Breaking down Medicare’s controversial physician payment update for 2023

With 2023 Medicare regulations potentially inflicting significant financial constraints on physician practices, advocates are calling on Congress to implement a fix before Jan. 1.

CMS’s final rule for Medicare physician payments set the conversion factor at $33.06, a reduction of $1.55 — or 4.5% — from 2022. The decrease stems from a statutorily required update of 0% and the expiration of a 3% temporary increase that was implemented during the pandemic. Another factor is a mandatory budget neutrality adjustment to negate changes to clinical labor pricing and to coding for evaluation and management (E/M) visits.

The anesthesia conversion factor will undergo a similar adjustment, dropping by 4.6% to $20.61.

With CMS saying its hands are tied because of statutory requirements, physician advocacy groups are urging Congress to reverse or at least reduce the cuts before the new year.

“The rate cuts would create immediate financial instability in the Medicare physician payment system and threaten patient access to Medicare-participating physicians,” Jack Resneck Jr., MD, president of the American Medical Association, said in a written statement.

He noted that the 2023 reduction could total 8.5% because a 4% across-the-board Medicare payment decrease is scheduled to take effect Jan. 1 as a result of a pay-for clause in the COVID-19 relief legislation known as the American Rescue Plan. Stakeholders hoped Congress would postpone the 4% cut, given that implementation “would severely impede patient access to care due to the forced closure of physician practices and put further strain on those that remained open during the pandemic,” Resneck said.

Some specialties will have an advantage

Changes to RVUs, along with corresponding budget neutrality adjustments, will affect different specialties in different ways.

Without accounting for the termination of the temporary 3% payment boost, specialties that are projected to see the biggest payment increases include:

• Diagnostic testing facility: 7%
• Infectious disease: 4%
• Internal medicine: 3%
• Geriatrics: 2%
• Physical medicine: 2%

“The services that make up these specialties rely primarily on E/M services or on clinical labor for their practice expense costs,” CMS wrote.

The “other E/M” category of services — spanning hospital inpatient, observation and emergency department settings, among others — is undergoing changes to reduce the administrative burden of coding and documentation. The changes mirror those previously implemented for office and outpatient E/M visits.

As a result of the adjustments, new work RVUs will trigger higher payments for some specialties. So will higher practice expense RVUs for specialties with higher clinical labor costs as CMS phases in new labor pricing over a four-year period that began in 2022.

Other specialties won’t fare as well

Specialties that are projected to see the biggest payment reductions (again, without factoring in the end of the 3% payment increase) include:

• Interventional radiology: -3%
• Vascular surgery: -3%

A number of specialties are looking at cuts of 2%, among them cardiac surgery, general surgery, thoracic surgery, radiology and rheumatology.

In addition to coming out on the short end of the redistributive effects of the other E/M services revaluation, these specialties have practice expense costs that derive more from supplies and equipment and less from labor. That means they won’t reap as much of the benefit of the ongoing changes to the clinical labor pricing methodology, yet their overall payment update is still subject to the budget neutrality adjustment.

Variation is expected based on setting

The projected changes are averages spanning entire specialties, CMS noted, “and may not necessarily be representative of what is happening to the particular services furnished by a single practitioner within any given specialty.”

CMS mentioned that it has improved its suite of public use files to show the estimated impacts “at a more granular level” (look for a ZIP file titled “Final Rule Specialty Impacts by Practitioner”).

Those data show that for some specialties, there are significant discrepancies in the impact on physician payments depending on the setting. For instance:

• Family practice physicians are projected to see their allowed charges rise by 4% if they are in a facility setting and drop by 1% in non-facility settings.
• Internal medicine physicians will reap a 7% increase in facility settings but a 1% decrease in other settings.
• Interventional radiology physicians will see their payments drop by 1% in facility settings compared with 4% in non-facility settings.

Among specific procedures, payment will drop by 5% or more for services such as arterial grafting for coronary bypass, tissue exams by a pathologist, and critical care.

Payment for initial hospital care will drop significantly, including by 14% for code 99223. But payment for subsequent hospital care will rise, including by 25% for code 99231, 9% for 99232 and 14% for 99233.