The Centers for Medicare & Medicaid Services (CMS) recently announced proposed updates to the 2021 Medicare physician fee schedule, including a shake-up to the way in which relative value units (RVUs) are calculated. The changes, which would go into effect on or after Jan. 1, 2021, could ultimately translate to increased compensation for practitioners while medical groups collect little to no offsetting revenues.
One of the most impactful proposals would affect medical groups’ RVUs – a measure used by CMS to determine provider reimbursement amounts – and reimbursement mapping by Current Procedural Terminology (CPT) code. To get ahead of these proposed changes, medical groups should plan to review and revamp provider productivity benchmarking and compensation models by specialty to appropriately realign revenues and incentives.
CMS’s proposal would recast providers’ productivity measures.
To assess the impact to medical groups’ RVUs and reimbursement, Premier analyzed InflowHealth™, our robust database with volume, operational and revenue data for more than 30,000 ambulatory providers across more than 100 specialties nationwide.
Our analysis found that CMS’s proposal will increase the total amount of work RVUs (wRVUs) – a measurement of the volume of completed work – produced within most medical groups, while reimbursement will remain relatively flat, as projected by CMS. The wRVUs are expected to increase by approximately 14 percent, although the composition of specialties and provider types within the medical group will obviously affect the severity of both the wRVU and reimbursement changes.
Of the medical groups that are projected to have a less than 10 percent increase in wRVUs, most employed more than 500 provider FTEs. Premier also found that groups that are projected to have a less than 10 percent increase in wRVUs will likely have a more substantial reimbursement impact, with the average percentage change around -2.5 percent.
There are two primary drivers of this. First, mathematically, the smaller the increase in RVUs, the smaller the change in financial reimbursement for medical groups. Second, many of these medical groups are comprised of a greater portion of surgical specialties, which is projected to take a disproportionately large share of the financial burden. In fact, a recent survey found that nearly one in three surgeons expect the CMS rule would reduce their Medicare patient intake.
Health systems that pay their providers based upon wRVUs should consider how to overhaul their compensation models quickly to minimize the impact both from a provider satisfaction and retention standpoint, as well as for the medical group’s bottom line. Providers whose wRVUs are likely to increase will probably expect increased compensation, while providers whose wRVUs are projected to decrease due to the allocation methodology will fight to maintain their current compensation levels.
Providers are likely to register wide variation in productivity measures across specialties.
One of the most commonly noted updates in the increased wRVU allocation is that of evaluation and management (E&M) codes. There are ample allocation adjustments across the spectrum that impact many specialties and providers, such as a 90 percent increase in wRVUs for removal of tissue expanders and a 30 percent wRVU increase for care after delivery, but a 25 percent decrease in wRVUs for echocardiographic monitoring. For individual specialties, the changes can be wide, with significant variations in wRVUs. The graph below depicts the specialties with the largest projected increases and decreases in wRVUs, assuming no change in practice patterns, according to InflowHealth.
While some of the specialties shown in the charts are not incredibly common, the analysis illustrates how CMS’s proposed updates will yield wide variation in measuring completed work between all types of specialties. Of the nearly 130 specialties included in the analysis, more than 100 were projected to register increases in wRVUs while fewer than 20 were expected to see decreases. Most providers tracking their wRVUs will expect their compensation to increase commensurately if conversations around the changes to do not occur in the near term.
Timely benchmarking will be critical to realign compensation in productivity-based models.
For providers that more heavily weight productivity in their compensation models, wRVU increases are going to command a significant pay increase for providers with little to no offsetting revenue – threatening more compressed margins for medical groups.
It is also worth noting that when trying to benchmark productivity and compensation in the near term, a providers’ compensation and productivity metrics will likely be far apart. For example, medical groups that currently deploy a productivity compensation model could be paying doctors for production at the 75th percentile, based on the updated RVUs, while the practitioner is still producing at the 50th percentile. The chart below shows how compensation per provider in an RVU-based compensation plan, could increase anywhere from $50,000 to $150,000.
The key to closing the gap between these percentiles will be accurate, timely data. Given that most survey data that medical groups commonly reference for benchmarking is at best 18 months old, it could take quite a while before these metrics can realign. However, providers that tap into a source data tool that has benchmarks updated every month will be ahead of the curve in achieving accurate and up-to-date comparisons.
The specialties most impacted by the wRVU changes are not necessarily the same as those affected by the reimbursement modifications.
Not only is CMS adjusting wRVU values, but the agency is also modifying reimbursement for each CPT code. As evidenced by the graphs below, the specialties most impacted by the wRVU changes are not necessarily the same as those affected by the reimbursement modifications. In fact, the divide between specialties projected to record reimbursement increases versus decreases is almost a complete reversal compared to the wRVU projections shared above.
Prominent in the reimbursement declines are pediatric subspecialties and surgical specialties, while primary care and certain medical specialties comprised those projected to see revenue increases.
Only one-third of the specialties analyzed are expected to see reimbursement increases under the CPT code reimbursement changes, while two-thirds are projected to see declines.
Four Steps to Mitigate the Financial Impact of CMS’s Proposed Measurement Changes
Providers should act now to understand the effect that these changes would have on their medical groups and create an action plan. Here are four steps to take now.
- Conduct an analysis to determine the exact RVU and reimbursement impact. Review your providers’ productivity by CPT code over a 12-month period of time (we recommend both pre- and during COVID-19), and map their productivity data against the proposed CMS values. This will help lay the groundwork for the conversations you will need to have with your providers, as well as project revenues for your medical group.
- Review your providers’ compensation plan to model the impact. You will need to be armed with the estimated impact to have a meaningful and fruitful conversation with your providers. Per our analysis, the changes will have a positive impact for most providers and a negative impact for a smaller group, such as those in pathology and radiology. Get out in front of the changes and work with your providers to help foster a supportive transition.
- Mitigate losses by shifting to value-based compensation and quality and performance-based metrics, such as panel size, patient access metrics and annual wellness visit completion for primary care. A value-based compensation model can help normalize drastic swings that are beyond providers’ control, such as pandemics or changes to the RVU calculation methodology. Volume will always be a part of the reimbursement equation, so attributable lives will remain a key factor in any financially sustainable strategy. The aim here is to create compensation structures that align the goals of the system with payer reimbursement incentives and that also meet the expectations of your providers.
- Review opportunities with payers to move into at-risk arrangements and align with compensation model components. While having more at-risk contracts can help offset volume declines, such as those seen this year, they are not required to update your provider compensation plans. You will want to closely align reimbursement factors with provider incentives – and having value-based contracts certainly helps make the transition easier. However, you can still begin the compensation model transition by applying factors such as patient access metrics.
Most medical groups are already struggling to make budget while continuing to deal with COVID-19. That challenge could be exacerbated next year by these impending changes. Further negative impacts to the bottom line could affect staffing ratios and resource availability, both of which are significant factors in provider retention and physician burnout. This means getting ahead of the curve is imperative.
Premier’s experts can help analyze the wRVU and reimbursement implications for your medical group, as well as potential next steps around redesigning your physician compensation plans. Our source data tool, Inflow Health, has benchmarks updated every month for accurate and up-to-date comparison purposes that continue to enable data-driven decision-making for medical group leaders and providers.