November 18, 2022

CMS Issues 2023 Medicare Physician Fee Schedule Final Rule

Holland & Knight Alert
Suzanne Michelle Joy

Highlights

  • The Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2023 Medicare Physician Fee Schedule (PFS) Proposed Rule on Nov. 1, 2022, which impacts Medicare Part B payments starting on Jan. 1, 2023.
  • The final CY 2023 PFS conversion factor is $33.06, a 4.48 percent decrease from CY 2022 and slightly higher than proposed. This decline is due to a statutorily required budget neutrality adjustment, an expiring temporary adjustment to mitigate the impact of previous coding changes and a zero percent update factor.
  • CMS finalized several significant payment policy changes, including revaluing remaining evaluation and management codes, continuing its four-year phase-in of clinical labor pricing updates, and delaying changes to redefine the substantive portion of a split/shared visit by time only until 2024.

The Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2023 Medicare Physician Fee Schedule (PFS) Final Rule on Nov. 1, 2022, which impacts Medicare Part B payments starting on Jan. 1, 2023.

CMS finalized several significant payment policy changes, including revaluing remaining evaluation and management codes, continuing its four-year phase-in of clinical labor pricing updates, and delaying changes to redefine the substantive portion of a split/shared visit by time only until 2024. In addition, the Agency finalized several policies to solidify access to telehealth and behavioral health services and that would impact Medicare Shared Savings Program participants.

This Holland & Knight alert provides a summary of the proposed rule and other key provisions. Additional details can be found in these CMS resources:

CY 2023 Conversion Factor Updates

The final CY 2023 conversion factor is $33.06, a 4.48 percent decrease from the CY 2022 PFS conversion factor and 0.06 percent more than proposed. This decline accounts for the zero percent update factor required under the Medicare Access and CHIP Reauthorization Act (MACRA), expiration of the 3 percent flat increase to mitigate the impact of previous Evaluation and Management (E/M) visit coding changes, and the statutorily required budget neutrality adjustment to mitigate the impact of additional coding changes finalized in the rule (Table 146). These changes to the conversion factor do not include 2 percent in Medicare sequester cuts, 4 percent in so-called "PAY-GO" cuts or an expiring 5 percent Advanced Alternative Payment Model (AAPM) payment incentive also scheduled to go into effect unless Congress intervenes.

Individual coding changes may result in additional increases or decreases by specialty, which are summarized in Table 148. Several specialties saw their impact decrease by a percentage point from what was listed in the proposed rule due to the lower final conversion factor.

Medicare Telehealth Services

CMS finalized adding 54 additional services to the Medicare Telehealth Services List on a Category 3 basis, guaranteeing their inclusion through at least 2023 (Table 12). Telephone E/M visits were not included. The Agency also added three prolonged service codes and two pain management codes to the permanent list of Medicare telehealth services (Table 13). The complete list of Medicare telehealth codes is posted to the CMS website.

CMS codifies several telehealth flexibilities that were extended for 151 days after the end of the Public Health Emergency (PHE) under the Consolidated Appropriations Act (CAA), including waiving of geographic and site of service requirements, covering audio-only services, allowing additional Medicare provider types to furnish such services, a revised payment methodology for Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs), and waiving in-person initial visit requirements for mental health services. The Agency also finalized several services that would be available via telehealth for the same time frame (see Table 14).

Following the year in which the PHE concludes, Medicare audio and video telehealth services will no longer require Modifier 95. However, appropriate place of service (POS) indicators will continue to be required. Starting on Jan. 1, 2023, Modifier 93 should be affixed to all audio-only telehealth claims. RHCs, FQHCs and opioid treatment programs may select between Modifier 93 or FQ (or both). CMS will continue to make payments at the non-facility-based rate for Medicare telehealth services through the end of the calendar year in which the PHE ends.

CMS did not finalize its proposal to revert direct supervision requirements to physical presence starting on the Jan. 1 following the end of the PHE. Rather, it will continue to permit direct supervision through virtual presence through at least the end of CY 2023 or the calendar year in which the PHE ends and will consider comments received in potential future rulemaking.

Evaluation and Management (E/M) Visits

CMS finalized several major coding and revaluation policies as a continuation of its multiyear effort to update coding and payment for E/M visits. Impacted codes include inpatient and observation visits, emergency department (ED) visits, nursing facility visits, domiciliary or rest home visits, home visits, and cognitive assessments and care planning services, which collectively comprise approximately 20 percent of all allowed charges under the PFS.

