Impact of the 2024 Medicare Physician Fee Schedule

The final 2024 Medicare Physician Fee Schedule was published yesterday in the Federal Register. The fee schedule will impact different specialties differently and as usual, there were some winners and some losers but mostly losers – all physicians will see a reduction in their total Medicare reimbursement. The entire fee schedule is a 1,230 page document. Here are some of the key take-aways.

 

Overall lower reimbursement

The single most important item that affects how much physicians get paid is the annual conversion factor. This is the amount that Medicare pays physicians per RVU. In brief, each service or procedure performed by a physician is assigned a number of RVUs (Relative Value Units) that correspond with the complexity and amount of time it takes to perform that serve or procedure. There are 3 subcomponents of the RVU: a work RVU (physician effort), an expense RVU (overhead expense to perform that service or procedure), and a malpractice RVU (cost of malpractice insurance to perform that service or procedure). For example, a level 4 outpatient visit for a new patient is worth a total RVU of 5.44 (2.60 work RVU + 2.61 expense RVU + 0.23 malpractice RVU).

Every year, Medicare adjusts the conversion factor. Because Medicare is mandated to be budget-neutral, in most years Medicare reduces the conversion factor since there is not enough money to increase physician reimbursement while expanding Medicare coverage for new areas of spending. For 2024, Medicare will again lower the conversion factor, this time to $32.74, which is a decrease from 2023’s conversion factor of $33.89, 2022’s conversion factor of $34.61 and 2021’s conversion factor of $34.89. Thus, over the past 3 years, Medicare is has reduced physicians’ pay by 6.2%. During that same time, inflation has risen by 17.62%. To put these numbers in perspective, in 2021, an RVU could buy 9.8 gallons of milk but in 2024, an RVU will only buy 7.8 gallons of milk. This means that the purchasing power of 1 RVU has fallen by 20% since January 2021.

Given this rather enormous drop in the purchasing power of an RVU over the past 3 years, private practice physicians have few options to prevent lower income: spend fewer minutes with each patient or work more hours. Hospital-employed physicians require greater subsidy per physician from the hospital in order to overcome both inflation and the reduction in income generated by Medicare payments to the physicians.

Primary care got a boost

Primary care physicians have to do a lot of work behind the scenes to coordinate care among various specialists, fill out patient paperwork, negotiate with insurance companies for prior authorizations, answer phone calls, and respond to EMR patient portal questions. This additional work has not been compensated in the past. New for 2024 is an add-on CPT code, G2211, that accounts for this extra work performed by primary care practitioners after the patient leaves the office. It can be added onto most primary care office visit CPT codes, thus increasing Medicare payment for primary care services. Medicare estimates that it will eventually be used for 54% of all outpatient office visits that are billed using E/M codes. G2211 will be worth 0.33 RVUs (about $10.91).

Telemedicine did not get cut

The COVID pandemic resulted in Medicare loosening restrictions on telemedicine by allowing most outpatient E/M services to be paid when performed using telemedicine. Prior to the pandemic, telemedicine could only be performed in limited situations, such as when the patient lived in an isolated remote region of the country. During the pandemic, patients and physicians all throughout the country found that telemedicine was convenient, efficient, and in many situations just as effective as in-person office visits. In short, Americans liked telemedicine. As the pandemic has been winding down, there was fear that Medicare would revert to previous telemedicine restrictions, making telemedicine inaccessible to most patients and physicians. For 2024, Medicare has decided to extend the telemedicine waivers and will continue to pay for telemedicine through the end of 2024.

To bill for a telemedicine encounter, there must be both an audio and a video connection between the patient and the physician. This has been problematic for patients who lack high-bandwidth internet connections or lack video cameras on their computers or cell phones. In these situations, the encounter is generally converted to an audio-only telehealth encounter – essentially a phone call. In the past, Medicare would not pay for these phone calls but during the pandemic, Medicare did pay for phone calls when they were done as a telehealth encounter that substituted for an in-person office visit. For 2024, Medicare will continue to pay for audio-only telehealth encounters.

