Successful medical practices must stay ahead of constant changes in the U.S. healthcare system. This includes new cuts to Medicare reimbursement rates putting your revenue at risk. Typically, these cuts are made through the physician fee schedule (PFS) and the hospital outpatient prospective payment system (OPPS).
Recent trends have seen adjustments in payment rates affecting specific services like physical therapy, home health care, and certain surgical procedures, often influenced by broader healthcare policy objectives, budget considerations, and economic factors.
In this article, we’ll explain the latest Medicare changes and how they impact the Medicare conversion factor you use to calculate reimbursements. We’ll also provide tips for protecting and even strengthening your revenue despite these challenges.
What Are the Medicare Reimbursement Rates?
Medicare typically reimburses healthcare providers at a rate lower than the charged amount or what private insurers might pay. The Centers for Medicare & Medicaid Services (CMS) reports that for most codes, Medicare pays about 80% of the total billed amount.
When calculating the reimbursement rates, use the Medicare physician fee schedule (MPFS). The calculation formula is shown below.
Payment = [(work RVU x work GPCI) + (PE RVU x PE GPCI) + (MP RVU x MP GPCI)] x CF
In the MPFS formula:
- RVU is the relative value unit or the time and effort of providing the service.
- GPCI accounts for variation in geographic practice cost indices across the nation.
- PE is the practice expense including overhead costs like supplies, staff, and rent.
- MP represents the cost of maintaining malpractice insurance.
- CF is the conversion factor used to calculate the total payment and is updated annually.
Although Medicare pays about 80% most of the time, lower reimbursement rates are associated with certain medical professionals. For example, nurse practitioners, clinical nurse specialists, and physician assistants are reimbursed at 85%. Surgical assistant services are reimbursed at just 16%.
Why Are Medicare Cuts Happening?
In November 2023, CMS announced a 3.4% cut affecting Medicare and Medicare Part B. This was part of a broader government-wide expenditure adjustment designed to increase patient access, equity, and affordability in the U.S. healthcare system.
Effective March 9, 2024, a new government spending package called the Consolidated Appropriations Act of 2024 eased but did not eliminate this Medicare cut. Many physicians and healthcare organizations were hoping for a complete elimination of the 3.4% cut.
Below, we’ll explain the most up-to-date Medicare conversion factor your associates should be using to calculate Medicare reimbursement rates accurately.
What Is the Medicare Conversion Factor?
According to the American Academy of Family Physicians (AAFP), doctors and healthcare providers should be aware of the latest change to the Medicare conversion factor, also known as the Medicare Physician Fee Schedule (PFS) conversion factor. It represents how much Medicare pays per relative value unit.
The new rule offsets the original cut by 1.72 percentage points, which is a bit more than half of the 3.4% cut. Medicare reimbursement rates for any services you provide between the announcement of the change on March 9, 2024, and December 31, 2024, will be impacted.
To put this another way, the PFS conversion factor increased by 1.68% from $32.74 for services rendered between January 1 and March 8 to $33.29 for those rendered from March 9 to December 31. Although no additional adjustment is expected at this time, stay tuned for ongoing changes from the federal government.
How Can We Adapt to a Potential Decline in Medicare Reimbursement Rates?
Adapting to continual Medicare cuts is challenging but not impossible. With help from Altruis, your healthcare organization can capture every possible dollar.
Altruis starts by conducting a thorough review of your Medicare billing practices to determine whether your practice is effectively maximizing revenue from Medicare reimbursements. We look for common mistakes, like using the wrong conversion factor or processing reimbursement requests with incorrect medical codes. In response, Altruis can augment your current billing or coding staff by adding the right expertise or we can handle the entire process, if you prefer.
We’ll also examine your entire revenue cycle to find red flags showing strong potential for higher reimbursement rates. For example, you might be missing out on retroactive revenue, which arises from Medicare patient records where the person recently became eligible for Medicare coverage not available at the time of service. This could increase your total revenue substantially.
Plus, optimal medical billing begins much earlier in the process than you might expect, long before patients arrive at the waiting room. Patient pre-verification and provider credentialing both go a long way toward strengthening revenue generation by preventing subsequent errors and delays. Let’s raise your clean claims rate and secure the full value of the reimbursements you deserve.
At Altruis, we’ve found that many of our federally qualified health center (FQHC) clients rarely or never review important contracts impacting their billing success and collection rates. Many FQHCs are also not yet using automated digital billing tools, which speed up the process and add new layers of accuracy and convenience.
This means that Altruis will boost your bottom line. Higher revenue is within reach, no matter what comes down the road in the U.S. healthcare system.
Boost Medicare Reimbursement Rates with Altruis
Rely on Altruis to capture the full value you’re owed for your services. We’re here to help healthcare organizations thrive in a chaotic environment with constant Medicare changes.
To learn more about using the latest techniques to optimize your revenue cycle, please schedule a call with us.
