What recent physician fee schedule changes mean for health systems: 4 Qs with Zachary Hartsell from SullivanCotter

Every year, CMS incorporates changes in policy, regulations and requirements for billing under the Medicare Physician

Fee Schedule (PFS). These changes are often adopted by commercial payers.

On Nov. 2, 2021, CMS released the final rule for the 2022 PFS. The final rule went into effect Jan. 1, 2022, and includes some important considerations related to the conditions for submitting split-shared visits for reimbursement that affect planning in 2022 and beyond.

These changes can potentially alter the existing workflow of physicians and advanced practice providers related to billing split-shared encounters. To discuss physician fee schedule changes, Becker's Hospital Review recently spoke with Zachary Hartsell, Principal and advanced practice providers (APP) growth team leader in the APP Workforce at SullivanCotter.

Note: Responses edited for length and clarity.

Question: To begin, can you outline some of the changes that went into effect in 2022 and the additional changes identified for implementation in 2023?

Zach Hartsell: Happy to discuss. Let me start by noting that the changes due for 2023 may now be postponed to 2024 based on the recently published proposed 2023 CMS PFS. I’d like to start by sharing the background on what split-shared visits consist of today, what has already changed, and what is expected to be changing in the future.

Split-shared visits are the evaluation and management services performed jointly by physicians and APPs in hospital-based practices. This includes inpatient, outpatient and emergency department settings. The rules apply to all inpatient professional Evaluation & Management (E&M) CPT codes historically, except for critical care services, procedures and time-based codes.

When physicians and APPs have used the split-shared service, the workflows are often designed so that the entire encounter can be billed under the physician assuming certain qualifications are met. Those qualifications include:

  • The physician must have a face-to-face encounter,
  • The physician must perform a medically necessary and substantive portion of the E&M service,
  • Both the physician and the APP are employed in the same group.

These have been the longstanding rules for more than 15 years. They were initiated through a CMS transmittal and not part of the final rule process.  Since they were essentially a midyear or off-cycle adjustment, I believe there has always been an interest in codifying them within the final rule.

It's also vital to note that there is something different called ‘incident-to billing’, which is only in the outpatient setting and has a separate set of governing rules and regulations. Incident-to will not be impacted by these changes.

As you mentioned, there were changes implemented on January 1, 2022, which were fairly modest, but include the ability to use the split-shared methodology to bill for critical care services. There was also a requirement that a new modifier be added to all split-shared visits, the “-FS modifier”, to differentiate split-shared visits from non-split-shared visits. Finally, in 2022 (and now 2023 with the delayed implementation), providers can use the historical E&M methodology, or they can use the new time-based billing.

Starting Jan. 1, 2024, only the time-based methodology can be used. While this change was initially supposed to be implemented in 2023, the proposed 2023 PFS released in July suggests delaying the time-based changes to 2024. With the time-based methodology, the practitioner — whether a physician or APP — who performs a majority of the visit, defined as greater than 51% of the total time, bills for a visit.

Q: How might the new time-based methodology affect physician/APP workflow and compensation?

ZH: We, at SullivanCotter, consider these changes in three different groups: financial, care team and compliance. All three groups have potential implications for provider compensation.

First, you have financial impact - which can be twofold. One potential financial impact that could affect the organization is the change in reimbursement rates. Remember that historically the split-shared visit allows the physician to bill Medicare and receive 100 percent of the physician fee schedule rate. If the billing starts going out under the APP, presumably, organizations will receive the APP reimbursement rate - which for Medicare is 85% of the physician reimbursement rate.  Therefore, if an organization sees the same volume in the future, there could be a reduction in reimbursement. The best outcome here for organizations would be to increase the volume overall by having physicians continue to manage similar volumes as they have seen historically and then have APPs see select patients on their own. Even at a reduced reimbursement rate, this model can be sustainable for many organizations.

The second financial impact is related to physician compensation – specifically physicians with productivity-based compensation models. From a physician compensation standpoint, the new time-based methodology will require physicians to spend more than 50 percent of the time with a patient in order to receive the work RVU attribution for split-shared visit. Many practices that use the same workflows as today, physicians may see a decrease in the work RVUs for seeing the same volume of patients. While physicians may see a decrease in work RVUs, APPs could see an increase in their work RVUs. These potential shifts will likely require organizations to review both their physician and APP compensation plans to understand the impact that work RVU changes will have based on their current formulas and methodologies.  

For the care team implications, it is about looking at current APP, physician and staff workflows to identify patients that APPs can see more autonomously with indirect physician supervision. In addition, identifying activities that other care team members can perform in support of both the physician and APP visits. There will need to be intentional discussions around the workflows and responsibilities of both APPs and physicians in hospital and provider-based clinics. Also, there needs to be clear methodologies to delineate the time spent with the APP versus with the physician.

