On Nov. 1, the Centers for Medicare & Medicaid Services (CMS) published the 2023 Medicare Physician Fee Schedule Final Rule (Final Rule) listing reimbursement rates for lab testing and other Part B items and services. In case you don’t feel like reading all 3,300+ pages of the Final Rule, here’s a quick briefing on the five key changes labs need to be aware of.1
1. The 2023 CLFS for Medicare Part B Lab Tests
As in previous years, changes to the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) will have the most significant and direct impact on physician-based, freestanding, and hospital outreach labs.
PAMA Price Reporting: The 2023 CLFS finalizes changes to update two key definitions affecting price reporting under the Protecting Access to Medicare Act of 2014 (PAMA)—as amended by the Protecting Medicare and American Farmers from Sequester Cuts Act—specifically by stating that for the “data reporting period of January 1, 2023 through March 31, 2023, the data collection period is January 1, 2019 through June 30, 2019.” Translation: Labs must base their 2023 first quarter PAMA pricing reporting on data from the first six months of 2019. The Final Rule also clarifies that initially, data reporting starts on January 1, 2017 and is required every three years, beginning in January 2023.
Three-Year Cap on Rate Cuts: The Final Rule makes last year’s freeze on CLFS rate cuts official by specifying that payment for 2022 may not be reduced by more than 0 percent, as compared to 2021. Going forward, it limits rate cuts for a single year between 2023 to 2025 to 15 percent, as compared to the previous calendar year. Translation: Scheduled PAMA cuts that were deferred in response to the COVID-19 pandemic are going to take effect, but will be subject to a 15 percent cap over the next three years.
Increase to Specimen Collection Fee: The 2023 general specimen collection fee will increase a robust $3 to $8.57; as required by PAMA, that amount will increase another $2, to $10.57, for specimens collected from a Medicare beneficiary in a skilled nursing facility or a lab on behalf of a home health agency. Future increases will be indexed to percentage changes in the Urban Consumer Price Index (CPI-U).
Revised CLFS Travel Allowance Rules: The Final Rule also clarifies the methodology that CMS uses to calculate the travel allowance for specimen collection from patients who are homebound or admitted as inpatients by adding new regulations governing:
- General requirements;
- Travel allowance basis requirements; and
- Travel allowance amount requirements.
2. 4.5 Percent Cut in PFS Payments—At Least
The other headliner from the Final Rule are the deep cuts in physician reimbursements. After hammering physicians with a nine percent decrease last year, CMS is cutting PFS rates another 4.5 percent in 2023. Specifically, the agency reduced the conversion factor from $34.61 to $33.06. The $1.55 decrease reflects the elimination of the three percent increase in PFS payments for 2022 designed to help physicians cope with COVID-19 financial losses.
Context: How CMS Sets PFS Rates
Many of the diagnostic tests subject to the PFS are reimbursed in separate payments covering the services’ professional and technical components. Typically, labs and other suppliers bill for the technical component while the physician or practitioner bills for the professional component.
As noted above, PFS payments are based on the resources typically used to furnish the service, as reflected in relative value units (RVUs) covering work, practice, and malpractice expenses. To account for geographic cost variations, CMS applies a conversion factor to total RVUs to calculate the payment rate for each geographical area. The agency also applies any payment rate updates required by legislation.
The cuts come as a blow to the American Medical Association (AMA) and other physician groups that had called on Congress to prevent CMS from imposing them. Coupled with the four percent sequester under the Pay-As-You-Go (PAYGO) Act (which requires that mandatory spending and revenue legislation not increase the federal budget deficit), physicians will be hit with an overall 8.5 percent Medicare reimbursement cut in 2023, according to the AMA.2 Congress deferred the PAYGO sequester at the end of 2021, but it’s expected to go through this year.
3. Revisions to Billing Rules for Split (or Shared) E/M Visits
The 2022 PFS final rule revised CMS’ longstanding policies for split (or shared) evaluation and management (E/M) visits to reflect current medical practice, the evolving role of non-physician practitioners (NPPs) as members of the medical team, and to clarify conditions of payment that must be met to bill Medicare for these services.
One key change was the new definition of split (or shared) E/M visits as E/M visits provided in the facility setting by a physician and an NPP in the same group, with the visit billed by the physician or practitioner who provides the visit’s substantive portion of the visit. For 2022, the substantive portion included history, physical exam, medical decision-making, or more than half of the total time (except for critical care, which could only be more than half of the total time). In 2023, the substantive portion of the visit is defined as more than half of the total time spent.
Clinicians who furnish split (or shared) visits in 2023 will continue to have a choice of history, or physical exam, or medical decision-making, or more than half of the total practitioner time spent to define the “substantive portion” instead of using total time to determine the substantive portion. However, that option will end in 2024.
4. Changes to Telehealth Services Rules
Telehealth services that CMS temporarily added to the Medicare Telehealth Services List during the COVID-19 public health emergency (PHE) will remain on the list through at least December 31, 2023, giving the agency time to determine whether to add those services on a permanent basis. In addition, CMS states that any services temporarily included on the list will remain on the list for at least 151 days after the PHE ends.
Under the Final Rule, physicians and practitioners can continue to bill with the place of service (POS) indicator that would have been reported had the service been furnished in-person, as long as they list the modifier “95” identifying them as services furnished as telehealth services. The POS billing rules will remain in place until the end of 2023 or the year the PHE ends, whichever comes later.
5. Expanded Coverage of Colorectal Cancer Screening
CMS has finalized changes initiated earlier this year to expand Medicare coverage for colorectal cancer screening in accordance with new United States Preventive Services Task Force (USPSTF) guidelines:
- The minimum age for coverage of certain colorectal cancer screening tests is reduced from 50 to 45 years for individuals with specific risk factors; and
- The definition of colorectal cancer screening is expanded to include a complete colorectal cancer screening, where a follow-on screening colonoscopy after a Medicare covered non-invasive stool-based screening comes back positive.