Healthcare Industry Changes: A Confluence of Events

Healthcare Industry Changes: A Confluence of Events

The COVID-19 pandemic and 2020 as a whole have brought about significant changes in the healthcare compliance environment. We believe that these changes will materially impact provider compensation arrangements in 2021 and beyond. Most notably, we anticipate changes stemming from the following:

  • The COVID-19 pandemic and its impact on market data sources;
  • The proposed 2021 CMS Physician Fee Schedule (PFS); and
  • Stark and AKS Final Rules.

As we continue to assess the impact of these changes on the healthcare landscape, we recommend that healthcare organizations consider taking the following actions:

  • Avoid provider compensation arrangements with elements tied to specific market survey data points;
  • Calculate provider compensation arrangements with wRVU productivity incentives using currently published CMS weightings; and
  • Consider new definitions of Fair Market Value (FMV) and Commercial Reasonableness (CR) and take a more cautious approach to compensation arrangements overall.

Market Data Sources

The varying response to the COVID-19 pandemic across localities and health systems will likely have a material impact on market data sources over the next few years. As a result, over-reliance on the market data could potentially become problematic and cause arrangements with compensation elements indexed to market data sources to be inherently riskier.

Proposed CMS PFS

WRVU weighting changes combined with the conversion factor decrease found in the proposed 2021 PFS will have a profound impact on provider compensation and revenue cycles going forward. We have found that the impact on wRVU weightings has the potential to substantially increase provider compensation in certain specialties with no change in the required work effort. Further, as we discussed in October, the combination of these changes will result in a Double Whammy for Physician Hospital Employment.

Stark Law and AKS Revisions

Adding to an already unprecedented time in our industry, the final revisions to the Stark Law and AKS were recently released. The final rules include the much talked about changes to the definitions of FMV and CR. While we do not expect the new definitions to drastically alter FMV analyses or the resulting conclusions, it would be prudent to carefully consider the new definitions when analyzing compensation arrangements. The rules also further call into question historical levels of reliance on the market data, indicating that it may not be appropriate in all circumstances.

More Developments to Come

The Consolidated Appropriations Act, 2021 (the Act) was signed into law on Dec. 27, 2020. The legislation temporarily waived Medicare’s budget neutrality requirement and instead stipulated a 3.75% boost to be paid for with $3 billion in additional funds.

CBIZ continues to assess the impact of the Act on the healthcare landscape and will be providing additional information in the near future. In the meantime, please reach out with any questions.

For assistance in navigating these changes and the resulting impact on your organization, contact Kevin Walker at 816.945.5598 or kwalker@cbiz.com.


Copyright © 2021, CBIZ, Inc. All rights reserved. Contents of this publication may not be reproduced without the express written consent of CBIZ. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

CBIZ MHM is the brand name for CBIZ MHM, LLC, a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly-traded and privately-held companies. CBIZ MHM, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ).

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