An Important Update on Upcoming 2023 Medicare Cuts & Changes to Hernia Reimbursement
This message is to make sure that all SAGES members who are U.S. based are aware of the upcoming proposed cuts to Medicare reimbursement, as well as the changes that are occurring to the anterior abdominal wall hernia codes, all starting January 1, 2023.
Changes to Medicare Physician Fee Schedule
In the recently released 2023 Medicare Physician Fee Schedule (MPFS) Final Rule there is an approximately 4.5% cut to Medicare physician payments. These cuts, combined with the pending 4% PAYGO reduction with years of insufficient updates that have not kept up with inflation, are not sustainable for physicians. Both are slated to begin January 1, 2023.
Background Information for CMS Payments
The Centers for Medicare & Medicaid Services (CMS) reimburses physicians for care given to Medicare Part B beneficiaries based on the Medicare Physician Fee Schedule (MPFS), which lists the payment rates for more than 12,600 unique covered services.
The resource-based relative value scale (RBRVS) is the physician payment system used by CMS and most other payers. It is based on the principal that payments for physician services should vary with the resource costs for providing these services; it is intended to improve and stabilize the payment system while simultaneously providing physicians an avenue to continue to improve the system.
The Social Security Act requires CMS to establish these payments based on national uniform relative value units (RVUs), that account for the relative resources used in furnishing a service. This Act requires that the RVUs be established for 3 categories of resources:
- Physician Work
- Practice Expense (PE)
- Professional Liability Insurance (PLI) Expense
CMS is also required to establish regulation for each year’s payment amounts, incorporating geographic adjustments to reflect the variations in the costs of furnishing services in different geographic areas.
The Medicare Physician Payment Schedule’s impact on a physician’s Medicare payments is primarily a function of 3 key factors:
- The Geographic Practice Cost Indexes (GPCI)
- The monetary Conversion Factor (CF) [what is the amount that CMS pays per relative value unit – changes each calendar year]
Calculating the Medicare Payment Schedule
The Omnibus Budget Reconciliation Act of 1989 geographic adjustment provision requires all 3 components of the relative value for a service – physician work RVUs, PE RVUs, and PLI RVUs – to be adjusted by the corresponding GPCI. This ended up creating 6 components that make up the payment schedule:
- Physician work RVUs
- Physician work GPCI
- PE RVUs
- PE GPCI
- PLI RVUs
- PLI GPCI
To calculate a physician’s total RVU for a service.
(Work RVU X Work GPCI) + (PE RVU x PE GPCI) + (PLI RVU x PLI GPCI) = Total RVU
Total RVU x CF = Medicare Payment
Since the introduction of the RBRVS, the American Medical Association (AMA) created the AMA/Specialty Society RVS Update Committee (RUC), which is how the AMA and other specialty societies provide relative value recommendations to CMS annually. The RUC recommendations are only just that, recommendations. Ultimately, CMS makes the decisions on valuing care, and can agree, disagree, or change any recommendation that the RUC provides.
Surgical societies like SAGES and the American College of Surgeons have representatives on both the CPT Editorial Panel, and the RUC.
Changes to E/M Polices and Guidelines along with Budget Neutrality
Within the last couple of years, CMS had made changes to the evaluation and management (E/M) office visit policies and guidelines; all of you should have seen these changes enacted by now. E/M services enable physicians and others to diagnose and manage patients’ chronic conditions, treat acute illnesses, develop care plans, coordinate care, discuss patient preferences, and engage in shared decision making.
In 2021, when the E/M office visit payment increases occurred, they were offset by payment reductions across all physician services due to statutory budget neutrality requirements that exist within the MPFS. Under the current requirements, any MPFS change that occurs cannot increase or decrease by more than $20 million in a year. Typically, these are applied to the Conversion Factor, which is where we are seeing the 4.5% reduction in payments for 2023.
What Comprises the 4.5% Cut?
At the end of 2020 Congress passed legislation provided physicians a 3.75% increase to the Conversion Factor for 12 months to mitigate the impact of the E/M policy changes. Congress once again intervened at the end of 2021 to alleviate the impact. They did this via the Protecting Medicare and American Farmers from Sequester Cuts Act that included a separate 3.0% increase to the Conversion Factor through December 31, 2022.