Generally, CMS aligns the billing framework for these services with the recently updated framework for office/outpatient (O/O) E/M visits. Total practitioner time or medical decision-making (MDM) will be used to select the E/M visit level; history and physical exam will no longer be used. The full time within the CPT code descriptors must be met in order to select an O/O E/M visit level using time. Inpatient and observation care were consolidated into a single code set, as were home-based and domiciliary-based codes.

CMS generally proposes to adopt the Current Procedural Terminology (CPT) Editorial Panel's recommended code and descriptor updates, except for prolonged service codes, for which it finalized new G-codes. The Agency accepted many, but not all, Relative Value Scale Update Committee (RUC)-recommended code valuations. For example, CMS retained higher work relative value units (RVUs) for cognitive assessment and care planning services.

CMS continues not to recognize subspecialties, but did modify how it defines an initial service as one where the patient has not received any professional services from any physician or other qualified healthcare professional of the same specialty who belongs to the same group practice.

Split/Shared Services

CMS finalized its proposal to delay defining the substantive portion of a split/shared visit based on total time only until Jan. 1, 2024. Accordingly, for visits other than critical care visits, substantive portion could be defined by medical history, exam, medical decision making or total time spent by the physician and non-physician providers (NPP) performing the split/shared visit.

Rebasing and Revising the Medicare Economic Index (MEI)

CMS finalized its proposal to revise and rebase the MEI with some technical revisions based on comments. The index was rebased using more current data representing a multitude of ownership structures, resulting in a slightly higher increase and significant distributional changes across specialties and geographies. CMS did not use the updated methodology for 2023 rate-setting to allow providers time to adjust and to avoid interfering with Geographic Practice Cost Indices (GPCI) updates.

Behavioral and Mental Health Services

CMS will allow "incident to" behavioral health services to be furnished under general (as opposed to direct) supervision. The Agency finalized a new G code (GBHI) for behavioral health integration performed by clinical psychologists (CPs) or clinical social workers (CSWs) when mental health services are the focal point. Psychiatric diagnostic evaluations can serve as the initiating visit for these services. CMS also removed the restricted procedure status indicator for family psychotherapy services.

Chronic Pain Management (CPM) Services

CMS created two new G-codes for bundled monthly CPM services that include a person-centered care plan, health literacy counseling and administering pain rating scales. The initial visit must be face-to-face, though subsequent visits could be delivered via telehealth. Beneficiaries who have previously been diagnosed with chronic pain and those diagnosed during the visit are both eligible. CPM codes may be billed in the same month as chronic care management (CCM) services, transitional care management (TCM) services, behavioral health integration (BHI) services or opioid use disorder services. However, time may not be double-counted, and CPM services cannot be billed on the same date of service as a new office/outpatient visit. Up to two practitioners may bill for the same patient per month.

Opioid Use Disorder (OUD) and Opioid Treatment Programs (OTPs)

CMS revised its methodology for pricing the drug component of the methadone weekly bundle to account for inflation. The final CY 2023 methadone payment is $39.37, representing a projected 5.3 percent increase from 2022. For the nondrug component, CMS updated the base rate for individual therapy to 45 minutes, as opposed to 30 minutes. Thirty-minute add-on codes may also continue to be applied. Services furnished via OTP mobile units will qualify for reimbursement under Medicare OTP bundled payment codes as if they were furnished at the physical location. The prohibition on billing OTP services for the same beneficiary more than once within a contiguous seven-day period would apply regardless of location. Services to initiate treatment with buprenorphine (not methadone) may be furnished via two-way audio-video (or audio-only if audio-video is not available) through at least 2023.

Clinical Labor Pricing Updates

CMS is continuing its four-year phase-in of clinical labor pricing updates that began last year as reflected in Tables 6 and 8.

Future Changes to Indirect Practice Expenses and Global Surgical Codes

CMS sought comment on and intends to propose new approaches for valuing indirect practice expenses and global surgical codes in future rulemaking. The Agency would like to better account for evolving market trends and technologies and the impact of E/M coding changes.

Potentially Misvalued Services

CMS did not adopt any of the nominated codes as potentially misvalued (Table 10).

