Doctor physician with stethoscope calculate medical fee costs and revenue

How changes to the physician pay landscape impact strategic planning

Savvy provider organizations are seizing on these changes to drive operational efficiency and long-term enterprise value.

In brief

  • In 2022, the Centers for Medicare & Medicaid Services (CMS) finalized the 2023 Medicare Physician Fee Schedule (MPFS) payment rule and Congress passed an Omnibus spending bill, both of which have implications for physician pay.
  • Effective as of calendar year 2023, the MPFS rule and Omnibus bill include cuts to physician Medicare payments.
  • For provider organizations, the 2023 MPFS rule and Omnibus bill also bring new opportunities for growth around value-based care, behavioral health and more.

In 2023, Medicare providers face payment cuts, but their patients will also gain access to certain new services and flexibilities under the calendar year (CY) 2023 Medicare Physician Fee Schedule (MPFS) payment rule and recently enacted fiscal year 2023 Omnibus spending bill. While the MPFS rule brings the Biden administration one step closer to its long-term goals around both value-based care and whole-person care coordination, health care providers on the ground are raising concerns. Faced with an ongoing talent crisis, continued supply chain disruption, rising drug costs, and several other unprecedented and simultaneous cost pressures, health systems and provider groups are widely concerned about how the fee schedule cuts will impact operations, provider burnout, retention and patient care.

To be successful in a reality in which Medicare will need to tighten the purse strings to remain solvent, health leaders will need to employ strategic thinking to take advantage of the new growth opportunities that are included in the latest regulatory and legislative updates and mitigate the impact of overarching cuts.

Below, we discuss some key takeaways and action items for providers at this transformative time for the Medicare program, with a focus on the MPFS.

Medicare payment cuts amid rising cost pressure

  • CMS finalized a 4.47% cut to the MPFS conversion factor, which Congress partially offset resulting in a 2.08% cut to the MPFS conversion factor for CY 2023.
  • Congress also delayed a scheduled 4% Medicare “PAYGO” cut from taking effect, while allowing 2% Medicare sequester cuts to continue.

The MPFS final rule included a 4.47% reduction of the conversion factor, which is the starting point for calculating Medicare reimbursements for physician services. In acknowledgment of the significant financial head winds facing provider groups, Congress in December 2022 passed a one-time 2.5% pay bump to partially offset the cut. As a result, the conversion factor for CY 2023 will be reduced by 2.08%. The overarching impact to group practices and individual physicians, however, will vary based on practice type and the mix of patients and services provided. This is due to rate-setting updates and relative value unit (RVU) changes within the budget-neutral system, which may result in additional increases or decreases by specialty.

Despite calls for Congress to intervene, physicians also face a 2% Medicare sequester cut in CY 2023, though lawmakers stepped in to stop a 4% “PAYGO” cut to Medicare payments that was set to take effect in CY 2023, deferring it until 2025.

CMS also plans to rebase and revise the Medicare Economic Index (MEI) cost-share weights, providing a new methodology for estimating base year expenses that relies on publicly available data that more accurately reflects current market conditions. This new model will allow for the MEI to be updated more regularly. The agency will also delay until 2024 the split (or shared) visits policy finalized in calendar 2022 to define the substantive portion of a split (or shared) visit based on the amount of time spent by the billing practitioner, which would likely have negative implications for physicians’ revenue.

In addition to cuts under the MPFS, hospital outpatient departments, ambulatory surgery centers (ASCs) and home health agencies argue that updates under their respective payment systems are insufficient in light of other financial head winds, such as staffing and inflation.

Mental and behavioral health investment

  • CMS added a new behavioral health integration service for coverage and expanded the types of providers that can be reimbursed for providing mental health care.
  • CMS gave opioid treatment programs (OTPs) new authority to prescribe buprenorphine via telehealth and to be reimbursed for services provided via mobile units.

Consistent with the September 2022 release of the Biden administration’s mental health roadmap² and enhanced funding opportunities such as its October 2022 announcement of new mental health-related funding for community behavioral health clinics,³ the 2023 MPFS final rule and the Omnibus bill provide additional support to the behavioral health workforce aimed at increasing access to care.

First, CMS in the MPFS rule created a new general behavioral health integration service to be performed by clinical psychologists or clinical social workers, with the mental health support they provide serving as the focal point of monthly care integration. In addition, the new rule carves out an exception to current supervision requirements, whereby marriage and family therapists, licensed professional counselors, addiction counselors, certified peer recovery specialists, and other behavioral health professionals would provide services under general instead of direct supervision.

In addition, the Omnibus bill passed by Congress includes several provisions to increase access to mental and behavioral health. The bill reauthorizes existing programs and establishes new programs to support mental and behavioral health, as well as adds Medicare Part B coverage of mental health counselor and marriage and family therapist services and intensive outpatient services to Medicare’s partial hospitalization benefit beginning January 1, 2024.

