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CMS's Impact On Pediatrics

Updated: Oct 29, 2018


The Centers for Medicare & Medicaid Services (CMS) recently proposed for 2019 that the Work Relative Value Unit (wRVU) for 99201-99205 and 99213-99215 be the same. The goal behind this effort is to "reduce the documentation burden of providers". Ironically, applying the same value for each of these CPT codes not only undermines the foundation of the RVU system, but also has the potential to negatively impact the financial bottom line for organizations who rely on RVU-based indicators to measure productivity and provide incentive bonuses for physicians. Moreover, reduced access to subspecialty pediatric care for children is among the potential unintended consequences of this change- which could place additional burdens on the general pediatric practices. Given the stakes for financial bottom lines and patient care, providers should take steps both to weigh in with CMS on the impact this proposed change will have, and to prepare for the adoption and implementation of the proposed change.

The Current RVU Framework Relative Value Units (RVU’s) is a system developed to break down the cost to provide the services to a patient. There are three components: 1. Work: This number is supposed to represent the provider’s compensation related to the estimated time spent with the patient plus all the education and skills necessary to complete a given procedure; 2. Practice Expenses: This number represents the practice’s estimated cost to provide the service such as rent, clinical salaries, utilities, etc.; 3. Malpractice: The estimated cost for medical liability insurance on a “per-procedure” basis.

In theory, this is a point system allowing providers to be paid a proportional amount whether they are doing an aortic valve replacement or a level-3 established Evaluation & Management (E&M) visit. By assigning different values to reflect the physician’s expertise, level of decision making, technical acumen needed to provide the service and cost to provide the service, RVUs help to normalize payments for all the different services and procedures in healthcare, while also considering the varying levels of effort, expertise, and risk associated with different types of medical care.

Comparing the RVU analysis for a level-3 established patient E&M visit with that of an aortic valve replacement using the 2018 national Medicare fee schedule illustrates the point:

Figure 1:


Under the RVU system that has been in place for over 25 years, the estimated physician’s training, cost and skill required to perform an aortic valve replacement is 31 times greater than that needed to treat a child requiring an expanded assessment with low to moderate severity . While the RVU system is not without its faults, caution should be exercised when abruptly changing the individual values of a collection of CPT codes. Normally such values are evaluated by a group referred to as “The RUC,” which extensively studies each code before assigning or adjusting the relative value components of a given code . While CMS reserves the right to determine the final RVU values assigned to the CPT codes, consideration should be given to the precedent that assigning a collection of CPT codes the same values would set, and the extent to which this would open the door to additional scrutiny of this vital instrument that sets pricing for much of the U.S. healthcare system.

Proposed RVU Changes The specific language of CMS’s proposed RVU changes includes the following:

“To improve payment accuracy and simplify documentation, we propose new, single blended payment rates for new and established patients for office/outpatient E/M level 2 through 5 visits and a series of add-on codes to reflect resources involved in furnishing primary care and non-procedural specialty generally recognized services.”

Practically speaking, CMS proposes to pay the same rates for 99202-99205 ($135) and 99212-99215 ($93), instead of the differential payment rates currently in use:

Figure 2:


Financial Impact While the 99201, 99202, 99203, 99211, 99212 and 99213 CPT codes will see an increased payment rate, providers who are billing a high percentage of 99204, 99205, 99214 and 99215 should expect a revenue decrease. On a line by line basis, 99213 will see an increase of over 25 percent, 99214 and 99215 will see a decrease of 14.7 percent and 37.2 percent, respectively. Since the Medicare Fee Schedule is the gold standard to set state Medicaid payment rates, such changes in E&M code rates will trickle down to practices almost immediately. For practices that have little or no Medicaid patients, they will feel the pinch as every insurance company (whether they admit it or not) bases their contractual allowed amount on a “percent of Medicare.” Regardless of the number of Medicaid patients in a Pediatric practice, CMS’s proposed change has the potential to adversely affect the financial stability of Pediatric practices.

Scenarios It is not uncommon for a general pediatric practice to have an E&M distribution like this:

Figure 3:



While much can be said about the practice with the distribution displayed above, this is not an uncommon pattern seen when PMI is called in to evaluate a practice. Based on CMS’s proposed rates, this practice with a heavy emphasis on 99213 could see a potential increase in revenue:

Figure 4:


A practice with the same number of visits (21,371) but has a higher percent of 99214/5 codes should plan to experience a decrease in payments:

Figure 5:


As one can see, the impact of CMS’s proposed rate changes will influence the practice’s bottom line to varying degrees based on their practice’s E&M distribution. The only way to measure the impact your practice may experience is to run a similar analysis. The practices that historically rely heavily on 99213 are expected to see an increase. In contrast, practices that have been coding at higher levels (more 99204, 99205, 99214 & 99215), should brace themselves for the potential decrease in revenue . This illustrated reduction of over $92k cannot be offset by any decrease in overhead cost as this analysis examines only the individual CPT codes involved, not the entire visit. Such payment reductions can only be offset by a reduction in provider compensation or an increase in hospital subsidies (if available to employed providers).

