On September 13, 2022, Representatives Ami Berra (D-CA-7) and Larry Bucshon (R-IN-8) introduced the Supporting Medicare Providers Act of 2022 (H.R. 8800), which aims to infuse the Medicare Physician Fee Schedule (MPFS) with a 4.42% funding increase for 2023.¹ With a bipartisan coalition of 12 co-sponsors, the bill would have the practical effect of negating the impending 4.42% cut to the MPFS conversion factor. This Health Capital Topics article will review the bill, discuss its support, and examine its potential implications.

Physician fee schedule payments are calculated according to Medicare’s Resource Based Relative Value Scales (RBRVS) system, which was designed with the intent of bringing medical practice payment more in line with a prospective payment system and away from a purely fee-for-service (FFS) system.  The RBRVS system assigns relative value units (RVUs) to individual procedures based on the resources required to perform each procedure. Under this system, each procedure in the MPFS is assigned RVUs for three categories of resources: (1) physician work (wRVUs); (2) practice expense (PE RVUs); and, (3) malpractice expense (MP RVUs).  Further, each procedure’s RVUs are adjusted for local geographic differences using geographic practice cost indexes (GPCIs) for each RVU component.

Once the procedure’s RVUs have been modified for geographic variance, they are summed, and the total is then multiplied by a conversion factor to obtain the dollar amount of governmental reimbursement. The conversion factor is a monetary amount that is multiplied by the RVU to determine the payment amount for a given service.² This conversion factor is updated yearly by a formula that takes into account: (1) the previous year’s conversion factor; (2) the estimated percentage increase in the Medicare Economic Index (MEI) for the year (which accounts for inflationary changes in office expenses and physician earnings); and, (3) an updated adjustment factor.³ Notably, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) contains a predetermined schedule of updates to the MPFS conversion factor. However, these annual updates have been relatively small, with an update of 0.5% from 2016 to 2019, and an update of 0% for years 2020 through 2025.⁴

For 2023, the Centers for Medicare & Medicaid Services (CMS) proposed decreasing the conversion factor by 4.42% from the 2022 conversion factor of $34.61, which would have been a second straight year of conversion factor decreases.⁵ These conversion factor decreases emanate from MACRA’s statutory update of 0%, the end of the temporary 3% payment rate bump for 2022 pursuant to the Protecting Medicare and American Farmers from Sequester Cuts Act, and budget neutrality adjustments.⁶ Further, as pointed out by the Medical Group Management Association (MGMA) in response to the proposed rule, the conversion factor could be further reduced by the impending Pay-As-You-Go Act (PAYGO) sequestration, which is scheduled to take effect on January 1, 2023. PAYGO requires that “all new legislation changing taxes, fees, or mandatory expenditures, taken together…not increase projected deficits” and “is enforced by the threat of automatic across-the-board cuts in selected mandatory programs [including most Medicare payments] in the event that legislation taken as a whole does not meet the PAYGO standard.”⁷ Consequently, Medicare payments could be cut by an additional 4% (the maximum amount allowed by law) for the next several years, barring congressional intervention.⁸

Since the release of the 2023 MPFS proposed rule, physicians and their professional trade associations have lobbied furiously to educate lawmakers on what is at stake should these Medicare physicians payments be cut by 8.42% (a combination of the reduced conversation factor and the implementation of PAYGO), amid “rising costs, staff shortages and record inflation.”⁹ To provide “a unique perspective into the real-world consequences such dramatic physician payment cuts would have on physician practices’ ability to treat patients,” MGMA surveyed its members, which “offer[ed] an alarming look into the projected impact.”¹⁰ Of the 517 medical group respondents, 92% reported that in 2022 (before the cuts even occur), Medicare reimbursement has not adequately covered the cost of care provided.¹¹ According to the survey (which was published prior to the introduction of the Act), providers are considering a number of options to offset the payment reductions:

• “58% are considering limiting the number of new Medicare patients;
• 66% are considering reducing charity care;
• 58% are considering reducing the number of clinical staff; and
• 29% are considering closing satellite locations.”¹²

As a result of these actions, MGMA listed its predictions of five practice themes that will emerge, should the cuts go into effect:

1. “Reducing or eliminating the number of Medicare beneficiaries served”;
2. “Projected delays in scheduling care, resulting in up to 6 months’ wait for visits”;
3. “Decreased ability to recruit staff at all levels, including physicians, clinical support staff, and administrative staff, especially in rural areas”;
4. “Reduced participation in value-based payment contracts as limited resources and revenue are diverted away from non-essential practice activities”; and
5. “Closing satellite offices or selling the practice due to insufficient revenue streams.”¹³

In response to the introduction of the Act, while MGMA stated that it “strongly supports” the proposed funding, it noted that “[e]ven with the stabilization offered by this bill, the Medicare conversion factor will be the lowest it has been in ten years at a time when medical groups face runaway inflation and significant workforce shortages. Freezes to Medicare payment rates have caused reimbursement to fall far below the true cost of furnishing care.”¹⁴ In addition, MGMA has asked Congress authorize to an inflationary update based on the MEI and “waive the 4% PAYGO sequester,” pointing out that the legislation that triggered PAYGO was unrelated to Medicare.¹⁵

Other physician trade associations shared MGMA’s sentiments. The Surgical Care Coalition (SCC) commended lawmakers for introducing the legislation and “also urge[d] lawmakers to support solutions to stop the pending 4% PAYGO cut and address the stagnant payment that has failed to keep pace with inflation for years to further stabilize the Medicare system and ensure patients have access to the high-quality care they deserve.”¹⁶ The College of American Pathologists (CAP) and American Physical Therapy Association (APTA) echoed the SCC’s statements.¹⁷

Interestingly, the Act is reminiscent of past congressional “Horatius at the Bridge”¹⁸ interventions related to the sustainable growth rate (SGR) formula. Prior to the implementation of MACRA, the SGR formula was utilized to provide annual target updates to the MPFS, based on a number of estimates. However, the SGR formula indicated downward adjustments to the MPFS every year since 2002, requiring Congress to repeatedly intervene and override the MPFS decreases to the conversion factor, sometimes replacing scheduled cuts with increases in payment.¹⁹

While the 2023 MPFS is typically finalized in November or December of each year, an additional layer of urgency is added to this year’s update, as the Act is going through the legislative process in the shadow of the federal government’s September 30^th funding deadline, by which date Congress must pass a continuing resolution (CR) to avoid shutting down the government. There are a number of healthcare issues included in current CR discussions. In addition to the Act, supplemental COVID-19 funding, as well as a five-year reauthorization of the U.S. Food & Drug Administration’s (FDA) user fee and an overhaul of the FDA diagnostic, dietary supplement and cosmetic regulations, are being discussed.²⁰ These significant healthcare issues on the congressional negotiating table as part of the CR makes an otherwise boring lame duck session one to watch.