In recognition of the ongoing opioid epidemic in the US, the 2023 MPFS rule finalized policies to support opioid treatment programs. For example, the final rule aims to expand access to buprenorphine by allowing OTPs to bill when prescribed via telehealth, including audio-only in limited circumstances. It also would allow OTPs to bill Medicare for services performed by mobile units without requiring separate registration. These policies follow the Biden administration’s September 2022 announcement of additional funding, and new actions to address this continuing crisis further demonstrate the federal government’s increasing willingness to step in to combat the opioid epidemic.⁴

Telehealth coverage landscape

  • CMS added five codes to Medicare’s permanent telehealth list and added more than 50 codes to its temporary Category 3 list and extended coverage for services added to the telehealth list on an interim basis, but not granted. Category 3 status, for 151 days after the public health emergency (PHE) expires.
  • Congress in the Omnibus bill extended several Medicare telehealth waivers included in the Consolidated Appropriations Act (CAA) through December 31, 2024.

Throughout the pandemic, providers and advocates have called on CMS to permanently expand the list of telehealth services Medicare covers. While CMS in the final rule continues to take a measured approach to evaluating and paying for telehealth services, the agency does provide some needed clarity as both the administration and providers begin to prepare for a post-public health emergency world.

In the rule, CMS reiterated CY 2023 as the end date for temporary telehealth services added on a Category 3 basis during the PHE and the end of the PHE for certain telehealth waivers not addressed by the recent Omnibus package. It also sought to align a distinct set of temporary telehealth services added during the PHE on an interim basis, as well as in-person requirements for mental health services, with Medicare telehealth flexibilities extended for 151 days beyond the PHE as part of the CAA. However, Congress in the Omnibus bill further extended the CAA Medicare flexibilities through December 31, 2024. As such, CMS will likely address the discrepancy in future rulemaking.

In addition, CMS finalized more than 50 codes as Category 3 and added five permanent additions to the Medicare telehealth list and made clear what services will not continue after they expire, namely telephone evaluation and management (E/M) services. CMS wrote, “[W]e believe that the statute requires that telehealth services be so analogous to in-person care such that the telehealth service is essentially a substitute for a face-to-face encounter.”

CMS noted that it will continue to examine services for permanent inclusion, and depending on the end date of the PHE, it may revise current expiration dates, potentially allowing more time for the agency to collect data and determine which services can be delivered via telehealth on a clinical basis. For example, CMS said if the PHE remains in place through most of CY 2023, it could extend the expiration date for Category 3 services to 151 days post-PHE.

Physical health coverage expansions

  • CMS finalized new codes for certain pre-surgical dental services, chronic pain management and treatment services, and colorectal screenings.
  • CMS finalized a code modifier giving Medicare patients direct access to an audiologist.

The 2023 rule also broadens access to a range of new dental, audiology, chronic pain management and cancer screening services that advance the administration’s goals around care access and health disparities.

For example, CMS is now broadening Medicare’s dental coverage definitions, which previously did not cover payment for dental services such as dental exams and treatment before organ transplants (essential to prevent post-surgical infection), in addition to clarifying existing coverage. In addition, the rule finalized a policy to allow beneficiaries direct access to an audiologist without an order from a physician or nonphysician provider for non-acute hearing conditions and added new Healthcare Common Procedure Coding System (HCPCS) billing codes for chronic pain management and treatment services. CMS will also treat a follow-up colonoscopy after an at-home colorectal cancer screening like a preventive service while also reducing the minimum age for colonoscopy coverage from 50 to 45 years of age.

MSSP and QPP adjustments

  • CMS finalized advance investment payments for new, low-revenue Medicare Shared Savings Program accountable care organizations that serve vulnerable populations.
  • CMS updated its methodology for calculating benchmarks to reduce the impact of an accountable care organization’s past performance and improve regional adjustments.
  • CMS finalized five new, optional Merit-based Incentive Payment System (MIPS) Value Pathways under the Quality Payment Program.

In keeping with its stated goal of moving all fee-for-service (FFS) beneficiaries into accountable care relationships by the year 2030, CMS has also finalized new 2023 provisions that aim to accelerate participation in Medicare accountable care organizations (ACOs). The proposals aim to incentivize potentially hesitant ACO participants from transitioning to value amid the financial and operational constraints discussed above through changes to the Medicare Shared Savings Program (MSSP) that aim to help sustain long-term participation.

For example, CMS is:

  • Modifying how benchmarks are calculated to drive long-term ACO participation. This includes reducing the impact of an ACO’s past performance on its benchmarks and improving regional adjustments
  • Providing advance investment payments to new, low-revenue ACOs that serve vulnerable populations. ACOs can use those funds to address the social drivers of health (e.g., food and housing insecurity)
  • Establish other policy adjustments that would provide greater flexibility to some ACOs around performance-based risk, including a longer glide path to downside risk and a sliding scale approach to shared savings
  • Updating MSSP quality-measurement policies, including a new health equity adjustment and policies aimed at supporting the transition of ACOs to all-payer quality measure reporting

The rule also adds five new, optional Merit-based Incentive Payment System (MIPS) Value Pathways under the Quality Payment Program (QPP) and advances several policies aimed at reducing burden and facilitating participation in Alternative Payment Models (APMs). This includes permanently establishing the 8% minimum Generally Applicable Nominal Risk standard for Advanced APMs, which is currently set to expire in 2024.

Three actions to take

For providers seeking to get ahead of the coming changes, three key actions will be crucial:


Instead of focusing solely on the impending cuts and other financial head winds, provider organizations should take strategic next steps to ensure operational efficiency, refine care coordination and value-based care strategies, and evaluate new opportunities for funding and flexibility around priority areas like behavioral health. Those that take the time to thoughtfully review the upcoming payment landscape will derive significant benefits for both patients and providers.

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