The 2023 Medicare Physician Fee Schedule Final Rule was released on November 1, 2022. The final rule includes CPT code changes recommended by the American Medical Association (AMA). The changes are numerous and vary in type, but the result is an overall increase in work Relative Value Units (RVUs) for nearly all physicians who provide evaluation and management (E&M) services in hospitals and nursing facilities.

2023 Inpatient E&M Code Changes

The 2023 Medicare Physician Fee Schedule Final Rule (2023 Final Rule) includes both increases and decreases in work RVU values for E&M services provided in hospital and nursing facility settings. Generally, the most used billing codes (99232, 99233, 99308, and 99309) within this subset are all going to realize double digit increases in work RVUs.

Table 1: Proposed 2023 E&M Code Updates

CPT/HCPCSDESCRIPTION2022 Work RVUs2023p Work RVUsWork RVU % Change
99221Initial hospital care1.921.63-15%
99222Initial hospital care2.612.600%
99223Initial hospital care3.863.50-9%
99231Subsequent hospital care0.761.0032%
99232Subsequent hospital care1.391.5914%
99233Subsequent hospital care22.4020%
99234Observ/hosp same date2.562.00-22%
99235Observ/hosp same date3.243.240%
99236Observ/hosp same date4.24.302%
99238Hospital discharge day1.281.5017%
99239Hospital discharge day1.92.1513%
99304Nursing facility care init1.641.50-9%
99305Nursing facility care init2.352.506%
99306Nursing facility care init3.063.5014%
99307Nursing fac care subseq0.760.70-8%
99308Nursing fac care subseq1.161.3012%
99309Nursing fac care subseq1.551.9224%
99310Nursing fac care subseq2.352.8019%
99315Nursing fac discharge day1.281.5017%
99316Nursing fac discharge day1.92.5032%

Source: Comparison of 2023 Final Rule to RVU22C

The work RVU changes in the 2023 Final Rule are more complex than those in the 2021 Final Rule. The 2021 Final Rule only increased work RVUs for seven outpatient services codes. Forecasting the 2023 Final Rule accurately requires crosswalking many deleted codes with substitute codes. The AMA and Medicare have deleted hospital observation E&M procedure codes and merged those services into the codes for hospital inpatient E&M services. Visit codes for E&M services in assisted living and custodial care facilities are also being consolidated into the general home visit service codes.

Table 2: 2023 Deleted Codes & Substitutes

Deleted CodesSubstitute CodesDeleted DescriptionSubstitute Descriptions
9921799238Observation care dischargeHospital discharge day (<=30 min)
9921899221Initial observation careInitial hospital care (>= 40 min)
9921999222Initial observation careInitial hospital care (>=55 min)
9922099223Initial observation careInitial hospital care (>=75 min)
9922499231Subsequent observation careSubsequent hospital care (>=25 min)
9922599232Subsequent observation careSubsequent hospital care (>=35 min)
9922699233Subsequent observation careSubsequent hospital care (>=50 min)
9924199242Office consultationOffice consultation (>=20 min)
9925199252Inpatient consultationInpatient consultation (>=35 min)
9932499341Domicil/r-home visit new patHome visit new patient (>=15 min)
9932599342Domicil/r-home visit new patHome visit new patient (>=30 min)
9932699342Domicil/r-home visit new patHome visit new patient (>=30 min)
9932799344Domicil/r-home visit new patHome visit new patient (>=60 min)
9932899345Domicil/r-home visit new patHome visit new patient (>=75 min)
9933499347Domicil/r-home visit est patHome visit est patient (>=20 min)
9933599348Domicil/r-home visit est patHome visit est patient (>=30 min)
9933699349Domicil/r-home visit est patHome visit est patient (>=40 min)
9933799350Domicil/r-home visit est patHome visit est patient (>=60 min)
9934399342Home visit new patientHome visit new patient (>=30 min)
9935499417Prolng svc o/p 1st hourProlong office/outpatient e/m each 15 min
9935599417Prolng svc o/p ea addl 30Prolong office/outpatient e/m each 15 min
99356993X0Prolng svc i/p/obs 1st hourProlong inpatient/observation e/m each 15 min
99357993X0Prolng svc i/p/obs ea addl 30 minProlong inpatient/observation e/m each 15 min

Source: AMA CPT Evaluation and Management Code and Guideline Changes

2023 Overall Medicare Work RVU Impact by Specialty

LBMC calculated the overall work RVU impact of the 2023 Final Rule changes by specialty by applying the new work RVU values to the billing data contained in the public 2019 Medicare Provider Utilization and Payment data set.

This analysis indicates that hospitalists, infectious disease physicians, geriatricians, PM&R, hematologists, psychiatrists, internists, palliative care, and other specialists who practice in hospital and nursing facilities will realize the most increases in work RVUs from the 2023 Final Rule changes. Advanced Practice Providers (APPs) specializing in geriatrics, acute medicine, mental health, and other facility-based specialties are similarly affected.

When combined with the 2021 outpatient E&M changes, dozens of specialties will realize double-digit increases in work RVUs.