The last area of concern relates to compliance. There is a need to educate physicians and APPs about the related rule changes, the potential new workflows, and the impact on their compensation plans. Additionally, there will need to be effective auditing mechanisms in place to check time-based billing, as well as ways to identify non-compliant workarounds. Regular auditing and education will likely need to continue into 2024.

One of the things that we've heard organizations focusing on is ‘the Impossible Day’ situation. This is where an individual encounter looks okay, but the sum of a day’s work exceeds the time available in the day. For example, you have an APP and a physician working together. The APP sees a patient for 20 minutes, and then the physician comes in and adds 21 minutes of time to the encounter. The physicians time would report as having greater than 50 percent of the time and thus the encounter would be billed under the physician. The concern lies in high volume clinics where if you add up the physician time throughout the day for 30 or 40 patients, the totality of all of the physician time could make it an ‘Impossible Day’. The other element is to look for consistent patterns in coding. For example, if an APP sees every patient for a physician and the physician sees every patient one minute longer than the APP, that could appear to be an improbable pattern. The improbability of that situation could trigger auditors and potentially raise compliance concerns.

Q: Could you share a brief case-based example of this?

ZH: Yes, absolutely. I'm a PA by background and have worked primarily in hospital medicine for the last 15 years. So let's stick with that specialty. Let’s say we have a hospitalized internal medicine patient -somebody with a pneumonia diagnosis - who's being cared for on the hospital medicine team comprised of a physician and an APP. On hospital day two, the APP rounds on the patient in the morning and spends 25 minutes with the patient. During the exam, the APP detects worsening lung sounds as compared to admission the day before. As a result, the APP orders a chest X-ray to evaluate the condition of the pneumonia. Later in the day, the physician and the APP spent an additional 10 minutes together to make afternoon rounds, review the chest X-ray findings, make some modifications to treatment, and briefly meet with the patient to review the chest X-ray results. We have a total of 35 minutes spent which includes 25 minutes for the APP and 10 minutes for the physician. While the APP and the physician worked together for those 10 minutes, you can't concurrently count the time. This means that only 10 minutes can be counted for the afternoon rounds.

The hospital medicine team would bill the encounter as a 99233, which is a subsequent hospital care level 3, based on the time spent. Under the historical medical decision-making approach, this could be billed under the physician as a split-shared visit, assuming that the other criteria are met, or by the APP and reimbursed at 85 percent for Medicare patients. Under the proposed time-based methodology, the visit could only be billed under the APP as the APP provided greater than 51% of the total time of the encounter. The APP would have performed 25 of the 35 minutes, or 72 percent, of the total time spent. The challenge we see with this example is that, while the physician is involved in the care, the physician would not receive work RVU or reimbursement credit. Under this scenario, the physician would not be credited the wRVU productivity and if the physician is paid based on a wRVU productivity-based compensation model, the resulting compensation for the physician would be reduced.  The APPs compensation could be positively impacted if paid on a wRVU basis.

Q: Final question, in terms of physician and APP compensation, are there any modifications that could be considered to help ensure financial stability and regulatory compliance?

ZH:  Yes, we think organizations should focus their attention on a few key areas. First is a continued focus on educating providers to enhance their knowledge. Second is the review and design of intentional care models which support patient care and third is the potential modification of compensation plans to help address the changes and support care delivery.

In the short term, I think it is important for organizations to focus on educating providers about the new rules and how critical it is to ensure accurate documentation and coding - especially in a time-based environment. It is important to remember that many providers have not had experience in a time-based billing environment. It will also be helpful for organizations to focus on the intent of the rules, which is to avoid the duplication of services and provide clarity of the contributions of the APPs.

The real challenge is keeping the momentum to make the needed changes to compliance structures and educate providers on new workflows before the go live on January 1, 2024. The extra time proposed may tempt organizations to delay addressing this issue. This may be a mistake given the degree of cultural change and education required. For example, most organizations have not historically had reliable ways to document or measure how many of the visits were split-shared visits. Future compliance will require an exacting understanding of the number of split-shared visits in the organization, and while the new modifier will help, its limited existence will likely require organizations to perform deeper analytic reviews on their encounter types. In organizations with a high degree of split-shared visits, these changes could have a profound effect and require thoughtful and intentional reviews of hospital revenues and the provider compensation plans.

One final note about compensation arrangements. It will be important to review the physician and APP compensation arrangement to ensure financial sustainability with the changes. Once the impact on the care team and on the compensation, plans have been quantified, organizations may need to develop new workflows and policies to address. Examples of the types of questions we will see are: How will protections be built for work RVU decreases by the physicians? What about caps on work RVU increases by the APPs? How will those protections be handled and how will they impact regulatory compliance? At this point there will continue to be a lot of unanswered questions until organizations are able to quantify impact of these changes.

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