The Eagle Has Landed . . . Finally!

The Impact of the 2021 RBRVS changes.

Happy New Year! And along with all the wishes for a happy, healthy, and prosperous 2021 is my praise to the Centers for Medicare & Medicaid Services (CMS) for (finally) giving us some guidance on what to expect with regards to Medicare payments in 2021.

Notwithstanding its tardiness, the new (final?) rule, for the first time in a really long time, leans heavily in favor of the physician provider. In fact, of the 80 specialties that I analyzed, 67 (84 percent) will likely see a little to a large increase in payments this year from Medicare, assuming things remain somewhat constant over 2019. That’s right, 2019, because we all know what happened in 2020; “constancy” was a word that was often heard with respect to medical practice routines and procedures. 

Before I get into the details, I would like to explain the methodology (and logic) of my analysis. First of all, the most recent utilization data for Medicare comes from the 2019 Provider/Supplier Procedural Summary (P/SPS) master file, which, with a caveat, reports 100 percent of fee-for-service claims submitted to Medicare in the 2019 calendar year. The caveat is this: services or procedures that were reported fewer than 11 times for a given provider were not reported, and while you might think that this is a small caveat, it was not.  It actually accounted for nearly 75 percent of line items within the file. The double-edged part of this is that the majority of those services and procedures were arcane – and, in fact, did not necessarily represent mainstream services and procedures. In any case, it’s what we had to work with, and so, there you have it!

In this analysis, then, we used 2019 as a control for utilization. Basically, my approach is this: what would allowable payments look like for 2021 if physicians maintained the same utilization frequencies (by code) for 2021 as they did in 2019? The way to determine this is to take the relative value unit (RVU) data for a given procedure code for 2021 and multiply it by the conversion factor for that year. The result is the allowed amount for that procedure multiplied by the number of times that procedure might be reported. For example, using this method, I calculate that the total allowed amount for those 80 specialties for 2021 is going to be somewhere around $121 billion. It is important to remember that this does not include managed care payments, which account for a huge portion of Medicare payments to physicians. For reasons I will never understand, CMS continues to conceal managed care utilization data from the general public.

The next step is to apply this same rule to the 2020 RVU and conversion factor data. Why not just use the actual data for 2020? Two reasons: first, it isn’t yet available, and second, with the chaos caused by rules, restrictions, guidelines, and executive orders surrounding the COVID-19 pandemic, it would be quite reasonable to assume that 2020 utilization data is not going to accurately represent the “typical” activity within a medical practice. Therefore, I used the same utilization data from 2019 for 2020 that I used for 2021. The key to doing it this way is that, by keeping the frequency data constant, I can better visualize the impact caused by the changes in RVUs and the conversion factor together. In this case, 2021 would report an increase in payments to providers of some $4.8 billion, or nearly 50 percent year-over-year.

But let’s see how that breaks down by both specialty and category. To do that, we need to go back to the first paragraph, which addresses the gross results for those 80 specialties. Several of the losers are not what one might consider mainstream practices (for example, occupational therapists in private practice, registered dietitians, and nutrition professionals or audiologists). Of the mainstream specialties, hospitalists take a hit of -1.6 percent, and there is a pretty linear explanation; hospital visits didn’t see a bump in RVUs, and the conversion factor was some 3.3 percent lower than in 2020. This was not the case, however, with primary care-type providers. For example, my calculations show family practices with an increase in payments from Medicare of around 12.4 percent, and again, the explanation is straightforward; they primarily report office visit codes, and the increase in RVUs for these procedures exceeded the reduction in the conversion factor – so pretty much all providers that were heavier on office visits will see a pretty substantial increase. 

It is important to remember that the allowed amount is what Medicare “allows” as the maximum payment under the Medicare Fee Schedule. It is not, however, what is actually “paid” to the provider. For the most part (for participating providers), Medicare pays 80 percent of the allowed amount, and the practice is responsible for collecting the difference, so to take advantage of these increases, the practice really has to dig in to its ability to collect co-pays from its patients. 

Let’s move on to RVUs, which have a different impact than the allowed amount, because while the conversion factor is fixed across all procedures, the RVUs are not. For total RVUs, again, based on the assumption that the utilization will remain constant between 2020 and 2021, I expect to see an overall increase in RVU reporting of 7.2 percent. Why is this important? Hopefully, this can help you create some type of financial impact assessment for your private payors – those that, while not paying necessarily at the Medicare rate, do pay on some multiple of the conversion factor. For example, if payor X pays at 120 percent of Medicare, you could multiply the total RVU time by 120 percent of the conversion factor to get an estimate of expected payment. While the actual fee schedule will likely come from the payor, this is a good way to “trust but verify.” 

In general, rheumatology and endocrinology lead the pack, with overall projected total RVU increases of 18.4 and 18.2 percent, respectively, followed by many of the primary care specialties, once again. Remember, this is because while the conversion factor decreased, individual RVU values increased, particularly those in the office visit categories. In fact, and I might as well say it now, evaluation and management (E&M), as a coding category, saw a general increase in total RVUs of 12.1 percent. One notable point is that for 2021, not a single specialty is projected to report fewer total RVUs, based on my methodology. 

The next metric has to do with work RVUs. And these are critically important, because so many practices rely upon work RVUs for at least some portion of their physician compensation models. Overall, once again, assuming that utilization remains constant, I expect to see an overall increase of 6.5 to 7.2 percent in work RVUs. This is not the case, however, for codes within the surgical and radiology/imaging categories, for which I project a reduction of 0.38 and 0.40 percent, respectively. 

With respect to specialties, the only two that I project will report fewer work RVUs are interventional radiology (0.1 percent) and diagnostic radiology (0.9 percent). The big winner, again, is rheumatology, and this continues to be driven by their historic utilization distribution of office visit codes. Interestingly, medical oncology and hematology/oncology also top all of the above categories. What does this mean for medical practices? Well, primarily, it means that they can expect to see their work RVU-based compensation increase, and, in some cases, quite significantly. I am not a finance person, but if I were the administrator for a medical practice, I would be doing a deep dive into projected revenues and projected compensation to ensure that one side will balance the other. 

From 2018 to 2020, I projected an overall payment decrease for providers, so it is encouraging to see an equivalent payment differential of nearly $6 billion for 2021. I guess we can thank our legislators for this, since the increases result in part from the COVID relief bills. Categorically speaking, radiology/imaging and pathology/laboratory are the only categories for which I project an overall loss in total RVUs. And this should be a relief to those in the surgical fields, because prior to this most recent update, I had projected surgical procedures to take a beating with respect to overall reimbursement.

In summary, it feels good to start a new year with good news, in the midst of nothing but bad news for the 12 months prior. And while not all the news is positive, this little nugget eases the pain just a bit. So let us give a hearty “thank you” to our legislators and CMS for pushing an effort to include our medical providers in the most recent bailout plans. 

And that’s the world according to Frank.

Programming Note: Listen to Frank Cohen report this story live during Monitor Mondays, Jan. 18, 10-10:30 a.m. Eastern.