ASCO Practice Impact Analysis of 2024 Medicare Physician Fee Schedule Proposed Rule

August 15, 2023

Executive Summary

The Medicare Physician Fee Schedule (MPFS) proposed rule for calendar year (CY) 2024 was recently released by the Centers for Medicare & Medicaid Services.

Oncology practices are expected to receive the following decreases in reimbursement due to the MPFS proposed rule, to include changes in relative value units (RVUs) and a 3.4% decrease to the MPFS conversion factor:

  • Hematology/Oncology: 0.2% decrease to Medicare allowable rates
  • Radiation Oncology: 3.6% decrease to Medicare allowable rates
  • Gynecologic Oncology: 0.7% decrease to Medicare allowable rates
  • Surgical Oncology: 2.9% decrease to Medicare allowable rates

Differences among specialty-specific impacts is largely the result of increases in RVUs for outpatient cognitive services and labor-intensive services, countered by various budget neutrality mechanisms that decrease reimbursement for other expenses.

Conversion Factor (CF)—For 2024, the temporary increase to the CF of 2.5% is reversed and replaced with a one-year temporary increase of 1.25%. The 2024 proposed rule also includes a -2.17% budget neutrality adjustment necessitated by a new Evaluation and Management (E&M) code created by CMS. Overall, the 2024 CF will decrease by 3.4%.

Specialty Impact—CMS calculates that the specialty specific impact of proposed changes is a 2% increase for hematology/oncology and 2% decrease for radiation oncology. CMS’ estimates, however, do not factor in the smaller temporary increase provided by the Consolidated Appropriations Act (CAA) for 2024 or the expiration of a temporary 1.0 floor for the physician work Geographic Practice Cost Index (GPCI). When included in the analysis, the cumulative effect is -1.8%.

Physician Work Valuation—In the CY 2021 MPFS final rule, CMS increased the valuation of office/outpatient visits and added a new add-on code, G2211 for complex visits. For 2021, CMS assumed that hematology/oncology would add G2211 to 90% of visits. These two factors resulted in in a -10% budget neutrality adjustment for 2021, significantly decreasing reimbursement for non-cognitive services. Through the CAA, Congress stopped CMS from paying for G2211 and provided a temporary increase in the CF to negate decreases due to the new work RVUs (wRVUs) for office/outpatient visits. The temporary hold on payment for G2211 expires at the end of 2023 and CMS is now predicting that G2211 will be added to 38% of all office/outpatient visits. Restrictions on use of the code include application only to office/outpatient visits; the expectation that certain specialties will use the code only with new patient visits; and a prohibition on adding it to visits paired with a “minor procedure.”

Because CMS did not update global services to include the increase in wRVUs for office/outpatient visits or the addition of G2211, the result is drastic changes in total wRVUs per specialty. Since 2020, hematology/oncology has experienced a 22% increase in wRVUs for the same set of services, whereas radiation oncology has experienced only a 2% increase for their services. While a 22% increase in wRVUs for hematology/oncology may be expected to result in increased compensation for physicians, both independent and hospital-based practices must account for reductions in payment for other services and overall payments which fail to sufficiently meet increased labor, supply, and equipment costs. The result is that employers have decreased compensation per wRVU for many productivity-driven contracts.

Clinical Labor Expense—Medicare allowable rates are calculated from the combination of wRVUs, practice expense RVUs (peRVUs), and malpractice RVUs (mpRVUs), adjusted geographically—Medicare uses GPCIs to adjust RVUs for each locality—and through annual changes in the MPFS CF. Practice expense is further broken down into direct and indirect expenses, with clinical labor falling into the direct expense category.

In the 2022 MPFS final rule, CMS initiated a four-year phase-in to update the pricing for clinical labor rates. For most labor codes, rates per minute had not been updated for 20 years (i.e., since the 2002 MPFS final rule). As a result, direct practices expenses have been grossly undercalculated for many years. For 2024, CMS proposes to implement the third year of the clinical labor pricing update.

Embedded within the calculation of the peRVUs is a budget neutrality mechanism titled “direct scaling adjustment” which converts actual labor, supply, and equipment expenses to adjusted values. If specific direct practice expenses increase or decrease, contraposed changes to the direct scaling adjustment keep the total number of direct peRVUs equal to the prior year. The increases to labor expenses precipitated a decrease in the direct scaling adjustment; to pay for increases to direct labor, rates for all direct expenses have decreased by 22% and are expected to decrease further in 2025.

Impact on Specific Oncology Services—The addition of G2211, reductions in the direct scaling adjustment and MPFS CF, and loss of the 1.0 floor for the work GPCI, combine for changes in reimbursement unique to each category of services. Reimbursement for office/outpatient visits will decrease an average of 2% in 2024, except when adding G2211, which will increase total reimbursement for a visit between 7.3% to 69%, depending on the level of service.

Place of Service and State Specific Impact—Analysis of national datasets including all 53 Medicare states and territories shows that, within hematology/oncology, payments are expected to decrease 0.4% for services performed in the office setting and 4.0% in the inpatient hospital setting. For services performed in outpatient hospital settings, the professional component of payments is expected to increase. Within radiation oncology, payments are expected to decrease in all settings. At a state level, the loss of the 1.0 floor for the physician work GPCI results in further disparities in reimbursement. When considering all oncology specialties, the impact to individual states ranges from -3.7% to -0.2%.

Please see the American Society of Clinical Oncology’s (ASCO’s) full analysis for additional details.

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