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Insights InHealth

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Medicare’s 2023 Physician Fee Schedule: Déjà Vu All Over Again for wRVU Comp Models

Updated: Dec 13, 2023

Earlier this month, the Centers for Medicare and Medicaid Services (CMS) released the final rule for the calendar year 2023 Medicare Physician Fee Schedule (MPFS). Many of the substantive changes set forth in the proposed rule released in July were ultimately included in the final rule, including adjustments to reimbursement for remote therapeutic monitoring, telemedicine, and pain management and behavioral health services, as well as some significant updates to the Medicare Shared Savings Program. For more detail on each of those changes, please see our previous edition of Insights InHealth from July.


In addition to those areas, the 2023 final rule also approved significant proposed revisions to the work relative value units (wRVUs) assigned to certain inpatient and observation evaluation and management (E/M) procedures in continuation of CMS’ overhaul of E/M services that began in the 2021 MPFS. To maintain budget neutrality, CMS reduced the MPFS conversion factor from $34.61 to $33.06, a reduction of 4.5 percent. As happened with the release of the 2021 MPFS, these wRVU and conversion factor changes have the potential to create substantial unintended consequences for medical groups that compensate providers based on wRVU production. In this edition of Insights InHealth, we examine these wRVU changes in detail, while exploring the impact they will have on provider compensation models and the strategies available for medical groups to address those impacts.


wRVU Changes for Inpatient E/M Services


Based on surveys of provider work time associated with such services, CMS has updated the wRVUs associated with hospital inpatient and observation E/M procedures. While the wRVUs assigned to some codes have decreased, the wRVUs of the codes more frequently billed by hospital-based providers have increased. The table below summarizes the proposed changes to wRVUs for the main inpatient and observation E/M current procedural terminology (CPT) codes (99221 – 99239).


These new wRVU assignments obviously will have a material impact on the production of hospital-based providers who bill a substantial number of inpatient and observation E/M services, such as hospitalists, palliative care specialists, and physiatrists, who may see 10 percent or greater increases in wRVUs. However, these updates will generally also positively impact the production of medical specialists who provide a substantial amount of inpatient coverage or rounding, such as noninvasive cardiologists, medical oncologists, inpatient psychiatrists, and pulmonologists, who could see wRVU increases of five percent or more. Providers in these specialties who are compensated on a per wRVU basis will likely see meaningful increases in pay as a result of this change (assuming their contract automatically adopts 2023 wRVU values).


CPT Code

2022 wRVUs

2023 wRVUs

Change

99221

1.92

1.63

-0.29

99222

2.61

2.60

-0.01

99223

3.86

3.50

-0.36

99231

0.76

1.00

0.24

99232

1.39

1.59

0.20

99233

2.00

2.40

0.40

99234

2.56

2.00

-0.56

99235

3.24

3.24

0.00

99236

4.20

4.30

0.10

99238

1.28

1.50

0.22

99239

1.90

2.15

0.25

Conversely, with the decrease in the MPFS conversion factor, the projected impact to Medicare revenue for each of these specialties ranges from a low of -1 percent to a high of +2 percent. As a result, and barring any budgetary intervention by Congress, the growth in wRVU-based compensation for many providers is likely to outpace any growth in Medicare reimbursement, leaving many provider employers in the same situation they found themselves in 2021.


Impacts on Provider Groups


The continued heavy utilization of provider compensation models reliant on wRVU productivity leaves many medical groups in the unenviable situation of having to navigate substantial compensation changes and economic impacts for their practice just months after many resolved similar issues related to the 2021 MPFS and in the midst of the highest period of provider burnout ever recorded. Their response to the current situation will, in many cases, determine whether their employed providers will enter 2023 with a renewed level of trust and appreciation for their employer, or if 2023 turns out to be the year their providers reach the breaking point of burnout.


The "Reactive" Responses (circa 2021)

The strategies employed by most organizations in response to the wRVU changes in the 2021 MPFS fell into one of the three broad categories shown in the figure below.



With the exception of the “Bite the Bullet” strategy, which was likely the least-utilized approach to the 2021 wRVU changes, each of these responses is likely to frustrate and breed resentment among your provider workforce. Considering the negative economic impact associated with that approach, each of these three responses clearly harms, rather than improves, the health of the provider organization, while doing absolutely nothing to mitigate further disruptions based on future changes to wRVU assignments. InHealth Advisors believes there is a fourth alternative available today to address these changes.



The "Thoughtful" Response (Value-Based Enterprises - established in 2023)

Rather than continuing to perpetuate the shortcomings of wRVU-based compensation models, progressive organizations are considering an alternative: the value-based enterprise (VBE). The use of VBEs not only relieves this current wRVU assignment problem, but also assists in realigning the organization’s providers with its strategy and proactively targets many causes of provider burnout. With the flexibilities afforded by the VBE structure, provider organizations are freeing themselves and their providers from the recent gyrations in wRVU values. At the same time, they are tackling some of the key issues faced by provider organizations today, including population health management, care-team integration and compensation, quality of care and patient safety, social determinants of health and health equity, and, ultimately, the provider alignment needed to succeed in risk-bearing value-based care contracts.




2023 Final MPFS
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