What You Need to Know About CMS Changes to the Physician Fee Schedule for 2021

by Sunil Verma, MD, MBA •

As many of you are aware, CMS has made significant changes to the Physician Fee Schedule (PFS) for the 2021 calendar year. These modifications to the PFS are the most significant changes made since 1997 and will undoubtedly affect the way in which otolaryngologists practice, from documentation to reimbursement.

The two largest areas of change in the PFS are those in ambulatory/outpatient evaluation and management (E/M) services and those in payment to providers.

Payment Changes

As a review, the CMS reimbursement payments are calculated as follows:

(Relative Value Unit) x (Geographic Practice Cost Index) x Conversion Factor = Payment

Each procedure’s relative value unit (RVU) is composed of three parts: work RVU (wRVU), practice expense RVU (PE RVU), and malpractice RVU (MP RVU). RVUs for each outpatient CPT code (99202-99205/99211-99215) increased substantially from calendar year 2020 to calendar year 2021. All components of the RVU, including wRVU, changed; the wRVU for 99203-99205 and 99213-99215 increased:

  • 99203 wRVU increased from 1.42 to 1.60
  • 99204 wRVU increased from 2.43 to 2.60
  • 99205 wRVU increased from 3.17 to 3.50

While, on the surface, an increase in RVU for E/M visits might seem favorable, budget neutrality requirements require that the increases in payment for these E/M visits be offset by reductions in payments for other services. This was achieved in two fashions. First, CMS did rebalance the RVU attribution for some services, which affected other subspecialties much more than otolaryngology.

The second, and more impactful, way that budget neutrality was achieved was the decrease in the Conversion Factor (CF) for the first time in many years, from $36.09 to $32.41. We have to look back over 25 years ago to 1994 to identify a comparable CF of $32.91, without any consideration of inflation.

The degree of history documented, including family, past surgical and medical history, and a review of systems, is no longer used for coding. As such, providers may document only a history that’s relevant to the medical encounter.

While, on the whole, these changes translate to an increase in payment for ambulatory/outpatient E/M services, it means procedures and other services in which RVUs did not meaningfully increase will be reimbursed at a significantly lower rate.

Many organizations have attempted to model what the changes in RVUs and payments will be, but this is difficult to project due to coding practices. Most agree, however, that otolaryngologists will receive an approximately 7% increase in wRVUs but a corresponding 3%-4% decrease in reimbursement for identical services rendered.   

Physicians paid on a $/RVU model can expect that organizations will propose decreasing the amount paid per RVU. Even for those with no or few Medicare patients, private payor contracts typically mirror CMS payment models, so changes throughout the year should be expected. Otolaryngologists who provide mostly ambulatory care with few procedural services may see increases in reimbursement or payments as a result of these changes.