How CMS final rule will impact E/M coding and documentation requirements

This year ushered in many changes affecting reimbursement for healthcare providers, but few are as important as the new Physician Fee Schedule from the Centers for Medicare & Medicaid Services (CMS) and the updated coding guidelines for Evaluation and Management (E/M) services from the American Medical Association. For many years, the Relative Value Unit (RVU) associated with the outpatient E/M code was considered too low compared to other physician services, and this was finally addressed. Coding and documentation guidelines for E/M services were also revised for the first time in more than 25 years. These changes are significant, and they deserve a closer look.  

E/M documentation now focuses solely on medical decision making  

Prior to 2021, providers had to meet certain criteria and address three key areas in the patient’s progress notes: patient history, physical exam and medical decision making (the thought process used to develop a diagnosis and treatment plan). All categories were required to meet certain thresholds for new patient billing, while only two of the three were needed when billing for established patients.

Historically, all three categories had equal weight in determining the level-of-service billed. However, because many providers simply copied information from prior visits, medical records often represented the patient visit inaccurately. This copy-and-paste behavior was pervasive, causing CMS to eliminate the history and exam components as required elements for billing purposes. As a result, this change causes medical decision making to be the sole driver of the level-of-service.

Changes within medical decision making

The medical decision making component itself is still separated into three categories: 

• Number and complexity of problems addressed
• Data the provider must review and analyze
• Overall risk of the patient

Within the first category, ‘number and complexity of problems addressed,’ much of the emphasis now centers on the severity of any chronic conditions being treated. By documenting the status of a patient’s diagnosis over time and noting any deterioration or worsening of the diagnosis during the course of treatment, the physician will better support higher levels-of-service. 

The method used to assign a value for each of these three categories has changed as well. The AMA has published a medical decision making audit tool and supplemental guidebook, which providers should study to understand how their documentation is being graded. They need to familiarize themselves with the information important to include within the medical record for reimbursement purposes and reconcile this against the documentation needed from a med-legal or continuity-of-care perspective.

The documentation changes may take some getting used to, but they will help eliminate providers including extraneous information just to support a given level-of-service. The progress note will be a more honest assessment of the work actually done, accurately reflecting the effort the provider puts into a patient encounter.

RVU increase for outpatient setting 

For years, financial experts in the healthcare industry have viewed the outpatient office visit as undervalued. The changes within the 2021 Physician Fee Schedule bring the RVU to a level more appropriate for the amount of work involved and time spent by the provider during a patient encounter. Consequently, the reimbursement for all outpatient office visits has significantly jumped this year, with the highest level-of-service for established patient encounters increasing by nearly $40, going from $148 to $186 for Medicare beneficiaries. 

Financial impact 

The anticipated financial impact of these changes varies by specialty. The difference between a positive and negative financial outlook is dependent on how heavily weighted a specialty is in surgical procedures. This is partially due to the annual adjustment of the conversion factor, which is the multiplier Medicare uses to assign a dollar value based on the RVU of a given service. The conversion factor decreased in 2021, reduced from $36.09 per RVU to $34.89, and will negatively impact net reimbursement for all billable, non-drug services. However, since the RVU for outpatient E/M services has increased, this outweighs the negative conversion factor adjustment, resulting in improved revenue for almost all office visit charges. Specialties that rely more heavily on revenue from their E/M services will fare better under this arrangement than specialties that perform more surgical procedures. Some specialties, such as rheumatology, hematology and medical oncology, will see up to a 16% increase in net reimbursement year-over-year, while others, like gastroenterology and retina, will experience a net decrease. 

In the 2021 Physician Fee Schedule Final Rule, Medicare includes a table on the anticipated financial impact by specialty. Practices should study it closely to determine how their specialty will be affected by the changes.

It is important to note one highly anticipated change to the available E/M code set was delayed. The Complex Patient add-on code, G2211, was to be used in addition to the standard E/M codes for patients receiving care for a single, serious, or complex chronic condition. This would have provided an extra $16 reimbursement per encounter, but it is now on hold until 2024.

Develop an action plan 

The release of Medicare’s final rule was delayed until December 1st, 2020, giving practices only a month to prepare before the changes took effect. While there may be some allowance for this delay, practices should understand they are already behind if they are just now starting to work on this issue. Following are a few actions they should take immediately:

1. Educate providers on the changes

Educating providers on the documentation changes should be a priority, as they are graded quite differently than in the past. It is critical to make sure they adjust their documentation to support the levels they are billing, so they will not face a monetary penalty should an audit occur. Physician behavior can be challenging to change, and the education process may need to be ongoing for a while. Practices should consider engaging a clinical documentation improvement (CDI) specialist to get physicians compliant as soon as possible.

2. Forecast the anticipated financial impact 

Practices can estimate how the changes will affect their revenue by utilizing the table listing the financial impact by specialty found within the 2021 Physician Fee Schedule. They will need to determine the percentage of each level-of-service being billed by their providers and use that information to estimate the reimbursement they can expect.

3. Review private payer contract language

Practices should review the contract language with all of their private payers to ensure they are being paid for office visits as a percentage of Medicare allowable. If not, they might not benefit from these financial changes across their commercial payers, and they will only realize an advantage with their Medicare beneficiaries.

Be proactive and prepare for audits

Whenever Medicare rolls out adjustments to coding or documentation, they always follow up with an audit period. Practices can anticipate an increased audit effort with an emphasis on outpatient E/M charges over the next one to three years, so they need to make sure providers understand the new grading structure. Again, engaging with a CDI specialist is probably the best solution here.

Implementing an internal, self-audit program is also a good idea to ensure compliance by provider staff. This process identifies billing and documentation concerns before a CMS auditing contractor discovers them. Finding and addressing your own problems eliminates the possibility of facing a financial penalty—an unwelcome surprise for any provider in today’s challenging environment.

Illustration: claudenakagawa, Getty Images

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