2021 CMS Physician Fee Schedule Changes – How the Changes Could Affect Your Practice’s Bottom Line

This week, the Centers for Medicare and Medicaid Services (CMS) published their full finalized Physician Fee Schedule (PFS) for the upcoming year, 2021. From the information contained in the preceding press releases, we knew that there would be major changes within the 2021 PFS, including a historical 10% decrease to the CMS National Conversion Factor, and rate increases for some outpatient office visits. Now that the PFS has been finalized, practice leadership can use this information to project next year’s Medicare revenue (and any other practice revenue that is paid based on CMS).

The Medical Business Advisory team at KatzAbosch, created a tool to demonstrate how the 2021 CMS PFS might potentially impact a typical primary care practice. Once the 2021 PFS was finalized, our team used the finalized data to calculate the Medicare reimbursement rates for the 3 localities surrounding our area (DC, Maryland and Virginia) and prepared a comparison to CMS’ current reimbursement rates. By using a representative annual frequency distribution for the top CPT codes for primary care, we were able to do a weighted projection of the yearly revenue for the new, established and wellness visit codes and compare it to revenue based on the same distribution from the previous year.

In summary, our analysis showed that the rates associated with new patient E/M visits, and physicals (new and established) will receive a lower reimbursement rate than current year due to the 10% reduction to the conversion factor and the change to the wRVU assignment.  On the upside, you will see an increase to reimbursements for established patient E/M visits and vaccination/immunization administration. Once these changes are in effect (January 1^st 2021) primary care practices should receive a weighted increase of approximately 3-4% overall (varies depending on your geo-location).

It is also important to note that MANY major commercial insurance carriers follow CMS’s rates and use it as the foundation to create their individual fee schedules. Therefore, it is inadvisable for a practice to dismiss these changes because either they do not participate with Medicare or do not see many Medicare patients due to the nature of their specialty. Practices that fall under these two categories could see the same changes to the revenue from commercial payers who closely follow Medicare’s rates each year.

We encourage all practices to review the attachment and prepare a projection for your individual practice using your own frequencies for a period of at least six months of time. This will help you to assess the revenue increase or decrease you can expect to see in the coming year. You may need to revise your 2021 budget to incorporate the changes.  Specialty practices will need to pull their top procedure codes to price them out using the 2021 rates.  We would suggest you use a similar format to what we have used in our analyses.