November 15, 2023

CMS Issues CY 2024 Medicare Physician Fee Schedule Final Rule

Holland & Knight Alert
Miranda A. Franco


  • The Centers for Medicare & Medicaid Services (CMS) released the final calendar year (CY) 2024 Physician Fee Schedule (PFS) on Nov. 2, 2023.
  • Physicians and other clinicians face significant cuts of more than 3.37 percent for CY 2024, a slightly larger cut than was outlined in the proposed rule.
  • The rule, which finalizes policies for Medicare payments under the PFS and other Medicare Part B issues, will take effect on Jan. 1, 2024.

The Centers for Medicare & Medicaid Services (CMS) released the final calendar year (CY) 2024 Physician Fee Schedule (PFS) on Nov. 2, 2023. The rule, which finalizes policies for Medicare payments under the PFS and other Medicare Part B issues, will take effect on Jan. 1, 2024.

Physicians and other clinicians face significant cuts of more than 3.37 percent for CY 2024, a slightly larger cut than was outlined in the proposed rule. Unfortunately, these cuts coincide with the ongoing growth in the cost to practice medicine as CMS projects the increase in the Medicare Economic Index (MEI) for 2024 will be 4.6 percent.

Additional information about the Medicare Physician Fee Schedule Final Rule is available at the following resources:

Key Elements of the Final Rule

Among a number of noteworthy elements, the Final Rule:

  • decreases the conversion factor (CF) for 2024 by 3.37 percent from the conversion factor for 2023
  • implements evaluation and management (E/M) add-on code G2211 and defines the "substantive portion" of a split (or shared) E/M visit to mean more than half of the total time spent by the physician or nonphysician practitioner or a substantive part of the medical decision-making
  • extends pandemic-era telehealth policies through Dec. 31, 2024, as mandated by the Consolidated Appropriations Act of 2023 (CAA 2023)
  • updates caregiver training services
  • relaxes direct supervision requirements for certain provider types and services
  • creates a new code, G0136, for social determinants of health risk assessment
  • rescinds the Appropriate Use Criteria program regulations
  • maintains the performance threshold of 75 points for all three Merit-Based Incentive Payment System (MIPS) reporting options
  • adds five new MIPS Value Pathways related to women's health, prevention and treatment of infectious disease, quality care in mental health/substance use disorder, quality care for ear, nose and throat, and rehabilitative support for musculoskeletal care
  • adds policies to implement required manufacturer refunds for discarded drugs
  • codifies previously finalized covered dental services

Conversion Factor

The 2024 physician CF is $32.7442. This represents a decrease of approximately 3.37 percent from the 2023 CF of $33.8872. The 2024 anesthesia CF is $20.4349, which represents a decrease of approximately 3.27 percent from the 2023 anesthesia CF of $21.1249.

The update is primarily based on three factors: 1) a statutory zero percent update scheduled for the PFS in CY 2024, 2) a negative 2.18 percent budget neutrality adjustment (approximately 90 percent of the negative 2.18 percent budget neutrality adjustment is attributable to a new add-on code for complexity, G2211, as discussed below) and 3) a "funding patch" passed by Congress at the end of CY 2022.

The "funding patch" legislation partially offset the CF cut by providing a 2.5 percent increase for the CY 2023 CF but only a 1.25 percent increase to offset part of the reduction to the CY 2024 CF. Separate from the PFS CF, the legislation also waived the Pay-As-You-Go Act (PAYGO) 4 percent reduction for 2023 and 2024.

There is a difference in specialty impact, as demonstrated in Table 118 in the Final Rule. Notably, the table does not reflect the statutory fix that decreased this year. Thus, the actual impact on specialties would be approximately 1.25 percent lower than what is shown in Table 118. Specialties that are negatively impacted include anesthesiology, interventional radiology, radiology, vascular and thoracic surgery, physical/occupational therapy and audiology.

G2211 Add-On Complexity Code

CMS will implement a new add-on code for complex patients, G2211. The add-on code is designed to capture resource costs associated with E/M visits for primary care and longitudinal care of complex patients. The add-on code will generally be available for outpatient office visits. CMS finalized this policy in 2021, but Congress suspended its use and prohibited CMS from implementing it before 2024.