Geographic Practice Cost Indices (GPCIs)

CMS finalized new GPCI cost share weights for CY 2023 (Table 25), as well as several refinements to the methodology. The finalized GPCIs reflect the 1.0 work GPCI floor, which was extended through 2023 by the CAA.

Malpractice (MP) RVUs

CMS made technical modifications to its methodology for calculating MP RVUs, including implementing a risk index rather than risk factors (Table 33). To mitigate the negative impact on certain specialties, CMS will phase in reductions exceeding 30 percent over three years and exclude certain specialties already excluded for purposes of calculating practice expense (PE) RVUs.

Multiple Procedure Payment Reduction (MPPR) Cap

CMS finalized its proposal to add CPT codes 0640T, 0641T, 0689T, 0690T, 0694T, 0700T and 0701T to the list of services to which the Outpatient Prospective Payment System (OPPS) cap applies, but did not finalize its proposal to add CPT codes 0493T, 0642T, 0651T, 0658T and 76883 to the OPPS cap list.

Administration of Preventive Vaccines and Therapies

CMS will geographically adjust administration services and update payment for all preventive vaccines annually based on inflation. The Agency will continue the additional payment of $35.50 when a COVID-19 vaccine is administered in a beneficiary's home through CY 2023. Following the end of the CY in which the PHE expires, CMS will transition to treating monoclonal antibody therapies used to treat COVID-19 as biologicals under the applicable payment system. Monoclonal antibody products used as pre-exposure prophylaxis for prevention of COVID-19 will continue to be covered under the Part B vaccine benefit.

Non-Face-to-Face/Remote Therapeutic Monitoring (RTM) Services

After considering comments, CMS did not finalize its proposal to create four new RTM G-codes and will instead generally maintain its current policies for RTM services, except that Agency will now allow RTM services to be furnished under general supervision requirements and will accept the RUC recommendation to accept the contractor price CPT code 989X6, a PE-only cognitive behavioral therapy monitoring device.

Skin Substitutes

CMS did not finalize proposals related to skin substitute products to allow additional time for stakeholder comments and intends to host a town hall for further discussion on the topic in early 2023.

Allowing Audiologists to Furnish Certain Diagnostic Tests Without a Physician Order

CMS will allow audiologists to furnish 36 diagnostic hearing testing services without a physician order (Table 36).

Dental Services

CMS clarified existing coverage policies concerning medically necessary dental services provided in conjunction with other Medicare-covered services and finalized additional dental services that could qualify for Medicare coverage. The Agency also finalized a process to review and consider future public recommendations for Medicare payment for other dental services.

Manufacturer Refunds for Discarded Single-Use Drugs

The Infrastructure Investment and Jobs Act requires drug manufacturers to refund CMS for certain discarded amounts from single-dose containers or single-use package drugs. CMS finalized a formal definition for single-use drugs based on U.S. Food and Drug Administration (FDA)-approved labeling or product information. To qualify, all national drug codes (NDCs) assigned to the drug's billing and payment code must be single-dose containers or single-use packages. Certain drugs are excluded, including radiopharmaceuticals, imaging agents, drugs requiring filtration and those new to Medicare Part B reimbursement (less than 18 months). The Agency finalized a separate "JZ" modifier for claims when there are no discarded amounts, so all claims for applicable drugs must include either a JW or JZ modifier.

The refund amount is the total number of discarded units per quarter multiplied by the drug's payment limit amount exceeding a certain percentage of the drug's total Medicare estimated charges – typically 10 percent, though certain drugs with unique circumstances may qualify for increased percentages. CMS will provide each manufacturer with an annual report containing the total number of discarded units for each quarter and total refund amount for which they are liable starting in 2023. Manufacturers may dispute their owed amount and will have until 30 days after the dispute has been settled to make payment or face an additional penalty. CMS will also periodically audit manufacturer claims for compliance.

Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs)

CMS will continue to allow for payment for CPM and behavioral health integration services in RHCs and FQHCs. The Agency also finalized conforming regulatory changes to telehealth policies under the CAA, including extending FQHCs and RHCs as applicable sites of service for 151 additional days beyond the end of the COVID-19 PHE. For purposes of establishing new payment limits for grandfathered provider-based RHCs required under the CAA, Medicare Administrative Contractors (MACs) will use cost reports ending in 2021, or whichever next most recent report contains a full year of data.