The current 2023 cut is constructed from two primary sources. The first one is the expiration of the 3.0% increase from Congress that expires at the end of 2022. The rest, or 1.5%, come from new CMS policies about E/M services in non-office settings (like hospitals, emergency rooms, nursing facilities, home visits), which requires an additional budget neutrality reduction.
No Accounting for Inflation
When the AMA did an analysis of Medicare Trustees data, they found that Medicare physician payment has been reduced approximately 22% adjusted for inflation from 2001-2022. This system lacks an adequate annual physician payment update, unlike other groups that receive Medicare payments. A continuing statutory freeze in annual Medicare physician payments is scheduled to remain in place until 2026, when then updates will resume at a rate of 0.25% per year indefinitely, which continues to be well below inflation rates.
Summary slides of these issues are provided below from the AMA:
What is being done to address these changes?
Congressman Ami Bera (D-CA) and Larry Buschon (R-IN) introduced HR 8800, “The Supporting Medicare Providers Act of 2022.” This legislation provides a positive adjustment to the conversion factor for calendar year 2023, preventing the incoming 4.5% cuts slated for January 1, 2023. There are numerous efforts underway lobbying Congress to take up and pass this critical piece of legislation during the lame duck session of Congress prior to the end of 2022.
In the bigger picture, it is widely recognized that the Medicare Payment System is broken and unsustainable. There are significant efforts being planned by the ACS and AMA to tackle this system. There also appears to be a willingness in Congress to do the same, with 46 U.S Senators recently sending a letter to both Democrat and Republican leadership in the Senate asking for them to take up this issue of Medicare payment reform.
Changes to Anterior Abdominal Wall Hernia Codes for 2023
Starting January 1, 2023, the way Medicare reimbursements occur for all umbilical, ventral, incisional, epigastric, spigelian, and parastomal hernia repairs will change.
A summary of the changes is below:
- Size of the hernia matters (reducible vs incarcerated/strangulated)
- <3 cm
- 3-10 cm
- >10 cm
- Number of hernias matters
- When have multiple hernias, you only report once based on total defect size
- Measured as maximal craniocaudal or transverse distance between the outer margins of all defects repaired – total length of the defect(s) corresponds to the maximal width or height of an oval drawn to encircle all the defects
- If the defects are separated by greater then or equal to 10 cm of intact fascia, then each hernia is measured individually and added together
- Type of abdominal hernia matters less than size and number
- Approach agnostic – will reimburse the same for open vs laparoscopic vs robotic
- New parastomal hernia repair code created
- Implantation of mesh code included in new codes
- New add-on code for total or near total mesh removal to be reported with all abdominal hernia repair codes
- All these codes are 0-day global codes, meaning every post-op visit and intervention can be billed and as not included in the payment for these hernia codes
- CMS has also decreased the value of these codes compared to previous reimbursement plans
This does NOT affect inguinal, lumbar, and femoral hernia repairs.
For more details, including a recent webinar with more information and guidance, please see the ACS website, link attached here:
Background to Change for Hernia Codes
The RUC uses objective screens to try and identify codes that may be potentially misvalued. One of the screens was for codes that have a “site-of-service” anomaly, meaning that these are global codes that include inpatient E/M codes even though claims shows that these codes are more than 50% outpatient.
Via this screen, 7 hernia repair codes were identified – 3 open and 4 laparoscopic. When the RUC surveyed surgeons regarding these codes, they found that the “typical” patients were staying overnight in the hospital and being discharged the next day.
Armed with this information, the RUC sent recommendations to CMS included an inpatient visit later on the same day of surgery and a full discharge management code on the next day. The RUC also recommended to maintain the work RVUs for these codes. CMS disagreed with the RUC recommendations and instead implemented a “23-hour outpatient policy” to reduce those code’s values; essentially no inpatient codes were permitted to be used to calculate the value of a global code if more than 50% of claims have outpatient status.
