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CMS Proposed Physician Payment Overhaul Creates Opportunities, Challenges

Medicaid Payment Perspectives

Medicaid Payment Perspectives helps Medicaid programs and other payers improve the methods used to purchase care and services for their beneficiaries. It’s published by the Payment Method Development team at Conduent.

Doctors will be able to spend more time with patients and less time on paperwork, according to a CMS proposal announced July 12. The effort delivers on a promise to put “Patients over Paperwork,” said CMS Administrator Seema Verma. CMS also announced key changes to the physician fee schedule, virtual care administration, drug costs, the Quality Payment Program (QPP), Medicare Advantage and price transparency. Note that these changes are part of the 2019 Proposed Physician Fee Schedule Rule and may differ in the final regulation.

Evaluation and management reform

Perhaps the most significant of the proposed changes concerns evaluation and management (E&M) reforms. In the announcement, CMS acknowledges unintended consequences from extensive documentation requirements for clinicians to bill E&M codes. Provider feedback showed concern about onerous data collection that consists of templates and boilerplates that add little meaning to a patient’s condition or care. The proposed 2019 Physician Fee Schedule aims to “free electronic health records (EHRs) to be powerful tools that would actually support efficient care while giving physicians more time to spend with their patients, especially those with complex needs, rather than on paperwork.”

“Physicians tell us they continue to struggle with excessive regulatory requirements and unnecessary paperwork that steal time from patient care, “Verma said. “This Administration has listened and is taking action.”

The proposal sets out to accomplish this goal through numerous changes. This includes:

  • Streamlining or offering flexibility in E&M documentation requirements for office visits
  • Reducing unnecessary physician supervision of assistants for diagnostic tests
  • Removing complex functional status reporting requirements for outpatient therapy
  • No longer requiring justification for a home visit instead of an office visit
  • Allowing clinicians to review and verify information already on a medical record instead of re-entering it

It’s important to note that practitioners may continue to use the current E&M standards for coding office visits if they choose to do so.

In regards to payment rates, E&M levels 2–5 will have a single rate for new patients (CPT codes 99202–99205) and a single rate for established patients (99212–99215). The result is that the payment rates for new and established levels 2 and 3 increase, while the payment rates for levels 4 and 5 decrease (see the table below). Level 1 for new patients (99201) decreases 2 percent and level 1 for established patients increases 9 percent. The rates were set to be budget-neutral, based on weighted averages using five years of utilization data.

Preliminary Comparison of Payment Rates for Office Visits

CPT Code CY 2018 CY 2019 Percent Change
New Patients
99201 $45 $44 -2%
99202 $76 $135 78%
99203 $110 $135 23%
99204 $167 $135 -19%
99205 $211 $135 -36%
Established Patients
99211 $22 $24 9%
99212 $45 $93 107%
99213 $74 $93 26%
99214 $109 $93 -15%
99215 $148 $93 -37%

1. Source: Medicare Proposed Physician Fee Schedule CY 2019.
2. Rates are proposed for CY 2019 and may differ from final values.

According to the proposed rule, setting single rates for these codes will reduce administrative burdens and eliminate the need to audit against the visit levels. This change has a significant impact on Medicaid programs that rely on the Medicare Physician Fee Schedule to set their own rates. While the change is intended to be budget-neutral for Medicare, that may or not be the case for Medicaid programs. In the Medicare dataset for CY 2016, levels 3 and 4 made up 32 percent and 44 percent of new patients and 39 percent and 50 percent of established patients, respectively. Depending on the mix of patients for levels 2 to 5, there could be a positive or negative financial impact for Medicaid programs. The Payment Method Development team at Conduent is able to help states the use the MPFS estimate the financial impact on their programs.

Other changes

In addition to the E&M documentation and payment reform, the QPP also faces changes intended to ease administrative burdens, reduce documentation requirements, focus on outcomes and promote EHRs. Participation in the QPP and the incentive payments associated with it remain unchanged. What has changed are documentation requirements. The proposed rule removes process-based measures that physicians said are of low value or low priority. Instead, the focus will be on “meaningful measures that have a greater impact on health outcomes.” The proposed rule also overhauls the “Promoting Interoperability” performance category to support interoperability of EHRs and to improve patient access to their health information.

CMS also is making it easier for doctors to provide care in non-traditional healthcare settings, such as the home and remote services. “CMS is committed to modernizing the Medicare program by leveraging technologies, such as audio/video applications or patient-facing health portals, that will help beneficiaries to access high-quality services in a convenient manner,” said Verma.

Improving access to virtual services is intended to help patients in rural areas and those with difficulty travelling to the doctor due to disability or limited access to transportation. The proposed MPDS supports telecommunications technology usage by paying for brief virtual check-ins, evaluation of patient-submitted photos, and prolonged preventive services.

The proposed MPFS also tackles the challenge of reducing drugs costs with changes that affect payment under Medicare Part B, which covers medications delivered in a healthcare setting. The proposed MPFS prices drugs more closely to the actual cost of the drug. The change will impact states that follow Medicare pricing in paying for drugs administered in a doctor’s office or outpatient setting.

Reaction to proposed rule

The American Hospital Association (AHA) had a mixed reaction to the CMS proposals. “We applaud CMS for taking action to reduce the regulatory burden hospitals and health systems face,” AHA says in a statement. AHA also expressed support for steps that expand use of telehealth and virtual services.

However, AHA said it was concerned about several aspects of the proposed policies. Reductions in payments for certain new drugs are concerning, and CMS should address rising drug prices directly with the pharmaceutical industry, the statement says. As for E&M payment methodology changes, AHA is concerned that physicians who provide care for a disproportionate number of high-acuity patients would “consistently, and unfairly, receive underpayment.”

There are many other policy changes, updates, and initiatives included in the proposed rule. The Payment Method Development team at Conduent can help states understand the scope and impact of the rule and assist in implementation of the changes.

Contact Andrew Townsend at for more information.