Clinical Diagnostic Laboratory Tests (CDLTs)

CMS codified several changes included in the 2021 omnibus bill, which mandated that payments for clinical diagnostic laboratory tests (CDLTs) not be reduced more than 15 percent annually through 2025. CY 2023 Clinical Laboratory Fee Schedule (CLFS) payment rates will be based on 2016 data. The law also further delayed the next data reporting period for CDLTs until Jan. 1 through March 31, 2023, which will be based on data from Jan. 1 through June 30, 2019, and used to set CDLT payment rates for CYs 2024 to 2026, after which reporting will occur on a three-year cycle. CMS increased the nominal fee for specimen collection from $3 to $8.57 for CY 2023 and will increase this amount by $2 for any specimens collected from a Medicare beneficiary in a skilled nursing facility (SNF) or by a laboratory on behalf of a home health agency and will update this amount annually based on inflation. Additionally, CMS finalized several modifications and clarifications to CLFS travel allowance policies.

Colorectal Cancer Screenings

CMS finalized two updates to expand its coverage for colorectal cancer screening in order to align with recent U.S. Preventive Services Task Force recommendations. These include reducing the minimum age for the Medicare-covered colorectal cancer screening tests from 50 to 45 and expanding the definition of colorectal cancer screenings to include follow-up screenings following a positive stool test result.

Removal of Selected National Coverage Determinations (NCDs)

CMS finalized its proposal to remove NCD 160.22 (Ambulatory EEG monitoring) and will defer to regional MACs to make determinations instead.

Nonemergency, Scheduled, Repetitive Ambulance Services

The Repetitive, Scheduled Non-Emergent Ambulance Transport (RSNAT) Prior Authorization Model was recently expanded nationwide. In this rule, CMS finalized clarifications to documentation and medical necessity requirements for qualifying services, including that coverage includes observation or other services rendered by qualified ambulance personnel.

Medicare Provider and Supplier Enrollment

CMS expanded the categories of parties covered by its denial and revocation provisions and clarified certain criteria for "high" screening levels, including all SNFs. Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) suppliers would also be required to be in compliance with all conditions of payment at the time the item or service was provided, including any applicable state licensure requirements.

Electronic Prescribing for Controlled Substances

CMS will extend the warning letter phase to CY 2024, having previously extended the date for additional compliance actions until Jan. 1, 2025, and will address further penalties and compliance activities in future rulemaking.

Medicare Ground Ambulance Data Collection System (GADCS)

CMS finalized editorial changes to improve the clarity of certain instructions and questions and respond to stakeholder questions. The Agency is in the process of developing the web-based reporting portal and intends to launch a web-based portal for submitting hardship exemption and informal review requests in late 2022.

Medicare Shared Savings Program (MSSP)

CMS finalized several major modifications to the program, which is intended to increase incentives for participation, particularly for Accountable Care Organizations (ACOs) that are new, small, independent and/or serving complex or underserved patient populations. These changes include advance payments for new, low-revenue ACOs, allowing new ACOs to remain in a one-sided risk arrangement for up to seven years and allowing certain low-revenue ACOs to be eligible to share in savings even if they do not meet the full minimum savings rate. The Agency also finalized benchmark revisions designed to enhance long-term participation in the model. CMS projects that the cumulative changes will yield $650 million in added shared savings payments to ACOs and an additional $14.8 billion in savings to Medicare. While the quality measure set largely aligns with last year's, CMS did finalize certain changes to quality performance, including extending the incentive for reporting clinical quality measures through 2024. The performance standard will be set at the 30th percentile next year and will increase to the 40th percentile in 2024. CMS also finalized a new health equity adjustment that is worth up to 10 bonus points and expects approximately 30 percent of ACOs to qualify and finalized an increase to the cap on positive risk score growth over the course of an ACO's agreement period. Finally, CMS added several new services toward the definition of primary care services used for beneficiary assignment and loosened certain application requirements in an attempt to reduce administrative burden.

Updates to the Quality Payment Program (QPP)

Information on the QPP-specific provisions of the rule are available.

