On Thursday, July 13, Medicare released its Proposed Rule delineating changes in a variety of Medicare programs including, but not limited to, quality programs, MIPS, rural work, telehealth, etc. The 2,033 page annual epistle of joy delineates programmatic changes proposed for CY 2024. Between the Draft Rule and the Final Rule’s release in the fall, interested parties were invited to comment on the proposals. The Final Rule (FR) was released in early November of 2023.
While varying professional medical associations and others have lamented, and rightfully so, the CY 2024 conversion factor (CF) reduction from $33.89 to $32.74 (a $1.15 or 3.4% reduction), many folks in the healthcare space writ large presume that the 3.4% reduction means their reimbursements, net/net, will decline 3.4% during 2024. This simply isn’t true.
Conversion Factor
For those unfamiliar with Medicare reimbursement math, it basically entails a series of calculations taking into account relative value units (RVUs) including work (wRVU), malpractice (mRVU), and practice expense (peRVU). While these values can change annually, once set the RVU values are static throughout the entire US. In Figure 1 below I delineate how you arrive at the Medicare “allowable” for a given CPT code. The RVU component pieces are multiplied by geographic practice cost indices (GPCIs) and the sum of those products is then multiplied by the CF to arrive at a geographically adjusted reimbursement rate for a CPT code. GPCIs are deployed to allow for cost differences in the delivery of care between different areas of the country.
Figure 1
To see the math “in action,” in Figure 2 below we examine reimbursement for a 99203, a Level 3 New Patient Visit, in both Atlanta, Georgia, and Richmond, Virginia, respectively. I compare CY 2023 to CY 2024 and make allowances for the 2024 change in CF as announced in the FR.
Figure 2
As you can see, the “work value” of the 99203 has not changed between 2023 and 2024. That implies that the “work” involved in delivering a 99203 has remained static. However, wGPCI has changed for Richmond. Note, too, that practice expenses in Richmond (peGPCI) for a 99203 have, in theory, decreased. Also, the theoretical malpractice cost exposure (mGPCI) has decreased in Richmond between 2023 and 2024 but has increased in Atlanta. The bottom line to this exercise is that after geographic disparities and the new CF are taken into account, the payment for 99203 in Atlanta has dropped almost $2 while a 99203 in Richmond has decreased more than $3.50.
The Sky Is Falling
Maybe, maybe not. It all depends on your patient mix, specialty, etc. Let’s look at Atlanta and the reimbursement changes in established patient (EP) visits and new patient (NP) visits between 2023 and 2024. E&M codes, especially EP and NP visits, account for much of the billing that is submitted annually in the US.
In Figure 3 you can see the delta between 2024 and 2023 Medicare allowables. For EP visits, the allowable is reduced between .96% and 1.90%. Likewise, for NP visits the per CPT reduction ranges between 1.32% and 2.32%. So, while the CF has been reduced by 3.4%, you can see that, with these select codes, the reimbursement reduction is nowhere near 3.4%.
Figure 3
That said, your overall reduction is really predicated on your CPTs billed, your patient mix, and geography/demographics. In Figure 4 we examine a practice in Atlanta.
Figure 4
In our fictional outpatient clinic Dr. X billed 100 99202s and 100 99205 office visits in 2023. The FR was released and he ran his data, based purely on what he billed last year. As Figure 4 delineates, Dr. X would, all things being equal, lose $154 on 99202s and $305 on 99205s for a total loss, performing the exact same work, $459 or about 1.5%. A couple of takeaways: first, this is obviously a fictional example but makes a pretty clear point; to wit, your practice may not experience a 3.4% reduction in reimbursement. Next, percentages are fairly irrelevant; the cost to the practice are the “real dollars” that disappear. Lastly, given inflation and the ever-increasing cost to run health systems and clinics, the 1.56% cut in Figure 4 is decidedly no victory.
Am I suggesting that clinicians should bill the same exact services and/or change billing habits to optimize revenue (or decrease your losses)? Absolutely not! Coding/billing is predicated on what is presented to the clinician. This exercise simply offers you a facile idea, all things equal, about what the Medicare changes for CY ’24 could mean to your clinic finances.
As a side note, and equally as important: outpatient clinics must understand, with clarity, their payer contracts. Many contracts are tied in to the Medicare allowables which means if Medicare cuts allowables, you may receive a cut in your commercial allowables, too.
The moral of the story as we head into 2024? Is the sky falling? No. But it may be raining really hard!
