The Medicare Physician Fee Schedule Final Rule for Calendar Year 2021 (the Final Rule) issued by the Centers for Medicare & Medicaid Services (CMS) on December 1, 2020, and published in the Federal Register on December 28, 2020, made significant and far-reaching changes to the Medicare Physician Fee Schedule (PFS). In the Final Rule, which went into effect on January 1, 2021, CMS implemented changes to streamline the reporting process for office and outpatient evaluation and management (E/M) services and increased the relative value units (RVUs) for E/M services.

To account for the increase in RVUs for E/M services and still maintain compliance with the budget neutrality adjustment, CMS decreased the 2021 conversion factor to $32.41, down $3.68 (or 10%) from 2020. CMS also implemented a number of changes reflecting permanent shifts to the healthcare system as a result of COVID-19 by expanding reimbursable telehealth services beyond the duration of the Public Health Emergency (PHE), contemplating future increases to reimbursement for vaccine administration, and increasing scope of practice flexibilities. Additionally, the Final Rule included changes to expand access to opioid treatment and combat the ongoing opioid crisis.

The Final Rule received sharp industry criticism as issued, and in response, was modified before going into effect by the omnibus appropriations bill signed into law by President Trump on December 27, 2020. Among other changes, the omnibus appropriations bill revised the PFS conversion factor to $34.89, leading to a less substantial decrease from the 2020 conversion factor. A summary of the key changes under the Final Rule, and the modifications made by the omnibus appropriations bill is provided below.

E/M Services

The 2021 PFS “marks the most significant updates to E/M codes in 30 years,” according to CMS Administrator Seema Verma. The Medicare PFS is updated each year to adjust Medicare payment and quality provisions for the upcoming calendar year. It establishes a payment rate for Medicare services, calculated by multiplying the RVUs assigned to that specific service by that year’s standard conversion factor.

Revaluing E/M Codes

In the PFS, CMS finalized significant increases in RVUs for common office and outpatient E/M services, including maternity care bundles, emergency room visits, end-stage renal disease capitated payment bundles, and physical and occupational therapy evaluation services. The purposes of these increases are to reduce billing and coding burdens on physicians and reimburse time spent evaluating and managing a patient’s care.

To ensure budget neutrality as required by statute, the 2021 Medicare conversion factor was initially reduced by 10% and set at $32.41, which is $3.68 less than the previous year’s conversion factor of $36.09, as an offset to the revisions to E/M codes. The budget neutrality rule requires the Medicare PFS to remain budget neutral if revisions to RVUs determining physician reimbursement result in changes of more than $20 million annually. Because the revisions to the RVUs for E/M services are expected to result in changes exceeding $20 million annually, CMS was required to make the significant adjustment to the conversion factor. In the Final Rule, CMS stated the revisions are intended to support primary care clinicians seeing an increasing number of Medicare beneficiaries, including many with one or more chronic conditions. The agency also believes the Final Rule will aid other clinicians by reducing the E/M documentation burden to streamline the reporting process for E/M levels. However, due to industry push-back, the omnibus appropriation bill later revised the conversion factor to $34.89, leading to a less substantial decrease of $1.20 from 2020.

These changes will impact medical specialties differently. In explaining the impact of the changes, CMS noted, “According to Medicare claims data, E/M visits are furnished by nearly all specialties, but represent a greater share of total allowed charges for physicians and other practitioners who do not routinely furnish procedural interventions or diagnostic tests.” Specialties performing a high rate of E/M services – such as family practice, endocrinology, oncology, urology, and rheumatology – are projected to see an increase of between 7-16% in Medicare reimbursements. This increased reimbursement demonstrates CMS’s commitment to supporting primary care physicians in providing care to more significant Medicare populations. However, specialties that bill more surgical or procedural services and fewer E/M services – such as radiology, anesthesia, infectious disease, pathology, and emergency medicine providers – are projected to see a decrease in Medicare reimbursements of up to 10%. [SEE TABLE 106 in the Final Rule.]

Several industry groups have expressed concern that CMS has reduced RVUs, including for specialists who have been working on the frontlines of the pandemic, particularly critical care and emergency medicine providers. In a survey conducted by the American College of Surgeons, one in five surgeons reported they may need to stop performing certain procedures, including those that are especially complex or risky. Susan Bailey, M.D., President of the American Medical Association, stated,

“Unfortunately, the newly adopted office visit payment rates, and other payment increases finalized in today’s rule, are required by statute to be offset by payment reductions to other medical services covered by Medicare. This will result in a shocking reduction of 10.2% to Medicare payment rates in the midst of the worsening COVID-19 pandemic while physicians are continuing to care for record numbers of patients diagnosed with COVID-19 and trying to keep the lights on in their practices. These cuts will hurt all Medicare patients, particularly those seeking care for COVID-19 critical care and hospital visits that will be reduced dramatically.”

