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CMS Updates: Doctors see small pay modification, prior authorization improvements

March 28, 2024

The new year has brought about two significant changes that will affect physicians in their daily practice. First, the Centers for Medicare & Medicaid Services (CMS) finalized the Interoperability and Prior Authorization Final Rule, which officially takes effect in 2026 and makes important reforms to the prior authorization process. The goals behind the changes are to decrease patient care delays and electronically streamline the prior authorization process for physicians. Second, doctors will receive a 1.68% pay hike in Medicare as of March 9 as part of legislation passed to fund the government.

Changes to prior authorization process

The Interoperability and Prior Authorization Final Rule expands and strengthens the electronic prior authorization system for Medicare Advantage plans, dramatically lessens the decision-making timeframe for prior authorization requests, and requires payers to share clinical and claims data when patients transfer more efficiently between plans. The rule governs Medicare Advantage payers, state Medicaid and CHIP fee-for-service program, Medicaid managed care plans, CHIP managed care entities, and Qualified Health Plan issuers on the federal exchange. (CMS, 2024)

Specifically, beginning in 2026, CMS mandates shortened processing time frames and requires that payers give physicians and patients more prior authorization-related information. Insurers will also be required to share specific explanations of why prior authorization requests are denied. Metrics on how often insurers approve or deny prior authorization requests will also be made public, creating more transparency and accountability. Affected payers will have to send prior authorization decisions within 72 hours for urgent requests and within a week for nonurgent requests. (CMS, 2024)

By 2027, plans are required to support an electronic prior authorization process embedded within a physician’s EHR, a change that is expected to bring automation and efficiency to what is currently a manual, time-consuming process. (CMS, 2024)

Combined, the changes are estimated to save physician practices an estimated $15 billion over 10 years, according to the U.S. Department of Health and Human Services. (AMA, 2024)

States are building upon the momentum created by these reforms. Legislation to improve prior authorization practices sooner has been introduced across 30 states, including Minnesota, Wyoming, and Massachusetts. And in 2023, New Jersey, Washington, D.C., and Tennessee were among those states that enacted comprehensive prior authorization reform laws. (AMA, 2024)

Physicians who treat Medicare patients will see a minor pay modification

On March 9, President Biden signed into law a measure that softened a cut in a key rate used to determine how physicians are paid for treating Medicare patients. In November 2023, CMS finalized a 3.4% decrease in the physician fee schedule conversion factor for 2024. A provision to mitigates these payment reductions was included in a larger spending package that received bipartisan approval in early March. With the passage of the legislation, the pay decrease is blunted by providing a 1.68% bump, but medical groups will still be left with a 1.69% reduction in reimbursement for the remainder of the year. (Muoio, 2024)

In a recent interview with Healthcare Finance, Dr. Jesse Ehrenfeld, president of the American Medical Association, voiced disappointment on behalf of the AMA. “There were many opportunities and widespread support to block the 3.37% Medicare cuts for physician services that took place January 1, but in the end, Congress opted to reverse only 1.68 of the 3.37 percentage payment reduction required by the Medicare Fee Schedule,” said Ehrenfeld. According to KFF, Medicare payment cuts could prompt more doctors to opt out of the Medicare program. About 1% opted out in 2023, according to the KFF analysis. (Cottrill, 2024; Morse, 2024))

Sources:

(2024, January 17). U.S. Centers for Medicare & Medicaid Services. CMS Finalizes Rule to Expand Access to Health Information and Improve the Prior Authorization Process. https://www.cms.gov/newsroom/press-releases/cms-finalizes-rule-expand-access-health-information-and-improve-prior-authorization-process

Cottrill, A., et al. (2024, March 6). KFF. What to know about how Medicare pays physicians. https://www.kff.org/medicare/issue-brief/what-to-know-about-how-medicare-pays-physicians/

Henry, TA. (2024, March 8). American Medical Association. 9 states pass bills to fix prior authorization. https://www.ama-assn.org/practice-management/prior-authorization/9-states-pass-bills-fix-prior-authorization

Muoio, D. (2024, March 10). Fierce Healthcare. Biden signs $460B spending bill with doc pay bump, delayed DSH cuts and community health funding. https://www.fiercehealthcare.com/providers/congress-reaches-spending-deal-doc-pay-bump-delayed-dsh-cuts-and-more

Morse, S. (2024, March 7). Healthcare Finance. Spending bill gives physicians 1.68% pay increase but overall decrease remains the same. https://www.healthcarefinancenews.com/news/spending-bill-gives-physicians-168-pay-increase-overall-decrease-remains

Robeznieks, A. (2024, March 14). American Medical Association. New prior authorization reforms show power of physician advocacy. https://www.ama-assn.org/practice-management/prior-authorization/new-prior-authorization-reforms-show-power-physician