It's important to note that CMS did not lower the budget neutrality impact of adding the new E/M add-on code. Specifically, CMS maintained the estimated utilization assumption of the add-on code at the proposed rule's estimate of 38 percent when initially implemented in 2024. CMS stated that it would consider all public comments on steps it could take to improve the accuracy of valuing services and how the agency might evaluate E/M services comprehensively, more regularly and with greater specificity in future rulemaking.

Split/Shared Services E/M Visits

Under Medicare, a service can be billed by only one clinician, and if nonphysician practitioners bill for a service, they receive only 85 percent of the total Medicare rate. The primary issue around split/shared services is deciding who provides the "substantive" portion of the service and can, therefore, bill for it. In the CY 2022 MPFS Final Rule, CMS created a policy that provided some flexibility for how that decision could be made. Specifically, the clinician who performed the history and physical exam, the clinician who performed the medical decision-making or the clinician who spent more than half of the total time spent with the patient could be selected as the clinician who provided the substantive portion of the split/shared service. In the future, however, CMS planned only to allow the third option (time) to be used to determine the substantive portion of a split/shared service. Last year, CMS delayed the transition to time-only until 2024.

In the Final Rule,  CMS established the definition of "substantive portion" of a split or shared service in 2024 to mean more than half of the total time spent by the physician and the nonphysician practitioner (NPP) performing the split (or shared) visit, or a substantive part of the medical decision making (MDM) – aligning with CPT® (Current Procedural Terminology) guidelines.

CMS noted that it finalized this policy for CY 2024 partly to avoid the administrative burden, as described by commenters, that would otherwise be present for practices that spend time and resources preparing for potential policy changes that are delayed year after year. If warranted, CMS will address any subsequent policy change through notice-and-comment rulemaking.

Clinical Laboratory Fee Schedule

CAA, 2023 delayed the data reporting period for nonadvanced diagnostic laboratory tests by one year and extended the phase-in of payment reductions until CY 2026. To align with these changes, CMS updated definitions, reporting requirements and the phase-in of payment reductions.

Rural Health Clinics and Federally Qualified Health Centers

Per CAA, 2023, CMS finalized several provisions intended to improve reimbursement accuracy, access to care, and reduce administrative burdens for rural health clinics (RHCs) and federally qualified health centers (FQHCs). The Final Rule will:

  • align supervision requirements for behavioral health services with MPFS regulations, allowing general supervision for flexibility
  • include RPM and RTM services under the general care management code G0511
  • include Community Health Integration and PIN services under the general care management code G0511
  • add new codes for care coordination services addressing SDOH and navigation
  • revise the payment calculation method for general care management services

Drugs and Biological Products Paid Under Medicare Part B

CMS finalized changes to the payment limits and beneficiary out-of-pocket costs for specific drugs, including biosimilars and Part B rebatable drugs. Additionally, CMS discussed limitations on coinsurance and adjustments to supplier payment for insulin furnished through durable medical equipment (DME).

In the proposed rule, CMS also solicited comments on:

  • definitions, determination processes and updates to the self-administered drug list
  • coding, payment guidelines and potential policy revisions regarding complex non-chemotherapeutic drug administration

CMS did not finalize any changes in these areas but stated its interest in future policy development.

Telehealth Services

Place of Service Codes for Medicare Telehealth Services. Beginning CY 2024, claims billed with place of service (POS) 10 (Telehealth Provided in Patient's Home) will be paid at the non-facility physician fee schedule rate. Claims billed with POS 2 (Telehealth Provided Other than in Patient's Home) will continue to be paid at the PFS facility rate for non-home originating sites, such as physician's offices and hospitals.

Removal of Category Taxonomy from the Medicare Telehealth Services List. During the COVID-19 public health emergency (PHE), CMS introduced more flexibility for telehealth services to enhance Medicare beneficiary access to healthcare. CMS is responsible for maintaining the Medicare Telehealth Services List, which comprises all the services covered by Medicare when delivered via telehealth. CMS routinely evaluates requests to expand the list and determines whether to add services on a temporary or permanent basis under the Category 1, 2, or 3 criteria.