Impact on Mental Health Care

Since the payment for treating a runny nose or dealing with a child with mental health issues will be given the same weight (and the same payment rate), it is clear that the proposed change could adversely affect a provider's willingness to spend the time necessary to address such concerns. While most, if not all, of PMI's clients would never let a child's mental health needs go unattended, the real focus come down to adequate compensation for taking the necessary time to help the child/family facing mental health issues. Under CMS's proposed change, they are advcocating that the provider be paid the same for treating simple concerns versus taking the time necessary to address mental health issues. PMI believes that CMS's declared intention to "reduce the documentation burden of providers" will pose additional unintended consequences that need to be fully evaluated before the proposed changes are finalized.

Implications for Pediatric Subspecialists Since many pediatric subspecialists are not able to utilize the consultation codes (99241-99245 and 99251-99255) for Medicaid patients due to varying state Medicaid payment policies following Medicare’s previous decision to stop paying such codes, they will see a greater impact on their financial performance.

It is well-documented that subspecialists are not able to bill the consultation codes for Medicaid patients in many states across the country. As such, they are relegated to using the 99214/99215 codes for such patients , which is entirely appropriate based on current CPT guidelines. The squeeze comes when these subspecialists are faced with a 37.2 percent reduction in their “bread and butter” codes for consultations (99215) and they have a high percentage of Medicaid patients- which is normal. PMI finds it very difficult to see how large pediatric academic centers with a high percent of Medicaid patients in states that do not pay for consultation codes will be able to continue to adequately pay such providers for their time and effort to care for children without additional hospital subsidies or a reduction in provider salaries.

The unintended consequence of CMS’s proposal points to a potential reduction in access to subspecialty care for children in various regions of the United States. For example, if Acme Children’s Hospital in Anywhere, USA employs many pediatric subspecialists that routinely rely on 99215 to bill for their services, the projected reduction of over 37 percent related to this code for Medicaid patients is sure to have a negative effect on their financials. Aside from the “seasoned” subspecialists who are nearing the end of the careers finally being pushed into retirement because of this financial reality, PMI expects that if CMS’s proposal is accepted, this will lead to further reductions in access to subspecialty care. Additional pressure on subspecialty care can be seen when looking at the data from the Resident Match Program results released in December of 2017 :

Figure 6:


As the results indicate, there are less people going into key subspecialty areas of Pediatrics than available. The reduction in financial stability for subspecialists only decreases the likelihood that future candidates will be willing to continue their education for an additional three years only to find that their area of expertise pays less money to provide fair compensation and address their student loan obligations.

Physicians, hospitals and academic centers only have a few options to address the issue, each of which would have residual effects on other aspects of their financial operations:

  1. Hospitals can find ways to increase their subsidies for the employed subspecialty providers to offset the cost allocated to their “cost centers,” thereby allowing more funds to flow through to the bottom line and to support provider compensation/benefits;

  2. Academic centers can shift funds from within their respective practice plans to support the communal good of ensuring appropriate levels of compensation for all providers within the institution;

  3. Physicians, if the salaries cannot be protected in some way, may move away from a given region to join a larger institution in areas that are financially favorable.

While there may be additional ways to address the potential impact to subspecialty pediatricians, the point remains the same: the financial impact from CMS’s proposal is certainly going to be painful for subspecialty care and could lead to additional shortages of access to subspecialty care within various regions across the country- thereby increasing the demand on general pediatric practices.

Implications for RVU-Incentive Contracts Hospitals and practices looking to offer production incentives to physicians utilize a wRVU-based formula because it provides an incentive for the work actually being done with no regard for payments received for services rendered. This is particularly popular with organizations that have providers care for disproportionate percentages of Medicaid patients.

A typical wRVU bonus incentive may look something like this:

Figure 7:


CMS’s proposed changes in wRVU will not nullify the applicability of wRVU-incentive bonuses. But the changes will require that physicians, practices, and organizations re-evaluate the numbers so that providers have a reasonable chance of earning a bonus.

If employers simply leave existing contracts alone with the same “threshold” (number of wRVUs needed to earn a bonus), then providers are not likely to earn a bonus given the proposed reduction in values for 99204, 99214, 99205 and 99215.

