CMS Final Rule Changes 2023
Centers for Medicare and Medicaid Services
Medicare calculates payments using the long-standing formula listed below.
[(wRVU x wGPCI) + (peRVU x peGPCI) + (mpRVU x mpGPCI)] x Conversion Factor = Payment Amount
This methodology involves utilizing each individual CPT code’s RVU values. RVU values are broken into 3 separate values per CPT code.
- Work Component (wRVU): this value represents the relative level of time, skill, training and intensity to provide a given service. This value is the same for each code whether the service is provided in a facility or non-facility setting.
- Practice Expense Component (peRVU): this value represents the costs of maintaining a practice including rent, equipment, supplies and staff costs. This value varies based on whether the service was provided in a facility or non-facility setting. With the exception of 6 individual codes the Non-Facility peRVU is higher than the Facility peRVU.
- Malpractice Expense Component (mpRVU): this value reflects the cost of professional liability insurance based on an estimate of the relative risk associated with each code. This value is the same for each code whether the service is provided in a facility or non-facility setting.
In an effort to adjust for geographic differences in market conditions and business costs the nation is split into 112 localities each being assigned a specific adjustment factor for each of the RVU components. These adjustment factors are known as GPCI’s.
Although it is easy to get lost in the complexity of this formula, it should be noted that what may appear to be a minor adjustment to even one component could significantly impact a practice. Below you will see a summary of the value adjustments to each component of the formula.
Conversion Factor Agreement
Perhaps the most straightforward component in the formula is the Conversion Factor. Simply being the dollar value multiplier for all professional fees it’s easy to compare the change in this rate over time. While CMS initially proposed a CY2023 Conversion Factor of $33.08, the Final Rule publishes the rate as $33.06, a decrease of $1.55 from the CY2022 Conversion Factor of $34.61. If this were the only adjustment to the values assigned to each component, determining the impact to your practice would be relatively straightforward. However, that is not the case!
GPCI Value Agreements
Adjustments to the Geographic Practice Cost Index (GPCI) values, in CY2023 will also play a role in reimbursement rates. The below chart simply outlines the number of localities where an adjustment was made to each GPCI component and whether that adjustment was positive or negative.
Localities within the states of Alabama, Louisiana, Nevada, and New York are seeing the largest decreases in GPCI values overall while some Connecticut, Georgia, Illinois and Texas localities are seeing the largest increases in GPCI values.
RVU Value Adjustments
Just as each locality could see an adjustment to any one of the GPCI values, each CPT code could see an adjustment to any of the 3 assigned RVU components. The utilization rate of the CPT code within a practice will vary across specialties, therefore some specialties see a larger impact to reimbursement rate solely based on adjustments to the RVU component values.
While the adjustments to RVU component values in CY2023 impact most specialties, those seeing the largest reduction in Total RVUs are Vascular Surgery, Cardiac Electrophysiology, Interventional Radiology, Licensed Clinical Social Workers, Psychologists and Thoracic Surgery. Specialties seeing an overall increase in Total RVUs are Internal Medicine and Family Practice, Hospitalists, Ophthalmology, General Surgery, Nephrology, Pulmonology, Infectious Disease, Psychiatry, and Orthopedic Surgery.
E/M Reimbursement Evaluated
Now that we’ve talked about the changes to each component, what does the overall impact look like when you combine an increase or decrease in total RVU within a specialty, the increase or decrease in the GPCI values within each locality, and then the Nationwide Conversion Factor decrease of $1.55 per RVU? Great question! Results will vary based on each individual practice based on the services performed (codes billed) and the location of the practice.
We’ve evaluated E/M services alone and found that Outpatient Office Visit E/M services are seeing a reduction in reimbursement nationwide when compared to 2022 rates. The San Francisco and Sacramento localities within California, as well as localities in Oregon and Idaho are seeing the lowest reduction in reimbursement rates for E/M services where localities in New York, Alaska, Washington DC, Nevada as well as the Santa Barbara and Santa Cruz localities in California are seeing more significant reduction in reimbursement rates for E/M services.
It is important that you understand the impact of these adjustments on your individual practices service mix.
If you would like help understanding how these changes will impact your practice in 2023 call V2V Management Solutions for an analysis of the impacts to your practice financial position. Acting quickly will provide your practice the best opportunity to plan any operational changes needed to avoid negative impacts to your financial position.
V2V is committed to following CMS Physician Fee Schedule updates and assessing how these changes could impact your practice. Please reach out for a personalized analysis of the impact of the proposed changes to your practice.
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Disclaimer: V2V Management Solutions is a healthcare consulting firm. We are not licensed attorney’s or certified public accountants. This guide is not intended to replace legal or financial advice from your trusted resources. Before acting on any information provided check with the appropriate legal or financial team. This situation is a constantly evolving landscape be sure to research for most current information.The following content consists of key takeaways on information published in the above referenced articles, facts sheets, and our personal/professional experiences in financial management throughout a crisis.