The Proposed 2019 E&M Overhaul: How Changes Will Impact Your Bottom Line

Practices need to get a handle on both their financial and RVU impacts.

Recently, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule that would change the face of evaluation and management (E&M) codes as we have known them.

Since 1992, E&M codes have been leveraged to accommodate the quantitative needs of the resource-based relative value scale (RBRVS). In essence, the E&M codes that we have been using for 26 years were based on the financial impact to Medicare rather than focused on the needs of providers.

Well, CMS has proposed a change that, in its estimation, will significantly reduce the decision points and burden necessary to select an office visit code. And be assured that, should these changes be implemented for office visits, hospital visits will be the next category similarly affected.

Perusing the Internet, I found hundreds of articles and tips that have been written regarding how the changes will impact documentation. But what I didn’t see was a lot regarding what the financial impact might be for any given physician.

In my opinion, this is as, if not more, important than how documentation requirements will be impacted. The calculations are not as difficult as one might think, because the two metrics we need are readily available. How the changes will impact relative value units (RVUs) and subsequently, the Medicare allowed amount, has been provided by CMS – and the second metric, knowing how often each physician bills for each office visit code, is readily available from your electronic health record (EHR).

Let’s work through an example, and you will see how easy this can be. With a little data and a calculator, you can estimate the financial impact for Medicare or for any other payor that may adopt this new model. First of all, table 1 shows the proposed 2019 RVU values.

You put the current RVU values in the table as well and then subtract the current values from 2019 proposed values:

Table 1: Financial Impact for Office Visits Based on 2018 Data

The RVU delta is the 2019 RVU minus the 2018 RVU. The impact is the RVU delta multiplied by the conversion factor you choose to use. This number is what the Medicare allowed difference would be for each of the code levels.

The next step is to build an Excel table that shows the frequency utilization for each of these codes, for each of your physicians. These frequencies will be multiplied by both the RVU delta and the impact to get the total estimated impact.

The RVU delta will play an important role with regard to physician compensation models that are based on RVUs, while the total financial impact will give the practice an estimate as to the gain or loss that can be expected under Medicare, assuming that the provider’s frequency remains the same.

Table 2: Financial Impact for Internal Medicine Physician

Table 2 clearly shows that this practice will incur a loss in both RVUs and Medicare payments. If you look at the total line, we can see that they will report more than 900 fewer RVUs. CMS posted its estimates using only the work RVU and the practice expense RVU. But we know that work RVUs make up around 72 percent of total RVUs for E&M codes, so you can multiply the 984.86 by that 72 percent, which allows you to estimate a loss of nearly 710 work RVUs for this one provider, had this new proposed model been in place in 2018.

The financial impact is calculated the same way. We multiply the unit impact by the frequency to get the financial impact. Here, you can see that, had this model been in place in 2018, this one provider would have generated $35,504 less in payments from Medicare.

Finally, we can get a handle on just how big the issue is by dividing the total financial impact by the total allowed (or paid, if you use that for both columns). Here, this physician would have seen a negative 3.38 percent impact for both RVUs and Medicare payments.

Irrespective of how this finally plays out, and no matter what other changes are sprung upon us by CMS, it is critically important that practices get a handle on both their financial and RVU impacts.

Management is all about making decisions and decisions are all about the evidence, and these simple calculations will give you the evidence you need to make the right management decisions for your organization.

And that’s the world according to Frank.

Program Note:

 Listen to Frank Cohen report this story during Monitor Mondays, Monday, Aug. 20, 10-10:30 a.m. ET.

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