Prior to the COVID pandemic, telemedicine was difficult to perform in teaching settings since the resident and physician needed to be in the same physical location. For 2024, Medicare will permit the resident and the attending physician to be connected by video conferencing during a telemedicine encounter, thus permitting them to be in different locations.

Medicare had originally proposed that if a physician performed a telemedicine encounter from their home (rather than the office), that their home address would need to be registered on Medicare enrollment and billing forms. Presumably this would also apply to telemedicine encounters performed by a physician located in a hotel room, AirBNB, or family member’s home. An implication of this was that all of these various addresses would then need to also be approved by malpractice insurance companies as “medical practice locations”. This would place an enormous burden on physicians and practice administrators by adding a huge volume of paperwork to be completed anytime a physician performed a telemedicine encounter from any location other than their regular medical office. The good news is that Medicare decided to NOT make this requirement for 2024. Instead, when a physician performs a telemedicine encounter from their home, they can use their regular office as the site of service for billing purposes.

Changes in reimbursement for specialists

Every year, Medicare tinkers with the amount that it pays for any given service or procedure. 2024 is no exception and as a result, the RVUs for some services and procedures went up and for others, went down. Because of the budgetary net neutrality requirement, an increase in RVUs for one service must be accompanied by an equivalent decrease in RVUs for another service. The result of this is that some specialties will see an increase in their total annual Medicare allowable charges and other specialties will see a decrease in their allowable charges. Medicare estimates the impact of the 2024 Physician Fee Schedule on various specialties on page 79,468 of the Federal Register. The table below shows these estimates for selected physician specialties.

This table lists the charges by specialty, not the actual reimbursement. The change in charges ranges from +3% (endocrinology and family practice) to -4% (interventional radiology). When added all together, the charges have to total zero due to net neutrality requirements. The effect of the reduction in the conversion factor is on top of any changes to charges. Because the conversion factor will fall by 3.4% ($33.89 to $32.74), all specialities will actually see a drop in reimbursement. To see the actual estimated effect on Medicare reimbursement for any specialty, subtract 3.4% from the percentages in the table above.

New CPT codes

The American Medical Association creates CPT codes and then Medicare decides which codes will be reimbursed and the amount of RVUs assigned to each new CPT code. For 2024, the AMA announced that there will be 230 new CPT codes, 49 deleted CPT codes, and 70 revised CPT codes. This brings the total number of CPT codes to 11,163. It can take a while for a newly created CPT code to work its way through the RVU assignment process. The best resource to determine whether a CPT code is currently reimbursed by Medicare is the Medicare Physician Fee Schedule Look-Up Tool on the Medicare website. By entering a CPT, you can find out what the RVUs are for that CPT code and also the dollar amount that it reimburses. The 2024 data has not yet been entered into this on-line look-up tool but should be available in January 2024.

Although commercial health insurance companies tend to pay for the same CPT codes as Medicare, on occasion, a particular insurance company may reimburse for a CPT code that Medicare does not reimburse for. This adds a layer of complexity to the revenue cycle office of any medical practice. By billing for these CPT codes, the revenue cycle department accepts that there will be denials from those insurance carriers that do not reimburse for a particular CPT code. However, no one wants to leave money on the table from the insurance carriers that do cover that CPT code.

Caregiver training services now covered

New for 2024, Medicare will pay for providers to train caregivers (often family members). Although these codes will likely primarily be used by physical, occupational, and speech therapists, other providers (including physicians) can also bill for these services. These CPT codes should be used to support patients with certain diseases or illnesses (e.g., dementia) in carrying out a treatment plan. This can cover a broad range of skills, from assisting with activities of daily living to more complex tasks such as transfers, mobility, communication, and safety practices. These codes should be used when only the caregiver is present and the patient is not present.