In this Final Rule, CMS finalizes its proposal to simplify its multicategory approach and consider additions to the list as either permanent or provisional beginning in 2024. The process remains consistent with the existing principles applied during the COVID-19 PHE. Services can be assigned "permanent" or "provisional" status based on a five step process.

PHE Telehealth Policies to Extend Through End of 2024. The Final Rule implements several telehealth provisions extended through the end of 2024 by CAA 2023. This includes:

  • the removal of telehealth frequency limitations for subsequent inpatient visits, observation stays, and nursing facility visits
  • extended payment for Telephone Evaluation and Management Services (CPT codes 98966 through 98968), supporting audio-only visits until Dec. 31, 2024
  • an extension of the definition of direct supervision through Dec. 31, 2024, to include the presence of the physician (or other practitioner) via audio/visual real-time communication technology (excluding audio-only)

Remote Patient Monitoring and Remote Therapeutic Monitoring Services Policies

In the Final Rule, CMS provided the following clarifications regarding remote patient monitoring (RPM) and remote therapeutic monitoring (RTM) services:

  • In the CY 2021 PFS Final Rule, CMS established that after the COVID-19 PHE ends, RPM services should be furnished only to established patients. Patients who received initial remote monitoring services during the PHE are considered established patients for this purpose.
  • The requirement for collecting data for at least 16 days in a 30-day period for remote monitoring services was reinstated at the end of the PHE. This requirement applies to existing RPM and RTM code families for CY 2024.
  • Practitioners may bill RPM or RTM but not both concurrently with other care management services to prevent overbilling of these services. Additionally, the same patient can only be billed for these services once per 30-day period when at least 16 days of data have been collected.
  • RPM and RTM services can be furnished separately during global periods for surgery, provided they are unrelated to the global procedure's diagnosis. Therapists and practitioners not receiving global service payment can provide RPM or RTM services during global periods for surgery.

Request for Information on Digital Therapies

CMS requested information on the opportunities and challenges related to coverage and payment policies for digital therapies, as well as claims processing of remote therapeutic monitoring and remote physiologic monitoring. Specifically, CMS asked for real-life examples of digital therapeutics (DTx) in practice models, the industry's standards for safety and privacy, and whether they could be billed under existing remote therapeutic monitoring codes. CMS asked what aspects of DTx for behavioral health it should consider when evaluating whether to design a new Medicare benefit category.

Some stakeholders commented that CMS had the authority to cover DTx under the Medicare Part B DME benefit. CMS responded in the Final Rule that digital therapeutics must meet the specific Medicare Part B criteria and definition of DME to be covered under that benefit.

CMS stated that the comments received will be used to inform potential future policy development.

Services Addressing Health-Related Social Needs – SDOH, CHI and PIN

CMS finalized new codes and payment methods for social determinants of health (SDOH) risk assessments, community health integration (CHI) services, principal illness navigation (PIN) services and caregiver training services. The rule clarifies eligibility criteria for initiating visits and addresses comments on roles and billing requirements.

Social Determinants of Health (SDOH) Risk Assessment HCPCS Code G0136. CMS finalized the adoption of a new standalone G code for administering an SDOH risk assessment as part of a comprehensive social history when medically reasonable and necessary in relation to an E/M visit. (Beneficiary cost sharing may apply when the assessment is not conducted as part of the annual wellness visit.) This code will also receive permanent status on the Medicare Telehealth List beginning in CY 2024. The aim is to allow behavioral health practitioners to furnish the SDOH risk assessment in conjunction with the behavioral health office visits they use to diagnose and treat mental illness and substance use disorders.

Community Health Integration Services HCPCS Codes G0019 and G0022. CMS also finalized the creation of two new G codes to pay for CHI services. CHI services focus on addressing the particular SDOH needs that interfere with, or present a barrier to, diagnosis or treatment of the patient's problem(s) addressed in the CHI initiating visit. CHI services can be performed by certified or trained auxiliary personnel, which may include community health workers or others who are external to, and under contract with, the practitioner or the practitioner's practice, such as through a community-based organization.

Understanding the significant and variable time potentially required, CMS did not establish a frequency limitation for the relevant HCPCS code; CHI services, however, may not be billed while the patient is under a home health plan of care.

