPFS changes in 2021 and 2022 have made it more difficult to determine appropriate physician compensation.

In order to best understand how an organization’s financial performance may be affected, organizations should assess the impact of these MPFS changes on both reimbursement and physician compensation. It is important to take a proactive approach. Even if the 3% reprieve takes effect, it is set to expire next year. Annual legislative efforts to mitigate cuts may not always come. LBMC has been assisting our clients in determining the financial impact of the 2021 and 2022 MPFS changes to their particular organization. A number of our clients have chosen to remain on the 2020 MPFS to gain additional time to assess the impact, make the appropriate adjustments, and/or await relevant, comparable survey data.

One other key component in considering physician compensation is determining what compensation benchmark survey data is most appropriate for consideration going forward. Given the potential issues described above, LBMC does not recommend the use of or reliance on the 2021 survey data (based on 2020 data) to establish and document fair market value as 2021 surveys include the impact of COVID-19 but exclude consideration of the 2021 and 2022 MPFS changes.

Complexities within the survey data require more expertise and analysis than in years past. It is more important than ever to consult with external advisors to 1) ensure consideration of all potential impacts from the 2021 and 2022 MPFS revisions, 2) determine the appropriate data to use and how to apply it and 3) reestablish internal and external processes for determining and documenting fair market value.

LBMC’s Healthcare Compensation Valuation team combines an understanding of complex financial and regulatory matters with an ability to analyze voluminous financial operations information to deliver fair market value opinions to ensure maximum compliance. For more information, contact our team today.