The implementation of the Centers for Medicare & Medicaid Services’ (CMS’s) proposed definition of the “substantive portion” for split/shared evaluation and management (E&M) inpatient visits will not only have regulatory compliance implications. It will also affect physician and advanced practice provider (APP) production and compensation—and consequently, industry benchmarks.
Expect Changes to Valuation and Benchmarking
Physician and APP services are frequently billed under the provider who is considered the “rendering” provider. For split/shared E&M visits, CMS requires the “rendering” and “billing” provider be the provider who performs the substantive portion of the visit. Historically, the determination for which provider would be the billing provider was activity-based (exam or medical decision-making). But now CMS is proposing that it be based on whichever provider spends more than 50% of the time performing the service.
The use of an APP for the provision of clinical service helps create an efficient care delivery system. For this reason, an APP generally performs most of a split/shared E&M inpatient visit based on time. But under the current activity-based definition, the physician is considered the rendering provider and bills for the service.
As with most professional services, work relative value units (WRVUs) associated with procedures and visits are attributed to the rendering provider within the context of a compensation plan. Under the proposed rule, there will likely be a shift of attribution of WRVUs impacting physician and APP production and compensation. Further, this shift will impact information reported in benchmark data.
Fair Market Value
Organizations compensating providers using a WRVU-based compensation methodology will likely see an increase in WRVUs attributed to the APP, and a decrease in WRVUs for this type of service to the physician.
- By shifting the volume of services rendered by APPs and physicians, compensation for physicians has the potential to decrease unless there is a change in practice patterns.
- Conversely, an APP’s production and compensation may increase as they bill for additional services.
Changes to compensation and production may impact the fair market value (FMV) of the arrangement with the provider. For this reason, organizations should evaluate the implications of the proposed change to ensure regulatory compliance remains.
Benchmark Data
Hospitals and health systems should anticipate changes in benchmark data reflecting the change in WRVU attribution and compensation. Revenue considerations were discussed in an earlier blog post; however, billing for services rendered under an APP (as compared to a physician) reduces reimbursement (i.e., 85% for Medicare, but potentially higher for commercial payers).
That said, revenue declines should be expected for any physician relying on APP utilization unless there is a change in practice (i.e., replacement of production through performing other billable patient-related services). As benchmark surveys are based on data from the preceding year, we should expect to see reported revenue decreases in 2025 benchmark surveys.
How to Prepare
In preparation for the regulatory change:
- Compare current productivity for physicians and APPs to productivity under the new regulation to understand potential impacts to compensation and production.
- Understand how this change may affect the compensation, WRVU, and collections survey benchmarks reported by industry surveys. Review multiple years of survey data when evaluating provider performance to avoid reliance on any outlier benchmark data.
- Review physician and APP compensation arrangements to understand whether modifications are needed to ensure regulatory compliance.
Visit our Center for Split/Shared Success for continuing updates and advice, and stay tuned for our next entry on operations and practice models.
Center for Split/Shared Success
Edited by: Matt Maslin