Principal Illness Navigation (PIN) Services HCPCS codes G0023 and G0024 & Principal Illness Navigation – Peer Services (PIN-PS) HCPCS codes G0140 and G0146. CMS finalized new coding for PIN services, which can be furnished following an initiating E/M visit addressing a serious high-risk condition/illness/disease expected to last longer than three months, such as cancer, chronic obstructive pulmonary disease, congestive heart failure, dementia, HIV/AIDS, severe mental illness and substance use disorder.

PIN services can be provided by trained patient navigators or certified peer specialists. Services can be provided more than once per practitioner per month. CMS will monitor utilization of the codes going forward to ascertain the time spent per month per PIN service. A new initiating visit must be conducted once per year. Written or verbal patient consent will be required in advance of providing PIN and CHI services, which was not initially proposed.

Caregiver Training Services (CTS). CMS also finalized its proposal to make payment when healthcare practitioners train caregivers to support patients with certain illnesses in carrying out a treatment plan. The Final Rule includes a definition of caregiver that's broader than CMS' earlier definition, which had limited the term to relatives of the beneficiary. The new definition expands "caregiver" to include "an adult family member or other individual who has a significant relationship with, and who provides a broad range of assistance to, an individual with a chronic or other health condition, disability, or functional limitation," and "a family member, friend, or neighbor who provides unpaid assistance to a person with a chronic illness or disabling condition."

CMS states that the "volume and frequency of CTS sessions furnished to caregivers by the treating practitioner for the same patient may be based on the treatment plan, as well as changes in patient condition, the treatment plan, the patient's diagnosis, or the patient's caregivers." Additionally, CMS designates CPT codes 97550, 97551 and 97552 as "sometimes therapy" services.

Skin Substitutes

In the proposed rule, CMS solicited comments on how best to use sources of price information and various billing approaches as potential methods to establish appropriate payment for skin substitute products under the MPFS. In the Final Rule, CMS simply acknowledged comments and concerns raised and noted that they will be used to inform future rulemaking.

Mandated Manufacturer Refunds for Discarded Amounts of Refundable Drugs

CMS finalized several provisions related to operationalizing the Part B discard drug refund policy, including: 

  • CMS will provide annual reports to manufacturers with discarded drug information, the first of which will be published by Dec. 31, 2024, and subsequent reports by Sept. 30 each year (to be timed with Part B inflation rebate reports).
  • Manufacturers must pay refunds in 12-month intervals as specified by CMS. Refund amounts from the initial refund report will be due by Feb. 28, 2025 and no later than Dec. 31 of the year in which the report is sent for all future years, unless the report is under dispute.
  • Each report following the initial refund report will include the four quarters from the prior calendar year and four quarters from the year before to account for lagged claims.
  • CMS finalized the calculation to adjust payment for lagged claims and the method by which they will apportion refund responsibilities among multiple manufacturers based on sales volume. These changes align with the method used for inflation rebate obligations and would apply from CY 2023 onwards.

CMS also finalized a hybrid approach to determining when it is appropriate to have an increased applicable percentage. This includes:

  • The applicable percentage for drugs with low-volume doses and rarely used orphan drugs will increase. CMS finalized the increased appropriate percentage for drugs contained within 0.1mL or 0.11mL–0.4mL to be 90 percent and 45 percent, respectively. CMS will define orphan drugs and the applicable percentage as 26 percent.
  • The rule finalized an application process for manufacturers to request an increased applicable percentage for individual drugs with unique circumstances. CMS finalized the Feb. 1 application deadline and modified the timeline for manufacturers of drugs that are not yet FDA-approved.

Medicare Shared Savings Program

CMS builds on changes made in the CY 2023 PFS Final Rule to the Medicare Shared Savings Program (MSSP) with the goal of furthering value-based care. CMS expects these changes to increase participation in the Shared Savings Program by 10 to 20 percent. 

Medicare Part B Payment for Preventive Vaccine Administration Services

A uniform payment rate of $30 for most vaccines and $40 for COVID-19 vaccines was finalized in the CY 2022 MPFS Final Rule. CMS extended this additional payment to other preventive vaccines administered in the home and set the in-home additional payment for CY 2024 to $38.55. CMS also finalized regulations regarding coverage and payment for COVID-19 monoclonal antibody products and their administration under the Part B preventive vaccine benefit if and when a monoclonal antibody is approved and made available.