For these reasons, several industry groups called on Congress to reduce the cuts and provide relief for affected providers shortly after the Final Rule’s release. In response to these concerns, the omnibus appropriations bill signed by President Trump on December 27, 2020, took steps to mitigate the changes by adding a 3.75% increase to all codes paid in 2021. The omnibus appropriations bill also extended the suspension of the 2% payment sequestration ordinarily applied to all Medicare fee for service claims through March 31, 2021 and reinstated the 1.0 floor on the work Geographic Practice Cost through 2023 in order to further support reimbursement for affected providers.

Other E/M Coding Changes

In addition to the revaluing of the E/M codes, the Final Rule made other changes to E/M-related codes. Other key changes to codes include the following:

  • Deletion of Code 99201: CPT Code 99201 for a Level 1 office/outpatient visit, new patient has been eliminated due to significant overlap with CPT Code 99202.
  • Time Values for Levels 2-5 Office/Outpatient E/M Visit Codes:  CMS finalized a proposal to adopt the actual total times (meaning the sum of the component times) rather than the total times recommended by the American Medical Association/Specialty Society Relative Value Scale Update Committee (AMA RUC), for CPT codes 99202 through 99215. CMS noted it believed the actual times were a more accurate reflection of time values than relying on the AMA RUC recommended times developed from survey data. For levels 2-5 E/M visits, the code level to report will be based on the level of MDM or total time personally spent by the reporting practitioner.
  • Revaluing Services Analogous to Office/Outpatient E/M Visits: CMS increased valuations for the following services: End-Stage Renal Disease Monthly Capitation Payment (ESRD MCP) services; transitional care management (TCM) services; maternity bundled services; cognitive impairment assessment and care planning  (CPT Code 99483); annual wellness visits and initial preventive physical exam (CPT codes 99204 and 99214); emergency department visits; therapy evaluations; and certain behavioral healthcare services.
  • New HCPCS G-code for Certain Ongoing Care Services: The G2211 (which replaces temporary code GPC1X) add-on code may be billed for visits that are part of ongoing healthcare services and/or visits that are part of ongoing care related to a patient’s single, serious condition, or a complex condition. The omnibus appropriations billed signed by President Trump on December 27, 2020, delayed implementation of this code for three years until 2024.
  • Prolonged Office/Outpatient E/M Visits: In the PFS, a new, shorter prolonged services add-on code, G2212, measures time in 15-minute increments. This will be used when the total time a provider spends on a patient on the date of service exceeds the maximum time allowed by at least 15 minutes or more.


The Final Rule makes several changes indicating CMS’s growing support of access to healthcare through telehealth visits—a care-delivery mode that has become particularly important during the PHE.  In recognition of the value in virtual healthcare encounters, the Final Rule creates an expanded list of covered telehealth services specific to the PHE, as well as makes permanent certain codes, added temporarily since the onset of the PHE, that are reimbursable under the Part B benefit when provided through telehealth.  The Final Rule also makes certain changes related to visits with beneficiaries in nursing facility settings, practitioners that may perform covered telehealth services, remote supervision of incident-to services, and clarifications as to audio-only encounters.

  • The following codes, added temporarily during the PHE, will remain on the approved telehealth list after the PHE ends:
    • Group Psychotherapy (CPT code 90853).
    • Psychological and Neuropsychological Testing (CPT code 96121).
    • Domiciliary, Rest Home, or Custodial Care services, Established Patients (CPT codes 99334-99335).
    • Home Visits, Established Patient (CPT codes 99347-99348).
    • Cognitive Assessment and Care Planning Services (CPT code 99483).
    • Visit Complexity Inherent to Certain Office/Outpatient Evaluation and Management (E/M) (HCPCS code G2211).
    • Prolonged Services (HCPCS code G2212).
  • In the Final Rule, CMS created a new category (Category 3) of telehealth codes, those that may be added on a temporary basis to the approved list of Part B telehealth codes. The following services and corresponding CPT codes were added on a Category 3 basis and will be covered for the duration of the COVID-19 PHE and during the calendar year in which the PHE ends:
    • Home Visits, Established Patient (CPT codes 99349-99350).
    • Emergency Department Visits, Levels 1-5 (CPT codes 99281-99285).
    • Nursing Facilities Discharge Day Management (CPT codes 99315-99316).
    • Psychological and Neuropsychological Testing (CPT codes 96130-96133; CPT codes 96136-96139).
    • Therapy Services, Physical and Occupational Therapy, All Levels (CPT codes 97161-97168; CPT codes 97110, 97112, 97116, 97535, 97750, 97755, 97760, 97761, 92521-92524, 92507).
    • Hospital Discharge Day Management (CPT codes 99238-99239).
    • Inpatient Neonatal and Pediatric Critical Care, Subsequent (CPT codes 99469, 99472, 99476).
    • Continuing Neonatal Intensive Care Services (CPT codes 99478-99480).
    • Critical Care Services (CPT codes 99291-99292).
    • End-Stage Renal Disease Monthly Capitation Payment codes (CPT codes 90952, 90953, 90956, 90959, 90962).
    • Subsequent Observation and Observation Discharge Day Management (CPT codes 99217; CPT codes 99224-99226).

