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Policy background information

Medicare physician payment


To help provide stability for dermatology practices in this uncertain time, the American Academy of Dermatology Association (AADA) urges Congress to take action to stop pending Medicare payment cuts and waive budget neutrality requirements that would require significant reductions in Medicare reimbursement for many dermatologic services on January 1, 2021.

Message to Capitol Hill

The Centers for Medicare & Medicaid Services (CMS) final Medicare Physician Fee Schedule (MPFS) rule for Calendar Year (CY) 2020 included broad changes to:

  • reduce administrative burden,

  • improve payment rates, and

  • reflect current clinical practice, especially as it relates to evaluation and management (E/M) services that are provided in physician offices.

These changes include new increased values for the revised E/M codes, which are scheduled to go into effect on January 1, 2021. However, because CMS is required to offset the anticipated increased expenditures associated with these services in a budget neutral manner, often referred to as budget neutrality, these changes for these E/M codes will generate sizable cuts for various sections of the physician and health care provider community.

These cuts would be in addition to the substantial financial uncertainties for physician practices due to the COVID-19 public health emergency (PHE). Significant reductions in Medicare payments would only add to these financial challenges facing dermatology practices, and this is in addition to the increased cost of operating in the PHE environment that disproportionately impacts physicians, including dermatologists, that provide medical procedures to patients.

The AADA urges Congress to take action now to preserve patients’ access to care and mitigate financial distress due to the pandemic by waiving the budget neutrality requirement. This will allow CMS to implement the office visit increases as planned and will not generate payment cuts for other services.

Ask

  • Support legislation to waive the budget neutrality requirements stipulated in Section 1848(c)(2) of the Social Security Act for the finalized E/M code proposal that is slated for implementation on January 1, 2021.

  • House only: Please sign the bipartisan letter led by Rep. Roger Marshall, MD (R-KS) and Rep. Bobby Rush (D-IL) that asks CMS to delay or mitigate these Medicare payment cuts and give Congress sufficient time to develop a meaningful solution to address the budget neutrality issue.

Background

The new values for the revised evaluation and management (E/M) codes will become effective January 1, 2021. An E/M code is used when a physician provides a cognitive service to diagnose and treat an illness or injury. The Conversion Factor is part of the formula that determine physician payment for providing services to beneficiaries in the Medicare program.

Under current law, CMS cannot increase or decrease expenditures for the value of physician payment for a particular service in the Medicare Physician Fee Schedule (MPFS) beyond an overall amount of $20 million without identifying an offset in payments to another service. This is known as budget neutrality.

To meet the budget neutrality requirements that are required under the MPFS, the expected increased payments for E/M visits in 2021 will be offset by a decrease in the conversion factor of more than 10%. This decrease will translate into drastic cuts in Medicare reimbursement for dermatology practices and could undermine the financial stability of practices and their ability to serve their patients. Waiving budget neutrality would allow CMS to implement the revised E/M codes without necessitating drastic payment cuts to other physician services that otherwise would be used to offset the increases in the E/M codes.

To prevent these drastic payment cuts from taking effect, Congress can include legislative text waiving budget neutrality requirements in any forthcoming legislation to provide a critical reprieve for a broad scope of physicians and non-physician health care providers facing substantial payment reductions in the coming months.

Though some dermatologists will see very little change in Medicare reimbursement because of the E/M code changes, dermatology practices that perform fewer office E/M services will be especially hit hard, including those practices that provide dermatologic surgical care and dermatopathology practices as well. Reductions for these practices will be between 6 and 8% in 2021. These reductions are in addition to the negative financial impact of COVID-19 where nine in ten dermatologists have reported losing more than half their income due to the PHE, as well as the increased cost of operating in this environment that disproportionately impacts physician doing medical procedures. These reductions are in addition to the negative financial impact of COVID-19 where loss of revenue for dermatologists has been more than 70%, as well as the increased cost of operating in this environment that disproportionately impacts physician doing medical procedures. The negative financial impact is expected to continue as long as most of the U.S. population does not have immunity to COVID-19.

More information

The AADA works to ensure physicians are positioned to succeed under Medicare reimbursement rules and are not unduly burdened by regulations. Learn more.

Download a fact sheet on Medicare Physician Payment cuts from a coalition of physician and non-physician health care provider organizations.


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