Appropriate Use Criteria (AUC) for Advanced Diagnostic Imaging

CMS stated that inherent risks in terms of data integrity and accuracy, beneficiary access, and potential beneficiary financial liability for advanced diagnostic imaging services render the AUC program impracticable, and have led the Agency to pause efforts to implement the AUC program for reevaluation and rescind current regulations. Specifically, CMS stated that the agency has "not identified any practical way to move the AUC program forward beyond the educational and operations testing period." Accordingly, CMS finalized their proposal to pause the AUC program for reevaluation and to rescind the regulations, keeping the section reserved for future use.

Updates to the Quality Payment Program

CMS reiterated its goal of aligning the Quality Payment Program (QPP) to the CMS National Quality Strategy, which involves implementing a "Universal Foundation" of measures in CMS programs. CMS notes the finalized changes align with its focus on impactful yet consolidated quality programs. CMS noted its commitment to modifying policies to encourage continuous performance improvement by clinicians in the MIPS program, particularly for those already high-performing clinicians. Additionally, CMS noted it would consider feedback on potential approaches to publicly reporting performance on MIPS cost measures received through an request for information (RFI) in the proposed rule.

Further for MIPS, CMS maintained the program threshold of 75 points to avoid a MIPS penalty. Historically, CMS has increased the MIPS performance threshold, but during the COVID-19 PHE the agency maintained a 75-point threshold for two consecutive years, allowing MIPS participants to avoid additional quality reporting challenges. CMS proposed to increase the MIPS performance threshold of 75 points to 82 points for the 2024 performance period. Under the proposed rule, CMS considered a "prior period" to establish the performance threshold, defined as three performance periods, rather than the mean score from a single performance period. CMS estimated that if it increased the threshold to 82 points, almost half of participants would likely see a MIPS penalty.

CMS is also finalizing five new MIPS Value Pathways (MVPs) to be available with the 2024 performance year, along with revisions to all previously finalized MVPs. The MVPs are a participation option to motivate clinicians to move away from reporting on self-selected activities and measures (traditional MIPS) and toward an aligned set of measures designed to be meaningful to patient care, better connect measures across MIPS categories and be more relevant to a clinician's scope of practice.

The five newly finalized MVP pathways are:

  1. Focusing on Women's Health
  2. Quality Care for the Treatment of Ear, Nose, and Throat Disorders
  3. Prevention and Treatment of Infectious Disorders Including Hepatitis C and HIV
  4. Quality Care in Mental Health and Substance Use Disorders
  5. Rehabilitative Support for Musculoskeletal Care

CMS is also finalizing the proposal to add five new episode-based measures to the cost performance category beginning with the CY 2024 performance period/2026 MIPS payment year: Depression, Emergency Medicine, Heart Failure, Low Back Pain, and Psychoses and Related Conditions. CMS is also finalizing its proposal to use a 20-episode case minimum for each of these new measures and to clarify the agency's policy regarding case minimums for cost measures.

For the Advanced Alternative Payment Model (APM) Track, CMS codified certain sections of CAA, 2023 that extended the Advanced APM bonus and froze Qualifying Participant (QP) thresholds. Without further congressional action, however, the bonuses will expire and the QP thresholds will increase in performance year 2024. CMS decided not to finalize proposals to make all QP determinations at the individual level rather than at the entity level.

Medicare Ground Ambulance Data Collection System

The Bipartisan Budget Act (BBA) of 2018 required CMS to implement regulations for a ground ambulance data collection system by Dec. 31, 2019. The Medicare Ground Ambulance Data Collection System (GADCS) portal went live on Jan. 1, 2023, and CMS has identified opportunities to improve it with the assistance of stakeholders. CMS finalized the following changes to the GADCS instrument:

  • enabling partial year responses from ground ambulance organizations
  • improving reporting consistency of hospital-based ambulance organizations through minor edits
  • correcting four technical typos

Medicare Part A and B Payment for Dental Services

CMS finalized its proposal to allow payment for certain dental services inextricably linked to other covered services used to treat cancer, including chemotherapy services, Chimeric Antigen Receptor T- (CAR-T) Cell therapy, and the use of high-dose bone modifying agents (antiresorptive therapy).

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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