Table 3: Estimated Overall Changes in Work RVUs by Specialty

Self Identified Primary Specialty2020-2021 Overall wRVU % Change2022-2023 Overall wRVU % Change2020-2023 Overall wRVU % Change
Hospitalist0.4%9.2%9.7%
Internal Medicine – Infectious Disease3.1%7.7%11.0%
Physical Medicine & Rehabilitation5.3%6.8%12.3%
Internal Medicine – Hospice and Palliative Medicine3.4%6.6%10.3%
Psychiatry & Neurology – Geriatric Psychiatry8.9%6.1%15.5%
Family Medicine – Geriatric Medicine8.9%6.1%16.1%
Internal Medicine – Geriatric Medicine9.9%6.0%17.3%
Family Medicine – Hospice and Palliative Medicine3.8%5.4%9.6%
Internal Medicine – Hematology15.1%4.8%20.5%
Psychiatry & Neurology – Psychiatry12.1%4.6%17.3%
Internal Medicine12.6%4.4%18.3%
Surgery – Trauma Surgery0.9%4.3%5.2%
Surgery – Surgical Critical Care0.7%4.2%5.0%
Internal Medicine – Advanced Heart Failure and Transplant Cardiology6.9%4.1%11.5%
Internal Medicine – Pulmonary Disease7.0%4.1%11.5%
Psychiatry & Neurology – Psychosomatic Medicine11.1%3.9%15.5%
Internal Medicine – Critical Care Medicine2.6%3.9%6.6%

Note: Overall wRVU % change by specialty does not reflect the skewed impact within specialties.
Disclaimer: No estimate is made for changes in existing coding patterns other than substitutes.

Highly Variable Work RVU Impacts within Specialties

The overall work RVU increases projected in the previous section do not reflect the expected variation in work RVU changes among physicians within each specialty. The 2023 Final Rule includes both increases and decreases in work RVUs among the CPT codes affected. The severity and complexity of patient illnesses varies from physician-to-physician within each specialty. The proportion of E&M services provided in hospitals, offices, and nursing facilities can also vary substantially within specialties like hospital medicine, psychiatry, and geriatrics.

For example, the table below summarizes the separate and combined changes for the 2021 Final Rule and 2023 Final Rule. The percentage changes from 2020 to 2021 in the left-most column illustrate the distribution of work RVU increases exclusively for outpatient E&M services. The percentage changes from 2022 to 2023 in the center column illustrate the distribution of work RVU increases exclusively for inpatient E&M services. The percentage changes in the right-most column illustrate the combined effects of both the 2021 and 2023 rules. Predictably, the sample of 13,529 hospitalists analyzed in the following table were not impacted by the 2021 outpatient E&M work RVU changes at all. The variation of inpatient E&M service severity and coding among these hospitalists yields a wide range of estimated effects from 2% decreases in work RVUs at the 10th percentile to 15% increases in work RVUs at the 90th percentile.

Table 4: Estimated Work RVU Change Variability within Hospital Medicine (n=13,529)

2020-2021 wRVU % Change2022-2023 wRVU % Change2020-2023 wRVU % Change
10th0.0%-2.4%-2.2%
25th0.0%7.1%7.8%
50th0.0%10.4%10.8%
75th0.0%12.9%13.2%
90th0.0%14.9%15.4%

Disclaimer: No estimate is made for changes in existing coding patterns other than substitutes

Forecasts estimate about half of physicians practicing Geriatric Medicine will realize increases in work RVUs during 2023 as a result of E&M updates for both inpatient and nursing facility services. When combined with the prior outpatient E&M changes from 2021, nearly all geriatricians are forecast to experience work RVU increases from 2020 to 2023.

Table 5: Estimated Work RVU Change Variability within Geriatric Medicine (n=3,013)

2020-2021 wRVU % Change2022-2023 wRVU % Change2020-2023 wRVU % Change
10th0.0%0.0%6.6%
25th0.0%0.0%12.6%
50th10.1%3.2%18.8%
75th23.9%10.1%25.3%
90th28.5%16.0%29.0%

Disclaimer: No estimate is made for changes in existing coding patterns other than substitutes

Adapting to Changes in Work RVU Production, Compensation & Reimbursement

On a combined basis, the 2023 Final Rule and the 2021 Final Rule materially change the Resource-Based Relative Value System on which physician reimbursement, productivity, and compensation is built. Commercial insurance carriers will not emulate Medicare’s changes in their own reimbursement systems overnight. Accordingly, an added level of thoughtfulness is required when using industry compensation and production surveys to set physician compensation. Employers of specialists that were unaffected by the 2021 Final Rule may find that they are materially affected by the 2023 Final Rule.

The path forward begins with identifying the financial impact of the 2021 and 2023 work RVU changes on production, compensation, and reimbursement for your healthcare professionals. Once the financial impact is known, the various options of partially or fully adopting the new production system changes can be assessed within your budgetary resources and restrictions.

LBMC Advisory Services has a team of experts exclusively dedicated to physician compensation analysis, planning, strategy and valuation. Contact LBMC today for assistance with productivity and compensation forecasts, scenario analyses, compensation planning, and questions regarding the impact of the 2023 Final Rule on Fair Market Value compensation analysis.

LBMC’s Nick Newsad recently discussed how the 2023 Medicare Physician Fee Schedule Rule will affect physician productivity measurement, compensation, and reimbursement during a webinar on August 4, 2022. Watch the webinar On-Demand: https://www.lbmc.com/blog/webinar-new-physician-work-rvu-increases/

Nicholas A. Newsad, MHSA works in the Advisory Services Group at LBMC. He can be contacted at nick.newsad@lbmc.com or 615-309-2489.