November 30, 2018
This article is the first in a series of articles about notable changes in the 2019 Physician Fee Schedule Final Rule.
This article was originally produced in the Medical Association of the State of Alabama's Rotunda e-newslettter in November, 2018. The article may be found on the Medical Association of the State of Alabama's website.
In the 2019 Physician Fee Schedule (“PFS”) Proposed Rule, the Centers for Medicare and Medicaid Services (“CMS”) proposed some major changes to the PFS, including changes to the way Evaluation and Management (“E/M”) services are reimbursed. The PFS Final Rule contains some good news and bad news. The good news . . . CMS isn’t making any of the major changes it proposed in 2019. The bad news . . . they plan on making some big changes over the next few years.
Proposal: CMS proposed to collapse several levels of E/M Codes into one reimbursement level with add-on codes for certain prolonged or complex visits.
Final Rule: CMS is reducing some documentation redundancies for 2019, but it is not finalizing most of the payment proposals described above until 2021.
Currently, there are 3 to 5 levels of E/M codes depending on the practice setting (3 to 4 in facility settings and 5 for outpatient or office settings). These codes are billed based on the relative complexity of the E/M service provided, as determined in accordance with either the 1995 or 1997 guidelines issued by CMS. The higher the level of E/M service (and associated relative time and resources required to deliver those services), the higher the reimbursement. According to CMS, E/M codes represent approximately 40% of allowed charges for PFS services, and outpatient/office visit E/M codes represent about 20% of total PFS allowed charges. Despite the frequency with which E/M services are performed and billed, there are a number of complexities surrounding how they are billed and the documentation required for each level of E/M code.
In an effort to alleviate this burden, CMS proposed to collapse the reimbursement for E/M level 2 through level 5 codes into a single reimbursement amount. In addition, CMS proposed to allow two new add-on codes to represent prolonged services and services with a relatively high degree of complexity. Noting the extensive time and resources that will be needed to adjust to the new coding regime, CMS has delayed the effective date of these rules until 2021. There’s time to prepare for the new E/M coding regime, and it may be altered some between now and 2021, but below is a brief overview of the finalized changes for 2021.
Collapsing Reimbursement for Levels 2-4. Importantly, CMS decided not to change the E/M codes themselves but instead chose to pay the same base reimbursement for E/M code levels 2 through 4. In theory, this will reduce the level of documentation required because physicians will only need to meet the documentation requirements for a level 2 E/M code. However, it will also result in a reduction in reimbursement for many physicians who ordinarily bill higher level E/M codes, unless they also bill for one of the new add-on codes discussed below. Despite the changes in reimbursement levels, physicians do not necessarily have to change how they perform and document E/M services. In fact, CMS expects that physicians will continue to document and bill as they normally would. Noting that other government and private payors (including Medicaid, Blue Cross & Blue Shield, etc.) may continue to use the existing coding structure—or would at least need time to adjust to new coding regimes—CMS decided to retain the existing coding structure, changing the reimbursement only.
Add-On Codes. To account for the reduction in reimbursement associated with the new combined reimbursement rate for E/M levels 2 through 4 and to better align reimbursement with the resources utilized in providing E/M services, CMS decided to add two new add-on codes (again, effective 2021) that can be billed with E/M levels 2 through 4. The first is an add-on code for E/M visits for primary care and certain types of specialized medical care. The second is an add-on code to account for additional resources utilized when physicians have extended visits with patients. Despite the addition of these new codes, CMS indicated that there should not be any additional documentation requirements for E/M services.
Reducing Redundant Data Recording (effective 2019). In response to stakeholder feedback, CMS decided to remove the requirement that physicians document the medical necessity of conducting a visit in the patient’s home instead of in the physician’s office. CMS also decided to streamline documentation requirements by allowing physicians to review information already contained in the medical record (review of systems and past, family and/or social history) and update it as needed, rather than re-recording all of the information.
Proposals Not Adopted. CMS decided not to adopt some of its proposals, including proposals to: (1) reduce reimbursement when E/M services are provided on the same day as a procedure; (2) establish separate podiatric E/M codes; and (3) standardize the amounts of practice expense RVUs for E/M codes.
Overall, there are some changes going into effect in just over a month, and others will likely be reshaped and refined over the next two years before they are implemented in 2021. For now, all physicians need to know is that they can continue to document and bill E/M codes as they always have, but in theory with less redundancy in documentation requirements.
This Insight is intended only to provide an overview of the matters addressed herein and does not constitute legal advice. If you have any questions regarding a specific arrangement with a physician or other health care provider, please seek appropriate legal counsel.
 CMS-1693-F, available at https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-24170.pdf.
 1995 Documentation Guidelines for Evaluation and Management Services, available at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNEdWebGuide/Downloads/95Docguidelines.pdf; 1997 Guidelines for Evaluation and Management Services, available at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNEdWebGuide/Downloads/97Docguidelines.pdf.
 CMS decided to combine levels 2 through 4 instead of 2 through 5, as original proposed.
 CMS reasoned that this decision is best left to the physician and patient, without applying additional payment rules.