Aligning Physician Compensation to Achieve Financial Sustainability

The amended CY2021 Physician Fee Schedule (PFS) highlighted a 3.3% reduction in the conversion factor (from $36.09 to $34.89) to calculate Medicare payments, a figure far smaller than the initially announced 10.2% reduction (to $32.41)1,2. The conversion factor is used to ensure budget neutrality through an adjustment accounting for changes in Relative Value Units (RVUs) and expenditures.

In its press release, CMS said it was “prioritizing [its] investment in primary care and chronic disease management by increasing payments to physicians and other practitioners for the additional time they spend with patients, especially those with chronic conditions"3.

In terms of 2021 RVU changes, there are “winners and losers.” RVU increases are highest for hematology/oncology (14%), family practice (13%) and internal medicine (4%)4. Conversely, RVU decreases are significant for emergency medicine (-6%), neurosurgery (-6%) and orthopedics (-4%)5.

Organizations evaluating how to respond to the 2021 CMS Physician Fee Schedule change should consider the following options:

  • “As is” - Continue to maintain 2020 wRVU values and historical compensation rates into 2021. This option is determined by contractual obligation and is a temporary solution.
  • Adopt 2021 fee schedule without modification of compensation plan. Transition to the 2021 wRVU values and maintain the organization’s wRVU compensation factor ($ per wRVU), resulting in higher compensation for primary care physicians and lower compensation for surgical specialties.
  • Adopt 2021 fee schedule and modify compensation plan. Transition to the 2021 wRVU values while lowering the organization’s RVU compensation factor to hold physicians to historical compensation levels (e.g., $300,000 per annum).

Footnotes:

1: CMS.gov. Final Policy, Payment, and Quality Provisions Changes to the Medicare Physician Fee Schedule for Calendar Year 2021. Fact Sheet; December 1, 2021, https://www.cms.gov/newsroom/fact-sheets/final-policy-payment-and-quality-provisions-changes-medicare-physician-fee-schedule-calendar-year-1

2: New Year Brings Significant Changes to Medicare Physician Fee Schedule. Bass Berry & Sims; January 4, 2021. https://www.bassberry.com/news/changes-to-medicare-physician-fee-schedule/

3: Trump Administration Finalizes Permanent Expansion of Medicare Telehealth Services and Improved Payment for Time Doctors Spend with Patients. CMS Press Release; December 1, 2021 https://www.cms.gov/newsroom/press-releases/trump-administration-finalizes-permanent-expansion-medicare-telehealth-services-and-improved-payment

4: Centers for Medicare & Medicaid Services (CMS), Health and Human Services (HHS). Medicare Program; CY 2021 Payment Policies under the Physician Fee Schedule and Other Changes to Part B Payment Policies... 85 Fed.Reg. 84472 (December 28, 2020). https://www.federalregister.gov/d/2020-26815

5: Ibid

Related Insights

Related Information

Published

October 28, 2021

temp Key Contacts

Jason Markham

Managing Director

Downloads

Sign up to get access to FTI Consulting Insights

Subscribe