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What you need to know from CMS' Physician Fee Schedule Final Rule

By David Long

December 6, 2022

In November, CMS released the Physician Fee Schedule (PFS) Final Rule that primarily sets the Calendar Year (CY) 2023 physician fee schedule conversion factor, along with several programmatic and quality reporting updates that impact physician practices across the nation. 

For CY 2023, CMS is reducing the PFS conversion factor from $34.61 in the prior year down to $33.06.  A lower conversion factor is disappointing for providers. Advocacy groups such as the American Medical Association and American Hospital Association have voiced concerns that the reduction "may have a negative impact on patients' access to certain services" due to ongoing financial pressures the industry has faced the past several years.

However, CMS has several provisions in the PFS Final Rule that include modifications to the Medicare Shared Savings Program (MSSP) to increase adoption, telehealth flexibility to promote viable models after the Public Health Emergency expires, and new quality reporting infrastructure to align closer to true medical practice focus.

3 key updates to the Medicare Shared Savings Program to increase participation

The MSSP is CMS's most popular and widely adopted Alternative Payment Model (APM), but after years of steady growth, provider participation in the program has plateaued. CMS is looking to encourage new participation by increasing the operational and financial viability for certain participants and by increasing equity and expanding access for populations historically underserved by the MSSP model. 

1. Changes to Accountable Care Organization (ACO) benchmarking

Current and past MSSP participants have often faced difficulties when it comes to benchmarking. High performers specifically have to compete against their past success with diminishing opportunity. To address this, CMS will adopt new prospective growth factors, adjusting methodologies and modifying risk scores to more fairly set ACO targets.

CMS hopes current participants will see new value in continued participation and that high-performing organizations will see viable opportunities to join the MSSP.

2. Flexible timeline for transitioning to risk

Over the years, CMS has made several changes to the timeline for adopting downside risk. Many organizations have expressed feedback that the MSSP model pushed participants into downside risk too quickly. In response, CMS has revised their standards to allow new MSSP entrants to participate in upside-only risk for all five years of the agreement period.

Some may also be eligible for a slower "glide path" to downside risk, with an additional two years of upside-only risk if they renew their ACO for another five-year period. Further, for agreement periods beginning in January 2024, participation in the ENHANCED track, the MSSP's highest level of risk, will be optional. This is a shift from previous standards that required certain ACOs to enter the ENHANCED track.

3. Quality adjustment for health equity

To be eligible for shared savings or avoid losses, MSSP ACOs must meet minimum quality performance. Beginning next year, up to 10 quality bonus points will be available based on a combination of quality performance and care coverage for underserved patients.

This update is in line with other updates to ACO quality performance standards to create new shared savings opportunities for ACOs that serve higher-complexity and underserved patient populations.

Extending telehealth coverage beyond the Public Health Emergency for 151 days

To the extent that legislation allows, CMS is extending coverage of certain telehealth services (Category 3) through the end of CY 2023.  For those services that have been temporarily included on the telehealth list during the Public Health Emergency (PHE), CMS will maintain coverage for 151 days following the end of the PHE. Behavioral Health visits will still be allowed audio-only telephonic E/M coverage, but other services will require two-way, audio-video communication.

Legislation also allows CMS to continue some flexibilities for 151 days after the PHE expires, including geographic originating site restrictions and allowing for Rural Health Clinic and Federally Qualified Health Center payments.

Extending these flexibilities past the 151 days is beyond CMS scope and will require new legislation. The coverage extensions available in CY 2023 will serve as extra data points to determine the best legislative updates to enact long-term changes to Medicare telehealth coverage.

3 key updates to quality reporting

The CMS Quality Payment Program (QPP) sets the reporting standards for two tracks: the Merit-Based Incentive Payment System (MIPS) and Alternative Payment Models (APMs). Updates to the two tracks include:


CMS updated both the Quality and Promoting Interoperability categories. For quality, the data completeness threshold will move from 70% to 75% in the CY 2024 performance period CMS will also add health equity and social needs measures for the CY 2023 reporting period.  For Promoting Interoperability (PI), CMS made changes to bring the physician PI measures and objectives more closely in line with the inpatient-based hospital Promoting Interoperability Program.

CMS is now requiring reporting on the Query of Prescription Drug Monitoring Program (PDMP) and adding the ability to report participation in the Trusted Exchange Framework and Common Agreement (TEFCA) to satisfy the Health Information Exchange objective.

2. APM

For the APM track, CMS will now permit PI reporting at the entity level, whereas before it was only at the individual or group level. This will simplify reporting for APM participants and further incentivize participation.

CMS is also permanently establishing the 8% minimum General Applicable Nominal Risk standard, despite previously stating that they would retire the 8% standard and potentially raise the threshold of risk they consider "more than nominal."  This reflects CMS' continued desire to minimize risk-exposure and incentivize participation.

3. MIPS Value Pathways (MVPs)

CMS has already established the framework for reporting through MVPs, stating a goal to eventually fully replace the current MIPS standard with MVPs. CMS added five new MVPs available to report in CY 2023 to go along the existing seven. 

While still a voluntary option in CY 2023, CMS is suggesting they will be the required standard for quality reporting as soon as CY 2025

Further CMS resources for QPP can be downloaded here.

What this means going forward

While the PFS Final Rule included discouraging news on the fee-for-service conversion factor, that update, along with other rule updates in the alternative payment space, continues to reinforce CMS' focus on transitioning as many providers as possible to value-based payments, supported by more functionable and actionable quality performance data.  These changes will be incremental but will continue to ramp up in the coming years. 

How to evolve your quality reporting governance

imageMany hospitals and health systems have a siloed approach to CMS quality reporting governance due to the constant evolution of reporting requirements. In addition, internal factors like multiple electronic health records (EHRs) and staff turnover make it challenging to coordinate quality reporting efforts across the Quality Payment Program (QPP), Promoting Interoperability (PI) program, and Alternative Payment Models (APM).

We profiled four organizations that have made significant progress in addressing this challenge.

Read more

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