This 23-hour outpatient policy was finalized for calendar year 2011 and used 3 steps to calculate a reduced work RVU for such codes. Those three steps are:
- Change the discharge visit code from 1.0 to 0.5 and subtract one-half of the work RVU for that code
- Remove all inpatient visit codes and subtract the work RVU for those codes
- Sum the “intra” face-to-face time for the deleted inpatient codes and multiple by 0.0224 to calculate a work RVU to add back in for those services
The ACS argued that this new policy was note fair for multiple reasons:
- The “typical patient” used to make this determination was the easiest, straightforward case
- If 70% were overnight stays, that meant 30% were inpatient stays
- This new policy downgraded payment for 70% of outpatient cases and never paid extra for the 30% inpatient cases
This led to multiple societies, including SAGES and the ACS to try and come up with a solution to address these issues that works within the current system.
How The Codes Changed:
One rule regarding evaluating codes is that if you resurvey some of the codes, then all the codes in that family need to be resurveyed. With these new findings, it means that all ventral hernia codes would need to be resurveyed and could be potentially devalued.
There were also issues that there was no way to correctly code and reimburse for robotic approaches to these repairs, since there were no robotic codes for ventral hernias. There were also issues coding for those cases where a hernia repair started in a minimally invasive approach but then required conversion to an open one, nor were there codes for parastomal hernia repairs. It was determined that new codes were needed for these cases as well.
When evaluating the 90-day global codes in this new environment, which included the new resurveying that was occurring, our representatives to the CPT and RUC were trying to predict what could occur if the global codes remained as is.
- Their concern was that there could be a 20% cut across the board for the entire family of hernia codes, which included open and laparoscopic approaches, since all codes would need to be resurveyed.
- This overall 20% cut did not also consider the fact that all the laparoscopic codes were last surveyed back in 2011, and a lot has changed over that time. One of the major factors how the RUC and CMS calculate a CPT code is based on intraoperative times, which would likely decrease since 2011, therefore potentially further reducing the valuation of those codes.
It was also realized that the current 90-day global codes did not factor in the amount of work that is done by the surgeon. Surgeons were getting the same RVU value for a small hernia compared to a large complex one.
This led to an overall concern that if the 90-day global codes were left as is, with all these changes, that the cuts that could have occurred to these hernia codes could have been significantly worse than anything we are currently dealing with.
Taking all of the above into account, coupled with the fact that the embedded E/M visit in the 90-day global codes were already being discounted by CMS compared to regular E/M services, the decision was made to move to a 0-day global code and also reconfigure the codes to take into account the hernia size, complexity of repair, etc.
All these changes went through a full CPT Editorial Panel review and then through the RUC for surveying, including arguing for fair values for all hernia repairs. RUC made their recommendations to CMS, who ultimately decided on implementing the change, and provided values that were less than what the RUC had recommended.
What you can do:
While all of this can be disheartening and frustrating, there are still things that we, as surgeons, can do. We have a voice, and we have a way of utilizing it.
Frequently people say, “what has SAGES done for me on this,” or “what has the ACS done for me on this.” These organizations are member-driven organizations, if the members of those organizations do not participate in these efforts, then nothing gets done. Individually we have some impact, collectively that impact is far more powerful.
But it requires all of us who are eligible to participate, something we have not done in the past. When you face a problem during an operation you don’t walk away from the operating table; you lean in and fix the problem. The same approach is needed here.
It does not take much effort if we all do this together. Below is a link to the ACS SurgeonsVoice website, where you can send messages to your members of Congress with relative ease. It actually will take longer to construct an email response to this message to say why you cannot send this than it will to click the link and send the emails to Congress. There is also a link to the AMA website, sending a similar message.
You can contact your members of Congress multiple times with this message, and the more we bring this to their attention, the better chance we have of making them aware and wanting to act on this issue.
WE NEED YOUR HELP. The reason other professions are so successful in this area (lawyers, etc.) is because they understand and recognize the need for advocacy from all their membership. It is time for all surgeons to step up and do the same.
The time is now. Please do your part to advocate for our profession.
Click these links to send messages to your members of Congress about the upcoming Medicare payment cuts: