Association of Evaluation and Management Payment Policy Changes With Medicare Payment to Physicians by Specialty

Key Points

Question

Were the 2021 changes in evaluation and management (E/M) payment policies associated with redistribution of Medicare payments from procedural specialists to primary care physicians?

Findings

In this retrospective observational study that included 180 624 US office-based physicians, the difference in the median total Medicare payments received by primary care physicians compared with specialists was $40 259.8 in July-December 2020 and $39 434.7 in July-December 2021 (difference, −$825.1 [2.0% decrease]).

Meaning

The 2021 E/M payment policy changes were associated with changes in Medicare payments by specialty, although the payment gap between primary care physicians and specialists decreased only modestly.

Abstract

Importance

US primary care physicians (PCPs) have lower mean incomes than specialists, likely contributing to workforce shortages. In 2021, the Centers for Medicare & Medicaid Services increased payment for evaluation and management (E/M) services and relaxed documentation requirements. These changes may have reduced the gap between primary care and specialist payment.

Objectives

To simulate the effect of the E/M payment policy change on total Medicare physician payments while holding volume constant and to compare these simulated changes with observed changes in total Medicare payments and E/M coding intensity, before (July-December 2020) and after (July-December 2021) the E/M payment policy change.

Design, Setting, and Participants

Retrospective observational study of US office-based physicians who were in specialties with 5000 or more physicians billing Medicare and who had 50 or more fee-for-service Medicare visits before and after the E/M payment policy change.

Exposures

E/M payment policy changes.

Main Outcomes and Measures

Outcomes included physician-level simulated volume-constant payment change, total observed Medicare payment change, and share of high-intensity (ie, level 4 or 5) E/M visits before and after the E/M payment policy change. For each specialty, the median change in each outcome was reported. The payment gap between primary care and specialty physicians was calculated as the difference between total Medicare payments to the median primary care and median specialty physician.

Results

The study population included 180 624 physicians. Repricing 2020 services yielded a simulated volume-constant payment change ranging from a 3.3% (−$4557.0) decrease for the median radiologist to an 11.0% ($3683.1) increase for the median family practice physician. After the E/M payment change, the median high-intensity share of E/M visits increased for physicians of nearly all specialties, ranging from a −4.4 percentage point increase (dermatology) to a 17.8 percentage point increase (psychiatry). The median change in total Medicare payments by specialty ranged from −4.2% (−$1782.9) for general surgery to 12.1% ($3746.9) for family practice. From July-December 2020 to July-December 2021, the payment gap between the median primary care physician and the median specialist shrank by $825.1, from $40 259.8 to $39 434.7 (primary care, $41 193.3 in July-December 2020 and $45 962.4 in July-December 2021; specialist, $81 453.1 in July-December 2020 and $85 397.1 in July-December 2021)—a relative decrease of 2.0%.

Conclusions and Relevance

Among US office-based physicians receiving Medicare payments in 2020 and 2021, E/M payment policy changes were associated with changes in Medicare payment by specialty, although the payment gap between primary care physicians and specialists decreased only modestly. The findings may have been influenced by the COVID-19 pandemic, and further research in subsequent years is needed.

This retrospective observational study compares simulated changes in Medicare evaluation and management (E/M) payment policy with observed changes in total Medicare payments to US office-based physicians and E/M coding intensity, before (July-December 2020) and after (July-December 2021) the payment policy change.

Introduction

Medicare payment policies have long undervalued cognitive services such as evaluation and management (E/M) visits relative to procedural services.^1,2,3 Since cognitive services and especially E/M visits dominate primary care work, this relative payment differential has resulted in lower Medicare reimbursement for primary care physicians compared with specialists.^3,4,5,6 While some differential between primary care and specialist payment may appropriately reflect differences in training, there is concern that the gap is too large and may deter physicians from primary care specialties.⁷

Effective January 1, 2021, the Centers for Medicare & Medicaid Services (CMS) aimed to partially address the undervaluation of cognitive services by increasing Medicare reimbursement for E/M services when provided by physicians of any specialty.⁸ The CMS simultaneously reduced the Medicare conversion factor for all specialties (ie, the amount Medicare pays per relative value unit), resulting in modest reimbursement cuts for non-E/M services.⁹ Additional conversion factor cuts are scheduled.^10,11 Coinciding with the E/M payment change, the American Medical Association eased documentation requirements for E/M codes and modified time-based billing guidelines—effectively making it easier to bill higher-intensity, more lucrative E/M codes.¹² Taken together, these payment policy changes are referred to as “the E/M payment change” throughout this article.

While many anticipated that the E/M payment change would narrow the Medicare payment gap between primary care physicians and specialists, the potential effects of the payment change on reimbursement are complicated and the extent to which Medicare payments to primary care and specialty physicians changed remains unknown.^8,13 This study simulated the volume-constant effect of the E/M payment change on total Medicare payments to physicians and compared simulated changes with observed changes in total Medicare payments and E/M coding intensity before and after the E/M payment change. We hypothesized that simulated and observed changes would vary by specialty, with large relative increases in Medicare payment observed for primary care specialists.

Methods

Because only deidentified administrative data were used, this study was deemed not research involving human participants and therefore exempt from informed consent requirements by the institutional review board at the University of Minnesota.

Study Design and Overview

We conducted 3 analyses to assess the association between the E/M payment change and Medicare payment to physicians and how this association varied across specialties. First, we simulated the volume-constant payment impact for each physician in our sample. This measure quantified the change in Medicare payments that physicians would have received under the new reimbursement policy if there were no changes in volume and no shift in service mix provided. The magnitude of this change depended on the extent to which the E/M rule increased reimbursement (which varied across affected E/M services), the baseline volume of E/M services delivered, and the share of total Medicare payments that those services represented for each physician. Second, we examined changes in coding intensity to assess the extent to which relaxing documentation rules may have altered billing patterns across physician specialties. Last, we quantified the observed change in total Medicare payments before and after the payment change.

We used data from the 100% Medicare Carrier file, which contains claims for physician services rendered to fee-for-service Medicare enrollees. This study followed the Strengthening the Reporting of Observational Studies in Epidemiology (STROBE) reporting guidelines.

Study Period

Our analysis used data from July-December 2020 (this was considered the “preperiod,” relative to the policy change) and July-December 2021 (the “postperiod”). We excluded data from January-June 2020, because this period reflected large, well-documented disruptions in care utilization due to the COVID-19 pandemic and thus deleted January-June 2021 to avoid bias due to seasonal patterns.^14,15 This comparison included some visit volume changes that may reflect factors other than the E/M payment change, but since utilization patterns had largely stabilized (although not necessarily at pre–COVID-19 levels) by the second half of 2020,^15,16,17 our results are more likely to reflect changes due to the E/M payment change than an analysis using the full calendar year. As a sensitivity analysis we redefined our baseline as July-December 2019. With a 2019 base, our simulated volume-constant payment analysis is unaffected by practice pattern changes due to the COVID-19 pandemic, although the coding and observed payment analysis will reflect residual changes due to the pandemic.

Study Population

Our analysis included physicians billing Medicare with an office as their primary place of service (defined as the setting in which they billed the plurality of services each year), since the E/M payment change applied to services rendered in an office or outpatient setting. We identified physicians’ specialty based on the code listed on the plurality of their Medicare services in any given year as in prior work^18,19,20,21 and limited our sample to specialties with at least 5000 office-based physicians billing Medicare during our study period. We required physicians to be in the sample during the preperiod and postperiod, excluding those with fewer than 50 visits in either the preperiod or postperiod, as their Medicare practice patterns may reflect variability related to sample size rather than reimbursement rates. Excluding low-volume physicians eliminated less than 5% of total payments to physicians.

Outcomes

Mean E/M Service Reimbursement

For the E/M services affected by the E/M payment policy change (list available in the eTable in the Supplement), we used 100% Carrier File claims in 2020 and 2021 to calculate annual mean payment per service and the change from 2020 to 2021. This calculation served to verify that the reimbursement changes occurred as anticipated, and it was the basis for our measure of simulated volume-constant payment impact. Rather than using Medicare’s national payment amount from the physician fee schedule, this calculation yielded a mean amount reflecting the geographic distribution of physicians in our sample. Since payment for a service is identical regardless of the rendering physician’s specialty, we calculated the mean across all office-based physicians included in our sample.

Simulated Volume-Constant Payment Impact

For each office-based physician, we constructed a measure of simulated payment impact, defined as the change in Medicare payments they would have received if the services they provided in the preperiod were repriced at 2021 reimbursement rates. To construct this measure, we mechanically increased reimbursement for the affected E/M services,²² when they were provided in an office or hospital outpatient department setting, to the service-specific mean observed reimbursement change from 2020 to 2021 (Figure 1; eTable in the Supplement). We then reduced reimbursement for all other services by an amount equal to the proportional decrease in the conversion factor from 2020 to 2021 (36.09 to 34.89).

Figure 1. Percent Change and Mean Medicare Reimbursement for Office-Based E/M Services, 2020 vs 2021.

Each dot indicates the annual mean payment for each evaluation and management (E/M) service, using all claims for services provided an in office by physicians, between January 2020 and December 2021. These E/M services (new-patient visits, Healthcare Common Procedure Coding System [HCPCS] codes 99203-99205; established-patient visits, HCPCS codes 99212-99215) represent a subset of all HCPCS services codes. For exact dollar values, relative changes, and sample sizes, see the eTable in the Supplement.

Change in E/M Intensity

For each physician in our sample, we calculated the share of all E/M services billed at an intensity level of 4 or 5 (the 2 highest possible intensities, referring to Healthcare Common Procedure Coding System [HCPCS] codes 99204, 99205, 99214, and 99215). We calculated the change in E/M intensity as the difference in this measure for the postperiod vs the preperiod. We included E/M services provided in-person and via telemedicine.

Change in Total Observed Medicare Payments

For each physician in our sample, we summed their total Medicare reimbursements (including program payments and beneficiary cost-sharing) for physician services appearing in the Carrier File across all places of service (eg, office, hospital outpatient department, and importantly, telemedicine). We calculated the change in total Medicare payments as the difference in this measure for the postperiod vs the preperiod.

Statistical Analysis

For each of the specialties included in our analysis, we computed the median, 25th percentile, and 75th percentile physician’s absolute and relative simulated volume-constant payment impact and observed change in total Medicare payments from July-December 2020 to July-December 2021. We calculated the median, 25th percentile, and 75th percentile physician’s share of E/M visits billed at level 4 or 5 (ie, high-intensity visits) in July-December 2020 and July-December 2021, for each specialty. By selecting our sample based on high-volume physicians and high-volume specialties, we avoided missingness in payment-related outcomes. However, a small share (2020, 4.6%; 2021, 6.4%) of physicians provided no E/M services and were therefore omitted from the outcome related to high-intensity E/M billing.

We also calculated the median, 25th percentile, and 75th percentile simulated and observed change in Medicare payments among all primary care physicians and all specialists. From this, we calculated the change in the payment gap between the median, 25th percentile, and 75th percentile primary care and specialty physician, from July-December 2020 to July-December 2021. We did not perform any statistical testing and therefore cannot make any inferences about differences between groups. However, given our sample size and use of the 100% Carrier File, we would expect that any statistical testing—even adjusted for multiple comparisons—would suggest significant changes from before to after the E/M payment policy change and across specialties. Analyses were conducted using Stata version 16 (StataCorp).

Results

The study sample included 180 624 office-based physicians billing Medicare in the second half of 2020 and 2021. The specialties with at least 5000 office-based physicians billing Medicare during this period were family practice, internal medicine, orthopedic surgery, ophthalmology, obstetrics/gynecology, cardiology, dermatology, urology, otolaryngology, psychiatry, neurology, general surgery, gastroenterology, and radiology. Of these specialties, family practice and internal medicine were considered primary care.

Simulated Payments If Volume Were Held Constant

Considerable variation in reimbursement increases was found across E/M services affected by the payment change in January 2021 (Figure 1). The payment increase from 2020 to 2021 ranged from relative increases of 2.3% ($3.6) for HCPCS code 99204 to 23.5% ($34.1) for code 99215, with larger average increases for established E/M visits (codes 99212-99215) than for new-patient E/M visits (codes 99203-99204). However, in both periods, new-patient E/M services were reimbursed at higher levels than established-patient E/M services.

When repricing all services provided in the second half of 2020 at 2021 payment rates, differences by specialty were found in the volume-constant payment change generated by the E/M payment change (Figure 2 shows median relative changes; eFigure 1 in the Supplement shows median absolute changes). The median office-based physician in some specialties—including radiology (−3.3% [−$4557.0]), ophthalmology (−2.8% [−$3169.6]), and general surgery (−0.1% [−$24.4])—stood to lose Medicare revenue at 2021 rates if they provided the same services that they had during the second half of 2020. However, office-based physicians in most specialties were poised to gain revenue. In descending order, the 5 specialties estimated to experience the largest gains relative to their preperiod total Medicare payments were family practice (11.0% [$3638.1]), internal medicine (10.8% [$4951.1]), psychiatry (9.2% [$2064.8]), neurology (5.7% [$2738.9]), and obstetrics/gynecology (4.6% [$518.5]).

Figure 2. Median Relative Change in Simulated Volume-Constant Payment, by Specialty.

Data represent the change in Medicare payments after repricing all services provided July-December 2020 at 2021 rates. For each box, the central bar indicates the median values for physicians of each specialty; the surrounding box indicates the interquartile range (ie, values for the 25th and 75th percentile). Figure includes the 14 specialties with 5000 or more office-based physicians billing Medicare in 2020 and 2021.

In July-December 2020, the median primary care physician received $41 193.3 in total payments from Medicare, while the median specialty physicians received $81 453.1, for a gap of $40 259.8 (Figure 3). Repricing the same services at 2021 payment rates, the median primary care physician would have received $45 754.0, while the median specialty physician would have received $83 513.5, for a gap of $37 759.5 and a 6.2% decrease in gap size from 2020 to 2021.

Figure 3. Median Primary Care and Specialty Physician Medicare Payments in July-December 2020 and July-December 2021.

For each box, the central bar indicates the median values for physicians of each specialty; the surrounding box indicates the interquartile range (ie, values for the 25th and 75th percentile). Primary care includes family practice and internal medicine. Simulated Medicare payments refer to the repricing of services provided in July-December 2020 at 2021 reimbursement levels.

Repricing physician services claims from July-December 2019 and July-December 2018 instead of July-December 2020 yielded slightly larger simulated payment increases (by 0.3 to 4.0 percentage points) but did not change the ordering of specialties (eFigure 2 in the Supplement). In July-December 2019, the median primary care physician received $47 142.0 in total payments from Medicare, while the median specialty physicians received $91 506.5, for a gap of $44 364.5 (eFigure 3 in the Supplement). In July-December 2018, the median primary care physician received $48 158.8 in total payments from Medicare, while the median specialty physicians received $91 066.2, for a gap of $42 907.4. Repricing 2019 and 2018 services to 2021 levels would have reduced the gap between the median primary care and median specialty physicians’ Medicare payments by 7.3% and 7.5%, respectively.

Coding Intensity Changes

The share of high-intensity visits increased from 2020 to 2021 for nearly every specialty (Figure 4). In descending order, the 5 specialties with the greatest observed increases between the median physician share of high-intensity E/M coding in 2020 vs 2021 were psychiatry (2020, 46.0%; 2021, 63.8%), orthopedic surgery (2020, 24.5%; 2021, 34.6%), urology (2020, 47.7%; 2021, 54.8%), family practice (2020, 62.5%; 2021, 67.5%), and otolaryngology (2020, 28.7%; 2021, 33.3%).

Figure 4. Median Share of High-Intensity E/M Coding, July-December 2020 and July-December 2021, by Specialty.

For each box, the central bar indicates the median values for physicians of each specialty; the surrounding box indicates the interquartile range (ie, values for the 25th and 75th percentile). Figure includes the 14 specialties with 5000 or more office-based physicians billing Medicare in 2020 and 2021. E/M indicates evaluation and management.

^aThe 25th percentile of radiologists bill 0.0% of their E/M visits at level 4 or 5.

Changes in Total Medicare Payment

Most specialties experienced an increase in total Medicare payments between July-December 2020 to July-December 2021 (Figure 5; eFigure 4 in the Supplement). In descending order, the 5 specialties experiencing the largest gains relative to their preperiod payments were family practice (12.1% [$3746.9]), otolaryngology (9.9% [$5498.7]), internal medicine (8.9% [$3864.1]), dermatology (7.4% [$7219.3]), and neurology (6.9% [$2504.9]). Of these, 3 (family practice, internal medicine, and neurology) appeared in the top 5 for the measure of simulated volume-constant payment impact. Conversely, the median physician specializing in radiology (−2.1% [−$1927.9]) and general surgery (−4.2% [−$1782.9]) experienced a decrease in total Medicare payments from July-December 2020 to July-December 2021.

Figure 5. Median Relative Change in Total Medicare Payments from July-December 2020 to July-December 2021, by Specialty.

For each box, the central bar indicates the median values for physicians of each specialty; the surrounding box indicates the interquartile range (ie, values for the 25th and 75th percentile). Figure includes the 14 specialties with 5000 or more office-based physicians billing Medicare in 2020 and 2021.

In July-December 2021, the median primary care physician received $45 962.4 in total payments from Medicare, while the median specialty physician received $85 397.05, for a gap of $39 434.7 (Figure 3). From 2020 to 2021, the payment gap between the median primary care physician and the median specialist shrank by $825.1 (a relative decrease of 2.0%).

Comparing July-December 2019 and July-December 2018 (rather than July-December 2020) with July-December 2021 revealed an increase in total Medicare payments for the median physician in only 4 specialties (family practice, 1.8% increase in 2021 vs 2019 and 2.2% in 2021 vs 2018; dermatology, 1.7% increase in 2021 vs 2019 and 6.1% in 2021 vs 2018; obstetrics/gynecology, 2.1 increase in 2021 vs 2019 and 4.6% in 2021 vs 2018; psychiatry, 1.5% increase in 2021 vs 2019 and 3.9% in 2021 vs 2018), with relative decreases in total Medicare payments observed for all other specialties (eFigure 5 in the Supplement). Relative to 2019, the payment gap between the median primary care physician and the median specialist decreased by 11.1% (−$4930.0) (eFigure 3 in the Supplement). Relative to 2018, the payment gap between the median primary care physician and the specialist decreased by 8.1% (−$3472.7) (eFigure 3 in the Supplement). These changes reflected a larger decrease in Medicare payments to the median specialist (2019 to 2021, −$6109.5; 2018 to 2021, −$5669.1) than the decrease in Medicare payments to the median primary care physician (2019 to 2021, −$1179.6; 2018 to 2021, −$2196.4), using prepandemic years as the baseline.

Discussion

In this retrospective observational study of US office-based physicians billing Medicare, simulated volume-constant Medicare payments increased following the 2021 E/M payment policy change, among physicians of most specialties, particularly for those providing a high volume of E/M services. Repricing services provided by physicians in July-December 2020 and 2021 reimbursement rates suggested a 6.2% reduction in the payment gap between the median primary care physician and the median specialist. Observed changes in total Medicare payments from July-December 2020 to July-December 2021 varied by specialty, with some of the largest relative increases observed among internal medicine and family practice physicians. Concurrent increases in E/M coding intensity were observed for physicians of nearly all specialties. A comparison of the payment gap in July-December 2021 vs July-December 2020 revealed a small (2.0%) reduction between the median primary care physician and the median specialist.

The simulated volume-constant payment analysis suggests that the E/M payment policy change was well-positioned to redistribute Medicare payments from some procedural specialists to primary care physicians. In percentage terms, primary care specialties (internal medicine and family practice) had the highest relative increases in simulated volume-constant payments. Variation by specialty in the simulated volume-constant payments is consistent with other efforts to understand the likely effects of the E/M payment change.²³ In absolute terms, it is notable that the median physician in some specialties (eg, cardiology) would have gained more revenue than primary care due to the repricing of E/M services with E/M volume held constant. This is because those specialties deliver a high volume of E/M services, even though E/M services represent a small share of those specialties’ total Medicare payments.

The changes in Medicare payments observed between 2020 and 2021 reflect not only repricing of E/M services but also increases in coding intensity and changes in service volume and/or mix of services provided, relative to baseline. Nearly all specialties took advantage of the eased documentation requirements, billing more intense E/M services in 2021 compared with 2020. While family practice specialists were in the top 5 specialties with large increases in coding intensity, coding intensity increased more for the median psychiatrist, orthopedic surgeon, urologist, and otolaryngologist. This finding suggests that the relaxation of coding rules related to visit intensity may have dampened the redistributive consequences of the payment change—perhaps because some specialties billed a smaller share of high-intensity E/M codes during the preperiod than primary care specialties and therefore had more opportunity to increase their share of high-intensity visits.