MIPS Value Pathways (MVPs)

CMS continues to press forward with its new MVP framework, to which it intends to eventually shift the Merit-Based Incentive Payment System (MIPS) entirely. Advancing health equity continues to be a major focus, along with APM alignment. CMS finalized revisions to the seven MVPs finalized last year and also added five new MVPs (Appendix 3). Stakeholders are encouraged to submit written revisions to MVPs on a rolling basis throughout the year. The Agency will host webinars on MVPs it is considering revisions to and will post draft versions of MVPs on the QPP website for a 30-day comment period. CMS clarified several technical stipulations around subgroup reporting, which will be voluntary to start but become mandatory in 2026. Subgroups would be ineligible to report via the APM Performance Pathway.

Merit-Based Incentive Payment System (MIPS)

Due to the COVID-19 PHE, CMS used 2019 data to set the CY 2023 performance threshold at 75 points, which it anticipates will subject approximately one-third of MIPS-eligible clinicians to negative payment adjustments. MIPS scores at or below 18.75 will earn the full minus-9 percent penalty, and scores of 89 points or higher will be eligible for the MIPS exceptional performance bonus. MIPS scoring policies are summarized in Table 99. Facility-based clinicians will be eligible to receive the complex patient bonus even if they do not submit data for one or more categories. Virtual groups will be eligible for facility-based measurement. Additionally, CMS proposes the following category-specific changes:

  • Quality: Moving forward, administrative claims measures will be scored using performance year data as opposed to a prospective benchmark set based on historic performance. The data completeness criteria threshold will increase from 70 percent to 75 percent for the 2024 and 2025 performance years, though web interface measures will continue to be evaluated differently. As is typical, CMS finalized several updates to the quality measure set, resulting in 198 total quality measures for 2023, which are summarized in Appendix 1. Among other changes, CMS will designate all health equity quality measures as high-priority measures and look to add additional health equity and price-transparency-focused measures.
  • Cost: CMS finalized updates to the Medicare Spending Per Beneficiary measure. Retroactive to the 2022 performance year, CMS will award up to 1 percent of the cost category score for improvement. There are seven episode-based measures under development and four more set to begin development this year.
  • Improvement Activities: CMS finalized five new activities related to reducing health disparities. In addition, the Agency retired or modified a handful of activities to avoid duplication. The finalized inventory of activities can be found in Appendix 2.
  • Promoting Interoperability: CMS finalized several measure-specific definitional and scoring changes and discontinued its reweighting policy for this category for some (but not all) non-physician providers. These changes are summarized in Tables 92 to 95 in the rule and in a separate comparison table available for download. CMS sought feedback on how to define digital quality measures and will use feedback to help inform future rulemaking.

APM Performance Pathway (APP)

APM Entities will be able to report data for the Promoting Interoperability (PI) performance category at the APM Entity level. The Agency also added two new quality measures related to screening for social drivers of health.

Advanced Alternative Payment Models (AAPMs)

The AAPM incentive payment is scheduled to end at the end of the 2022 performance year. Under MACRA, Qualified Participants (QPs) in AAPMs will receive a 0.75 percent annual update to their Medicare CF (which is 0.25 percent higher than for MIPS participants), but that will not begin until the 2024 performance year, which means there will be a one-year gap in 2023 during which there will be a zero update to the Medicare conversion factor and no AAPM Incentive Payment for AAPM participants. Under current statute, the QP thresholds are also set to increase. Intervention on either front requires an act of Congress.

CMS permanently established the revenue-based nominal amount standard at 8 percent. This dictates which models have sufficient risk to qualify as AAPMs and does not impact which individual AAPM Entities qualify. The Agency also finalized a change to the 50-eligible-clinician limit for the Medical Home Model that will help more groups qualify. CMS moved up the date to notify them of an appropriate Tax Identification Number (TIN) for purposes of rendering an AAPM Incentive Payment in cases where one cannot be identified to Sept. 1, or 60 days from the notice of the initial round of incentive payments, whichever is later. Finally, CMS sought comment on making QP threshold determinations at the clinician level, rather than AAPM Entity level, which it believes may help prevent AAPM Entities from selectively excluding certain clinicians, particularly specialists, from participation lists because of the impact that they might have on patient attribution, benchmarks or payment thresholds and will consider feedback received in future rulemaking.

Third-Party Intermediaries

The Agency tightened oversight of vendors and delayed Qualified Clinical Data Registry measure testing requirements until at least CY 2024 due to the ongoing impact of COVID-19.

Medicare Compare Tools

CMS will add utilization data and collapse coding groups into procedural categories to make data more meaningful. The Agency will also add an indicator for clinicians offering telehealth.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.


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