In response to industry concerns related to the 30-day frequency limitation on subsequent nursing facility visits performed through telehealth, the Final Rule resets the frequency limitation to one visit every 14 days.  CMS notes that this is intended to promote the use of telehealth in nursing facility settings while ensuring that providers are not disincentivized to provide in-person care.

In a COVID-19 Interim Final Rule published on March 31, 2020, CMS created a temporary coverage policy for evaluation and management services provided via audio-only connections to end upon the expiration of the COVID-19 PHE. CMS did not propose to continue payment for these services beyond the PHE because it cannot waive the requirement that telehealth services be furnished through an interactive, two-way audio-video connection. However, CMS recognizes that utilization of this service beyond the expiration of the COVID-19 PHE may be prudent in mitigating infection risks.  Through the Final Rule, CMS has implemented, on an interim basis, a new HCPCS G-code representing 11-20 minutes of medical discussion in determining whether an in-person visit is required.

The Final Rule also expands the scope of practitioners that may provide services through telehealth and receive reimbursement. As outlined in the Final Rule, licensed clinical social workers, clinical psychologists, physical therapists, occupational therapists, and speech-language pathologists will be able to bill for brief online assessment and management services, virtual check-ins, and remote evaluations. The Final Rule permits, on a temporary basis, coverage of “incident-to” services ordinarily requiring direct supervision. Per the Final Rule, virtual supervision by a physician or non-physician practitioner using interactive audio/visual real-time communications technology will meet the definition of “direct supervision.”

Vaccine Administration

In response to the COVID-19 PHE, CMS acknowledged the importance of beneficiary access to vaccinations to public health and proposed increasing payment for vaccinations by cross walking immunization codes to CPT 36000. CMS ultimately did not finalize the proposal, instead opting to keep CY2019 payment rates. However, CMS stated it would continue to seek additional information on the cost of providing services to establish payment on a long-term basis.

Scope of Practice

The COVID-19 PHE also influenced changes to CMS’s scope of practice policies. CMS implemented a number of scope of practice flexibilities during the COVID-19 PHE to ensure continuity of care. The flexibilities and clarifications set forth below are now being made permanent by the Final Rule.

Supervision Changes

The Final Rule made permanent the policy allowing nurse practitioners, clinical nurse specialists, physician assistants, certified nurse midwives, and certified registered nurse anesthetists to supervise the performance of diagnostic tests within their scope of practice and subject to applicable state law. CMS also reiterated in the Final Rule its prior clarification that pharmacists may fall within the regulatory definition of auxiliary personnel under “incident to” regulations. In accordance with state law and scope of practice, pharmacists may provide services “incident to” the services and under the appropriate level of supervision of the billing physician or non-physician practitioner (NPP) as long as payment for the services is not made under the Medicare Part D benefit. CMS also finalized changes allowing physical therapists and occupational therapists to delegate maintenance therapy services to a therapy assistant.

Verification of Documentation

CMS finalized changes allowing physicians and NPPs to review and verify documentation of their services when entered into the medical record by members of their medical team or students working under their supervision.

Telehealth Supervision of Residents

In addition, for residency training sites and teaching settings outside of a metropolitan statistical area (MSA), CMS made permanent the policy allowing teaching physicians to use interactive, real-time audio/video, excluding audio-only, to interact with the resident through virtual means to meet the requirement that they are present through the key portion of the service. The flexibility still expires after the end of the PHE for teaching settings within an MSA. However, in an attempt to increase beneficiary access to Medicare-covered services in rural areas and to expand training opportunities for residents in rural settings, CMS made the flexibility permanent outside of MSAs. The medical record must indicate how the teaching physician was present to the resident during key portions of services. The flexibility provided by the Final Rule does not apply in the case of surgical, high-risk, interventional, or other complex procedures; services performed through an endoscope; or anesthesia services. The flexibility expires for teaching settings within an MSA following the end of the PHE.

