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10.21.2020

What the Physician Fee Schedule Means for a Practice’s E&M Codes

by Travis Broome, SVP for Policy and Economics + Britainy Barnes, Policy Analyst

On August, 3 2020, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that includes their proposed changes to the Physician Fee Schedule (PFS) for 2021.

Here at Aledade, we know these policy decisions are crucial not just for the hundreds of independent primary care practices in Aledade ACOs, but for physicians across the country. We provided full comments to CMS on a variety of topics in the proposed rule.

The big proposal for primary care is to significantly update the physician or advanced practice provider time spent on evaluation and management (E&M) codes for the first time in over 20 years. 

To price most services, CMS relies on the data collection and expertise of the Resource Use Committee (RUC), run by the American Medical Association. A few years ago the RUC did a comprehensive survey on the time involved in providing E&M services. The RUC concluded that previous surveys had not adequately captured pre and post visit time and recommended significant increases in the work component RVU.

CMS has been planning to incorporate the new values ever since and 2021 is proposed to be that year. However, CMS does not have the power under the law to just spend more money so when they make changes like this revaluation it must be done in a budget neutral way. This requires lowering the reimbursement of procedures, increasing the reimbursement of E&M (including AWV and TCMs), and using a lower conversion factor. The revenue for specialities like primary care, which are E&M heavy, go up and procedure heavy specialties go down.

To both inform our policy position and to inform our partner practices, Aledade recreated 2019 under these proposed policies to compare the proposed policies to the policies that are currently in effect. Our analysis led us to recommend that CMS finalize the proposed changes to the value of E&M services.

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Background on Analysis

To inform our views on the proposed revaluation of Evaluation and Management (E&M) codes and the downstream effects this has on the RVUs of other codes, we analysed the billing data of 379 practices that were participating in the Medicare Shared Savings Program through an Aledade ACO in 2019. 

Collectively, these practices had 1.77 million E&M claims, 291,693 AWV claims, and 41,665 TCM claims. We adjusted for geography using the Geographic Adjustment Factor file included with the proposed rule. 

FQHCs and RHCs were not included in this analysis since the PPR and AIR have not yet been released. 

We were interested in the following questions:

  1. What was the mean effect of the revaluation on the revenue derived from E&M for the 379 practices?
  2. What was the mean effect of the revaluation on total revenue for the 379 practices?
  3. What were the practice level effects and what was the variation from the mean?
Effect on E&M Revenue

To answer the first question we calculated the total amount billed to Medicare in 2019. This was a relatively straightforward calculation that took into account the different RVU types (work, practice expense, and malpractice) and the corresponding GPCIs based on the practices’ location. The total amounts calculated include revenue from beneficiary deductibles and coinsurance and do not account for any modifiers that were billed with the claims. 

((work RVUwork GPCI) + (pe RVUpe GPCI) + (mp RVUmp GPCI)) 

x

Conversion Factor
 

Overall, the 379 practices can expect a 10.52 percent increase in revenue from office E&M codes (99201-99215) assuming their 2021 billing patterns are the same as those in 2019. This is equivalent to a $17.4 million increase (Figure 1). 

 

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Figure 1

 

The effect of the practice level distribution is a tight range, with few outliers. The payment changes at the practice level for E&M codes range from positive 5.43 to positive 20.20 percent (Figure 2). The difference in percent increase are primarily attributed to the ratio of E&M visits billed for new versus established patients and to changes in GPCIs. 

 

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Figure 2

 

Effect on Total Revenue
Overall Change

In 2019, the 379 practices billed over 8 million claims for a total of $300.5 million in allowed charges. Applying the 2021 proposed RVUs, GPCIs, and conversion factor to these same claims results in $313 million in allowed charges, or a 4.2% increase in total revenue. This range spans from negative 11.0 to positive 17.7 percent for individual practices. Figure 3 shows the distribution of revenue change for these practices. The reasons for the wider range seen in total revenue changes are explained in the following sections.

 

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Figure 3

 

“Good” Fee For Service

Other commonly billed codes by these practices include TCM codes (99495-99496) and AWV codes (G0438, G0439, G0402). The mean revenue increase for practices is 14.05 percent for TCM and 1.72 percent for AWVs. These percentages equal a $1.14 million and a $0.621 million across the 379 practices, respectively. It is also worth noting that 95 percent of practices billed TCM codes and 99 percent of practices billed AWV codes. 

At the practice level, the revenue percent change for TCM codes ranges from positive 9.3 to positive 21.5 percent (Figure 4). For AWV codes the revenue percent change ranges from negative 9.8 to positive 10.4 percent (Figure 5). Although an RVU increase is proposed for both G0438 and G0439, because of the lower conversion factor, G0438 actually sees a 7.25 percent reduction in payment amount at the national level. It goes from being reimbursed at $172.87 to $160.33.
 

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Figure 4

 

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Figure 5

 

Revenue From Procedures and Other Codes

Because the E&M RVU revaluations have an effect on other codes and also result in a lower conversion factor due to budget neutrality, it is necessary to take a holistic approach to the impact this will have on practice’s revenue. The mean revenue change from all other codes not previously mentioned in this appendix (office E&M, TCM, AWV) is -7.35 percent. At the individual practice level, the range for all of these other  codes is negative 19.6 to positive 17.2 percent. 

Other Things to Keep in Mind

The Geographic Practice Cost Indices adjust for things such as wages being lower in Wyoming than they are in New York City. For years, GPCI have had in place floors that raise valuations in New York, but do not lower them in Wyoming. For 2021, these floors have not been extended for many states. Because of this, there are some practices who are seeing a lower than expected revenue increase. 

Conclusion

To answer the three questions we started with, we found that the effect of the revaluation on the revenue derived from E&M and TCM visits was very positive. For total revenue, these changes are still positive. As to practice level effects, we found some variation based on frequency of other codes and the state the practice is based in. Essentially, a practice’s projected change in revenue came down to 3 factors:

  1. The new patient to established patient ratio of office E&Ms billed by a practice
  2. The number of procedures relative to total claims billed
  3. Changes in GPCIs, including the removal of GPCI floors in several states


Overall, this revaluation of E&M Codes in the 2021 PFS is a positive change for primary care practices, especially those who are working in value-based care arrangements. It would improve the revenue they receive by delivering the kind of care that provides a whole view of their patients’ health and helps connect with patients who have just left the hospital to ensure they don’t find themselves readmitted. Traditionally, American health care has underinvested in the care that is preventive and keeps patients healthy. This new proposed rule takes a step towards fixing that.