Future Contract Thresholds Will Need To Be Re-Calibrated Aside from the obvious problem that comparing a provider’s RVU productivity for 2019 versus any previous year(s), there are several issues that practices and providers need to bear in mind if CMS’s proposal is accepted as written: 1. For providers who are currently receiving a base salary plus a bonus payment for billing more than a specified number of wRVUs, care will need to be taken to address how the employer plans to account for the impact CMS’s proposal will have. If a provider currently has a high percent of 99214 & 99215’s, they should not expect to reach the same number of wRVUs in 2019. As such, the incentive threshold needs to be adjusted in the contract to set a reasonable expectation in terms of provider productivity; 2. PMI recommends that any providers who are seeking employment from a hospital or practice with such a bonus arrangement consider requesting that the contract state that the wRVUs are to be based on the 2018 wRVU values. However, if your contract is silent on the issue, it is best to clarify the employer’s intention in advance; 3. For practices and hospitals that are looking to offer or renew RVU-based incentives, care should be taken to account for the proposed change in wRVU values. Determining the appropriate bonus rate to be paid for each wRVU above a specific threshold can be challenging under the best of circumstances. If practices are unable to build the proper models to evaluate the financial impact of offering an RVU-based incentive, they run the risk of either jeopardizing the practice’s financials or not being able to compete with production incentives providers are being offered from other employers. The proposed changes may simply be too much, and consideration of an incentive based on charges or payments generated may be in order. PMI notes, however, that this may conflict with a variety of philosophical approaches and may undermine the idea of ACO’s, MIPS & MACRA.

For practices looking to consider performance incentive bonuses based on revenue generated, check out PMI's online calculator to help guide you on such efforts by clicking here.

Call To Action Considering the potential impact of CMS’s proposed RVU changes, PMI recommends that providers take a few important steps.

First, providers can weigh in with CMS. The proposed changes are not yet finalized, and provider perspectives may help to prevent the rule’s implementation or persuade CMS to modify the proposed language. You can weigh in with CMS in a variety of ways: 1. Provide a comment to CMS via their open comment period before September 10, 2018. You can access the Federal Register by clicking here. 2. Contact your state chapter of the American Academy of Pediatrics (AAP) to see what efforts are underway to bring attention to this issue. Taking advantage of this opportunity to speak as a unified voice lends credence to your voice and adds value to being a supporter and member of your state AAP chapter. 3. Contact your federal representative or senator to educate them on the impact CMS’s proposal will have on pediatrics, particularly subspecialty care. Depending on the financial stability of subspecialty employers, there could be potential “Access to Care” issues for their most vulnerable constituents. 4. Contact state medical directors to provide your input, since they have significant influence on the payment policies of the organizations they work for.

Second, you should prepare now for implementation of the proposed changes. This includes reviewing your managed care contracts to determine if the payment rates are based on the given current year’s Medicare rates/values or on a specific year. It is not uncommon for some insurance companies to pay a percent of the current year’s Medicare rates while others will specify in the contract the year of Medicare rates they intend to pay. For the practices that have contracts specifying the allowed amounts as X % of the 2018 fee schedule, you should not see any change for that payor. For practices with contracts with X % of a given current year’s Medicare rates, you can expect to see a decrease in revenue if you use 99204, 99205, 99214 and 99215 extensively.

While CMS is in a difficult position of trying to satisfy many competing interests, this effort is clearly not the way to address the “documentation burden” of physicians. If CMS continues down this path as proposed, pediatric practices will face even greater pressure to squeeze out operational efficiency or reduce provider compensation.

If your practice needs any assistance identifying opportunities to improve your financial performance, take a look at www.PediatricSupport.com or reach out to us to discuss how we can help.

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[1] https://www.acc.org/latest-in-cardiology/articles/2018/07/12/18/19/cms-releases-proposed-2019-medicare-physician-fee-schedule

[2] https://www.healthdatamanagement.com/news/seema-verma-tells-docs-cms-will-reduce-ehr-documentation-burdens

[3] While many readers may take issue with whether various values assigned to different components of these specific codes, for now, the focus of this example should be to visualize the relationship of the three components that make up the total RVU value.

[4] https://www.ama-assn.org/rvs-update-committee-ruc

[5] https://www.cms.gov/newsroom/fact-sheets/proposed-policy-payment-and-quality-provisions-changes-medicare-physician-fee-schedule-calendar-year-3

[6] Sample practice using IntelliTraq business intelligence solution to monitor their practice financials. The system currently analyzes over 4 million encounters to help pediatricians understand their financial data from Office Practicum, AllScripts, Greenway, eCW, Athena, Epic and several other systems.

[7] It should be noted that the expected increases to 99201,99202, 99211 and 99212 have been set aside in the analysis above since most readers of this article rarely, if ever, use such codes. When evaluating the practice’s entire revenue generation, the increases to these four codes should offset some of the variance in Figure 5. However, when evaluating the individual provider’s RVU-based incentive bonuses and the ability to generate enough income to cover their salary, benefits and cost to provide care, the CPT codes in Figure 4 and Figure 5 should be given stronger weight.

[8] https://www.texmed.org/Template.aspx?id=8285

[9] http://www.nrmp.org/wp-content/uploads/2017/12/Pediatric-Specialties-Fall-Match-Results-Statistics-AY2018.pdf

[10] https://www.federalregister.gov/documents/2018/07/27/2018-14985/medicare-program-revisions-to-payment-policies-under-the-physician-fee-schedule-and-other-revisions


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