• CPT 97550 – first 30 minutes of caregiver training. It is valued at 1.00 work RVUs.
• CPT 97551 – each additional 15 minutes of caregiver training. It is valued at 0.54 work RUVs.
• CPT 97552 – group caregiver training. It is valued at 0.23 work RVUs.

Spit/shared evaluation and management services

Under Medicare, a service can be billed by only one practitioner, and if non-physician practitioners (for example, nurse practitioners) bill for a service, they receive only 85% of the physician rate. Frequently, a nurse practitioner will do an initial assessment and then the physician will follow the NP later to confirm the assessment and finalize management recommendations. In the past, it has been controversial about whether the bill for the service should go out under the NP or the physician in these situations when the clinical service is considered “split/shared”. In past years, Medicare has stated that it should be whichever of the two providers were responsible for the “substantive portion” of the visit but did not provide a good definition of substantive portion. For 2024, Medicare has defined “substantive portion” of a split or shared service to mean more than half of the total time spent by the physician and the non-physician practitioner. This should eliminate much of the administrative confusion.

The implication is that when physicians bill for split/shared visits, they should document that they performed the substantive portion in their progress note in case of a billing audit by Medicare carriers. Medicare carriers sometimes differ in their documentation requirements so physicians (or their billing staff) should check with their specific Medicare carrier to learn what chart documentation is sufficient. Most likely, it will be something along the lines of: “I personally performed more than 50% of the total time required for this split/shared visit in conjunction with the advance practice provider“. In other words, just one more lengthly phrase to clutter up progress notes in patient medical records.

Vaccinations given in a patient’s home

As a pulmonologist, I have personally given many influenza vaccinations to patients on mechanical ventilators during home visits. I have also given many flu shots to patients during home hospice visits. Those vaccinations were reimbursed at the same rate as if they were given in a physician office. In 2021, Medicare approved paying providers $35.50 extra to give COVID vaccinations in a patient’s home, over and above the usual charge for the vaccinations. This was done to encourage widespread use of the COVID vaccines, particularly in vulnerable patients who were confined to their home due to chronic disease.

For 2024, Medicare will continue to pay the supplemental reimbursement for COVID vaccinations given in a patient’s home and will also expand the list of vaccines that are eligible for this supplement to include pneumococcal pneumonia, influenza, and hepatitis B vaccines. This supplemental payment for 2024 will be $38.55 and will be added to the usual Medicare Part B payment of $32.57 for influenza, pneumococcal, and hepatitis B vaccinations and $43.43 for COVID vaccinations.

It will be harder to maintain a private practice

Over the past decade, it has become increasingly difficult for physicians to fund their salary from billing for professional services alone. Because such a large percentage of physician revenue comes from Medicare, the changes to the Medicare Physician Fee Schedule have played an out-sized role in the inability of physicians to rely on their billings alone. Currently, 33.4% of physician professional billing revenue in the United States comes from Medicare. Medicaid accounts for an additional 8.5%, private health insurance accounts for 38.4%, and out-of-pocket payments account for 7.6%. The remaining 12.2% is from other federal health programs such as the Department of Veterans Affairs, the Department of Defense, the Indian Health Service, and CHIP. The changes that Medicare makes to the annual Physician Fee Schedule are generally also made by other payers, especially Medicaid and the other federal health programs.

When adjusted for inflation, over the past 22 years there has been a 26% decline in Medicare payments to physicians During those same 22 years, there has been a 47% increase in medical practice expense. This reduction in physician income from professional billing coupled with this increase in overhead office expense has led to most physicians now being hospital-employed rather than in a private practice. As hospital-employees, physicians can receive monetary subsidies from the hospital in order to maintain salaries that cannot be supported by professional revenue alone.

Due to inflation during 2022 and 2023, we have seen many unions win contracts with double-digit wage increases for union workers whereas Medicare is reducing payment to physicians for clinical services. This further reduction in physician payments by Medicare in 2024 is likely to push even more physicians out of private practice and into hospital-employed models as private practice becomes increasingly unsustainable.

November 17, 2023