Every year the Centers for Medicare and Medicaid Services (CMS) publishes their annual Final Rule, which contains updates to the Physician Fee Schedule that impact what healthcare organizations are reimbursed for physician services. The annual updates may also contain changes to the Physician Work Relative Value Units which oftentimes impact physician compensation.

CMS assigns Relative Value Units (RVUs) to each procedure (CPT) code to represent the value of the following components of a given procedure:

• Physician Work RVU
• Non-Facility Practice Expense RVU
• Facility Practice Expense RVU (which may differ from the non-facility PE RVU)
• Malpractice RVU

These three RVU components are reviewed and revised annually by CMS, leading to questions around expected reimbursement for the impacted physician services. The three RVU components are assigned Geographic Practice Cost Indices (GPCIs) that also impact reimbursement for physician services based on a healthcare organization’s locality, including:

• The Physician Work GPCI
• The Practice Expense GPCI
• The Malpractice GPCI

2024 Physician Fee Schedule Updates

On January 18, 2024, U.S. Congress passed another Continuing Resolution (CR), which extended the 1.000 Physician Work Floor through March 8, 2024. Should the Physician Work Floor not be extended beyond March 8, 2024, the below projections in reimbursement changes would be impacted.

Finally, CMS determines an annual Conversion Factor by which the Total RVUs are multiplied to calculate the physician fee that an organization would be paid for rendering one (1) unit of a given service. The 2024 Conversion Factor is $32.74 for each Relative Value Unit, which is a decrease of $1.15 or 3.4% from the 2023 Conversion Factor ($33.89). The annual change to the Conversion Factor generates much of the discussion around decreasing healthcare reimbursement. However, it is important to also understand how the RVU and GPCI factors impact expected reimbursement before making any organizational changes purely based upon the Conversion Factor.

Blue & Co., LLC has evaluated the data published by CMS on December 18, 2023 and expects very little change to the Work RVUs in 2024 (expected increase of 0.40% based upon an assumed volume of one (1) unit billed per every CPT code on the 2024 CMS fee schedule – volumes by clinician and by specialty should be evaluated in more detail to determine the expected impact on Work RVUs for a given specialty). With that said, Blue will continue to monitor updates from CMS as there have historically been changes to the CMS Physician Fee Schedule after January 1st.

2024 Physician Fee Schedule Impact on Indiana, Kentucky, and Ohio

In the three states where Blue’s offices are located – Indiana, Kentucky, and Ohio – there are several positive changes to report related to the GPCIs that soften the negative impact one might expect from the 3.4% decrease to the Conversion Factor. There are, however, two negative changes to the Practice Expense and Malpractice GPCIs in Ohio that do negatively impact physician services reimbursement, but not as severely as the change to the Conversion Factor alone indicates.

Indiana

• Indiana’s Practice Expense GPCI increased to 0.922 in 2024, up from 0.911 in 2023 and 0.900 in 2022 and 2021.
• Indiana’s Malpractice GPCI increased to 0.485, up from 0.475 in 2023 and 0.465 in 2022 and 2021.
• Indiana’s Physician Work GPCI was maintained at the floor value of 1.000 in 2024.

Overall, Indiana’s physician services reimbursement is expected to decrease by -1.86% in 2024 vs. 2023, which is less severe than what the Conversion Factor indicates.

Kentucky

• Kentucky’s Practice Expense GPCI increased to 0.877 in 2024, up from 0.873 in 2023 and 0.869 in 2022 and 2021.
• Kentucky’s Malpractice GPCI increased to 0.913, up from 0.870 in 2023 and 0.827 in 2022 and 2021.
• Kentucky’s Physician Work GPCI was maintained at the floor value of 1.000 in 2024.

Overall, Kentucky’s physician services reimbursement is expected to decrease by -1.79% in 2024 vs. 2023, which is less severe than what the Conversion Factor indicates.

Ohio

• Ohio’s Practice Expense GPCI decreased only by 0.001 to 0.911 in 2024, down from 0.912 in 2023 and 0.913 in 2022 and 2021. This decrease has a nominal (estimated -0.05%) impact on reimbursement for physician services in Ohio.
• Ohio’s Malpractice GPCI decreased to 1.033, down from 1.063 in 2023 and 1.094 in 2022 and 2021. This decrease has a small (estimated -0.25%) impact on reimbursement for physician services in Ohio.
• Ohio’s Physician Work GPCI was maintained at the floor value of 1.000 in 2024.

Overall, Ohio’s physician services reimbursement is expected to decrease by -2.72% in 2024 vs. 2023, which is less severe than what the Conversion Factor indicates.

Contact Us

To determine your organization’s expected impact on physician services reimbursement most accurately, Blue recommends conducting an analysis that incorporates the organization’s expected 2024 volumes by CPT code. Please contact your local Blue & Co. advisor or a team member below to learn more about how the 2024 Physician Fee Schedule could impact your organization.

Jake Lewis, MBA, Physician/Hospital Services Manager
jlewis@blueandco.com

Dustin Brown, ASA-MTS, CVA, Valuation/Transaction Advisory Services and Healthcare Consulting Manager
dbrown@blueandco.com

John Wortley, Physician/Hospital Services Senior Manager
jwortley@blueandco.com