The E/M repricing would have led to increases in payment for primary care specialties even if their visit volumes had not changed, and observed payment increases largely matched what would have been expected had volumes stayed constant. However, the increases were insufficient to meaningfully close the payment differential between primary care physicians and specialists. In part this is because many non–primary care specialties provided many E/M services and had opportunities to increase coding intensity. Nevertheless, specialties that provided fewer E/M services, such as radiology and general surgery, did see payment declines. Sensitivity analyses using the second half of 2019 and the second half of 2018 as the comparison years rather than the second half of 2020 revealed greater shrinkage of the payment differential between primary care physicians and specialists, but this was driven by a decrease in specialist payment and likely reflected an incomplete recovery from the COVID-19 pandemic.

If policy makers want to shrink the primary care/specialist pay gap, they may need to focus on broader changes to Medicare’s physician payment policies (ie, reforming the Relative Value Scale Update Committee, which advises Medicare on valuing the roughly 8000 payment codes comprising the physician fee schedule)⁶ and other tools such as primary care payment reform that are explicitly targeted to primary care physicians.

Limitations

This study had several limitations. First, this study used only 1 year of Medicare data following the E/M payment change; thus, long-term outcomes or outcomes for payers other than Medicare could not be assessed. However, it is likely that the results generalize beyond Medicare, given strong evidence that commercial payer reimbursement is positively correlated with Medicare’s fee schedule.²⁴

Second, the analyses were descriptive and did not support causal conclusions about the effect of the E/M payment change on outcomes.

Third, the study period included the COVID-19 pandemic, which profoundly altered care patterns, including prompting a shift to telemedicine that varied considerably across specialties.²⁵ This may have affected analysis of payment changes and coding changes but should be absent from the analysis of the simulated volume-constant price change—particularly for the 2019 sensitivity analysis. Relying on data from only the second half of 2020 addressed this concern, since outcomes had stabilized, and performing a sensitivity analysis using 2019 data and findings mirrored other published data concerning visit volume and physician behavior during the pandemic.^14,15,16,17 However, it is impossible to definitively attribute volume changes over time to the 2021 E/M payment change vs general recovery from practice pattern disruptions induced by the pandemic.

Fourth, total Medicare payments is not necessarily equivalent to physician income, particularly for salaried physicians and for physicians for whom Medicare represents a relatively small share of their overall payer mix. Relatedly, total Medicare payments may reflect the work of advanced practice clinicians such as nurse practitioners and physician assistants, if they bill their services incident to a physician. The number of services billed incident to a physician in this manner has increased gradually over the past decade; however, the marginal change from year to year is quite small and unlikely to drive our findings.²⁶ This is one advantage to presenting median—rather than mean—payments, because physicians with other clinicians billing under their provider identifier will appear as outliers.

Fifth, the analysis is limited to physicians who practice predominantly in an office setting; therefore, results may not generalize to physicians for whom inpatient or hospital outpatient department is their primary place of service.

Conclusions

Among US office-based physicians receiving Medicare payments in 2020 and 2021, E/M payment policy changes were associated with changes in Medicare payment by specialty, although the payment gap between primary care physicians and specialists decreased only modestly. The findings may have been influenced by the COVID-19 pandemic, and further research in subsequent years is needed.

Supplement.

eTable 1. Service-Level Average Medicare Reimbursement for Services Affected by the E/M Payment Change, by Year

eFigure 1. Median Absolute Change in Simulated Volume-Constant Payment, by Specialty

eFigure 2. Median Relative Change in Simulated Volume-Constant Payment, by Specialty and Baseline Time Period

eFigure 3. Median Primary Care and Specialty Physician Medicare Payments in July-December 2019 and July-December 2018 vs July-December 2021

eFigure 4. Median Absolute Change in Total Medicare Payments from Jul-Dec 2020 to July-Dec 2021, by Specialty

eFigure 5. Median Relative Change in Observed Total Medicare Payment, by Specialty and Baseline Time Period

Supplement 2.

Data Sharing Statement