Mitigating 2023 Proposed Medicare Reimbursement Cuts

Over the past few years, due to the public health emergency (PHE), Congress has stepped in to halt pending Medicare cuts. However, legislative intervention during the PHE only delayed the cuts until the following year.

With the proposed 2023 Medicare Physician Fee Schedule released in July, which contained several reductions, and the return of the 2% sequestration, healthcare providers need to start planning to mitigate upcoming reimbursement cuts.

2022 Medicare Cuts Adverted

As a result of the pandemic, several Medicare cuts that were proposed for implementation in 2022 were halted, including:

• Sequestration – Implemented in 2013, federal law requires a 2% reduction in Medicare fee-for-service claims. Congress halted this reduction in payment known as sequestration at the start of the pandemic. In 2022, sequestration was phased in with a 1% reduction in April and May and 2% for the remainder of 2022.
• Physician Fee Schedule – Payment decreases were delayed until 2023, and in 2022, physicians saw a 3% increase.
• Clinical Lab Fee Schedule – The 15% PAMA-related cuts to the clinical laboratory fee schedule was delayed for one year until 2023, along with the next round of private payor reporting requirements.
• MIPS ECU Exception – To provide relief for clinicians responding to the pandemic in 2020, CMS automatically applied the MIPS Extreme and Uncontrollable Circumstances (EUC) to all participants. As a result, participants were able to avoid the negative 9% payment adjustment applied in 2022 based on their 2020 MIPS performance.
• PAYGO Cuts – The statutory Pay-As-You-Go (PAYGO) rules were automatically triggered due to an increase in the federal deficit. The Medicare 4% pay-as-you-go (PAYGO) cut set to occur on January 1, 2022, was delayed for one year until 2023.

Pending 2023 Medicare Cuts

Sequestration

In July 2022, the 2% Medicare per claim sequestration cut was reinstated and is scheduled through 2023.

Medicare Physician Fee Schedule (MPFS)

Pathology – The estimated overall impact is a 1% decrease for pathology based on the 2023 proposed physician fee schedule released in July 2022.

Radiology – CMS estimated the overall impact of the MPFS proposed changes to be a 3% decrease for radiology.

Clinical Lab Fee Schedule

PAMA legislation requires CLFS payment adjustments to be phased in, with cuts between 2023 and 2025 not exceeding 15%.

MIPS Potential Payment Penalty

Under the 2023 proposed fee schedule, the performance threshold will remain at 75 points but achieving that will be more difficult. CMS will no longer offer an exceptional performance adjustment starting in the 2023 performance year. In addition, within this rule, CMS limits proposals for traditional MIPS and focuses on further refining MIPS Value Pathways (MVPs) implementation. However, 2023 participants who do not meet the performance threshold for traditional MIPS could see up to a 9% reduction in payments.

PAYGO Cuts

While Congress ultimately passed legislation that prevented this 4% PAYGO cut from taking effect in 2022, it only delayed the cut until 2023. The American Rescue Plan Act (ARPA) of 2021 provided economic relief for the PHE.

While the physician fee schedule is not final and new legislation, called the Savings Access to Laboratory Service Act, has been introduced to update PAMA, the combined impact of these potential cuts is clear: Diagnostic Providers will face continued reimbursement challenges in 2023.

Strategies for Mitigating Medicare Fee Cuts

On top of the proposed Medicare cuts, providers are also facing revenue uncertainty due to declining reimbursement from commercial payors, increasing payor denials, and staffing shortages.

To maintain financial stability in today’s healthcare environment, providers must have efficient and effective RCM processes to ensure they are getting paid for the work performed.

Critical elements in RCM Optimization include:

• Implementing workflow automation – Automation helps ensure faster clean claims submissions and frees staff to focus on more complex issues. Relevant capabilities include error correction and edits, insurance discovery, payor change handling, compliance checks, and flexible pricing configurations.
• Incorporating a denial and appeal strategy – On average, 15% of all claims are denied, and implementing a strategic appeals process is essential to recovering the revenue duly earned by your business. Automating specific components of the appeal process ensures efficiency and reduces cumbersome manual responsibilities. In addition, payor-specific front-end logic and edits should be easily configurable within the billing system to proactively address potential denial issues and modify them before sending them to the payor.
• Monitoring RCM data analytics regularly – To effectively manage complex business decisions and optimize clinical outcomes, diagnostic service providers must be able to precisely measure results and compare them to internal goals and industry benchmarks. Role-specific reporting capabilities for relevant stakeholders, including finance leadership, revenue cycle management, lab directors, and sales, is essential. Developing a weekly, monthly, and quarterly cadence for monitoring and tuning performance as benchmarks dictate is now an imperative.

The proposed 2023 Medicare Physician Fee Schedule is open for comments until September 6^th, 2022. We urge diagnostic leaders to take the time to review the revenue impact these proposed changes will have on their practice and provide CMS feedback on how these cuts could negatively impact their ability to serve their patient population.

Contact your MAC Medical Director or coordinate efforts with the specialty society, and let your voice be heard.

To learn more details about the true cost of deferring improvements and keeping the status quo, download the XiFin white paper, “A Healthcare Provider’s Guide to the True Cost of Deferred Billing Improvements.”

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Additional Resources

• Savings Access to Laboratory Service Act – Congress Introduces Legislation to Update PAMA Lab Reporting Requirements | XiFin
• PAMA News and Resources – PAMA Regulations, PAMA News & Resources | XiFin
• CAP July Advocacy Update on MIPS and Physician Fee Schedule – July 7, 2022, | College of American Pathologists (cap.org)
• ACR Radiology-Specific Summary of Physician Fee Schedule – ACR Releases Preliminary Radiology-Specific Summary of Proposed Medicare Physician Fee Schedule | American College of Radiology