Payment for Services Provided by Residents Outside of GME Program

Finally, CMS made permanent in the Final Rule the policy allowing PFS payment for fully-licensed residents’ services that are not related to their approved GME program in the inpatient setting of a hospital in which they are training. For the services to be reimbursable, the medical record must show the resident furnished identifiable physician services meeting the conditions for fee schedule payment for physician services to beneficiaries in providers in 42 CFR § 415.102(a); the resident is fully licensed to practice medicine, osteopathy, dentistry, or podiatry by the state in which the services are performed; and the services are not performed as part of the approved GME program.

Opioid Treatment

The Final Rule also made changes to expand access to opioid treatment. CMS finalized its proposal to add Naloxone to the definition of opioid use disorder (OUD) treatment services. The change will allow Medicare beneficiaries to receive Naloxone from an opioid treatment program (OTP) to the extent it is medically reasonable and necessary as part of their OUD treatment. To account for the additional cost of providing Naloxone, CMS added overdose education to the definition of OUD treatment services and finalized an add-on code for nasal Naloxone. The nasal Naloxone add-on code will be reimbursed at average sales price + 0. CMS placed some frequency limits on the use of the new Naloxone codes but is allowing exceptions if a beneficiary overdoses and uses the supply of Naloxone given to them by the OTP, to the extent that an additional supply of Naloxone is medically reasonable and necessary.

CMS also finalized its proposal to allow periodic assessments to be furnished via two-way interactive audio-video communication when clinically appropriate. The change is anticipated to make ongoing treatment more accessible in rural areas. Moreover, to better detect and identify OUD cases, CMS also included in the Final Rule a requirement that Medicare’s Initial Preventive Physical Examination and Annual Wellness Visit include a screening for potential substance use disorders.

Finally, CMS finalized a rule requiring prescribers to use NCPDP SCRIPT 2017071 standard for all electronic prescribing of controlled substances. Given that the standard is the same standard Part D plans are already required to support, commenters suggested to CMS that implementing the new standard should not be onerous for most providers. As such, CMS set the effective date for the change as of January 1, 2021, and the compliance date as of January 1, 2022.

Other Changes

In addition to those changes summarized above, the 2021 fee schedule includes the following changes:

  • CMS finalized rebasing and revising the Federally Qualified Healthcare Center (FQHC) market basket to reflect a 2017 base year. The 2017-based FQHC market basket update for CY 2021 is 2.4%. The multifactor productivity adjustment for CY 2021 is 0.7%. The final CY 2021 FQHC payment update is 1.7%.
  • CMS added 2 new HCPCS codes, G2064 and G2065, to the general care management HCPCS code, G0511, for PCM services furnished in RHCs and FQHCs.
  • CMS clarified that remote patient monitoring (RPM) is the collection and analysis of patient physiologic data used to develop and manage a treatment plan related to a chronic and/or acute health illness or condition with a U.S. Food and Drug Administration (FDA)-approved device. CMS further clarified that RPM services are considered E/M services and must be provided by healthcare providers who are eligible to furnish E/M services. However, auxiliary personnel, including contracted employees, may furnish RPM services under a physician’s supervision. Finally, CMS clarified that following the end of the PHE, RPM services may be furnished only pursuant to an established patient-physician relationship and that 16 days of data must be collected and transmitted every 30 days to qualify as RPM services.
  • CMS finalized the removal of 14 codes from the list of codes that cannot be billed in conjunction with CPT codes 99495 and 99496, which are used to describe management of a patient transition from acute care or certain outpatient stays to a community setting. CMS also finalized the allowance of the new CCM HCPCS code G2058 (CCM services, each additional 20 minutes of clinical staff time, per calendar month) to be billed concurrently with TCM when reasonable and necessary, and noted that minutes counted for TCM services cannot be counted toward other services.
  • CMS finalized the removal of 6 NCDs. The NCDs removed are 1) Extracorporeal Immunoadsorption (ECI) using A Columns, 2) Electrosleep Therapy, 3) Implantation of Gastroesophageal Reflux Device, 4) FDG PET for Inflammation and Infection, 5) Abarelix for the Treatment of Prostate Cancer and 6) Magnetic Resonance Spectroscopy.

If you have any questions on the changes introduced by the Final Rule or how the 2021 PFS impacts your business, please contact one of the authors.