2023 MPFS final rule eliminates E/M observation codes, extends telehealth waivers

CMS is moving ahead with major changes to evaluation and management (E/M) services, telehealth, coverage of dental services, and more in the 2023 Medicare Physician Fee Schedule (MPFS) final rule. The rule, released November 1, also includes updates to vaccine payments and quality and reporting programs.


CMS finalized its proposals to bring E/M coding and guidelines in line with the American Medical Association’s (AMA) changes, including eliminating the use of history for leveling. This will integrate the full family of E/M services with the guidelines that currently govern office visit codes 99202-99215. The policy will also delete all observation care codes (99217-99220, 99224-99226) and merge them with the initial and subsequent hospital care codes, as well as make other changes to bring CMS’ rules into alignment with the AMA.

“While the code selection rules are simplified, the medical decision-making grid for choosing a code has changed so physicians will need to be trained,” says NAHRI Advisory Board member Ronald Hirsch, MD, FACP, CHCQM, CHRI, vice president, regulations and education group with R1 RCM in Murray, Utah.  “And while observation codes are eliminated, the place of service [POS] will still need to be chosen correctly so that an initial hospital code with place of service inpatient hospital is not submitted for a patient who was outpatient with observation services.”

CMS is not extending the new guidelines to specialists visiting hospital outpatients, Hirsch points out. These visits will continue to be coded with office and other outpatient visit codes instead of the simplified hospital visit codes.

CMS will also differ from the AMA on prolonged service codes. Instead of using Current Procedural Terminology (CPT®) codes put forth by the AMA, CMS is launching a series of three prolonged service Healthcare Common Procedures Coding System (HCPCS) codes, G0316, G0317, and G0318, that providers can use depending on their setting. See p. 168 of the final rule for full code descriptions for these new HCPCS codes.


CMS will adopt the telehealth waiver extension in the Consolidated Appropriations Act of 2022. The policy extends a wide range of telehealth waivers for 151 days after the COVID-19 public health emergency ends, currently slated for January 2023, including the:

  • Audio-only exceptions
  • Waiver of geographic and other limits ordinarily required for telehealth services
  • Ability of therapists, occupational therapists, speech-language pathologists, and audiologists to bill such codes under telehealth

Providers using telehealth will continue to bill under the POS code that reflects their usual mode of operation with modifier -95—except for audio-only services. Effective January 1, 2023, audio-only services should be billed with the POS code that reflects their usual mode of operation with modifier -93.

The agency gave more insight into what it will, and will not, do during the five-month extension period. For example, it will continue to cover Category 3 telehealth services. Category 3 services were slated for removal from the telehealth list when the public health emergency ends. However, CMS declined to add additional grace periods to allow organizations to adjust to the end of the extension period.

Drug wastage modifier

CMS finalized its proposal to create a new modifier relating to wastage of drugs sold in single-use packaging.

Currently, modifier -JW is used to report drug amounts that are discarded and not administered to any patient when the drug is sold in single-use or single-dose packaging. Modifier -JW is an informational-only modifier and does not reduce payment. However, CMS is aware that modifier -JW is often omitted on claims and it’s unclear whether that’s because it was incorrectly omitted or there were no discarded amounts to report.

To address this, CMS will require organizations to report a new modifier, modifier -JZ, if no amount was discarded. This means that on all claims for single-use or single-dose drugs, organizations must report either modifier -JW or modifier -JZ.

“Although it’s disappointing that CMS is proceeding with the -JZ modifier, the guidance in the MPFS does contain some welcome clarification on billing wastage on the actual purchased vial rather than the lowest available vial for purchase,” says Kimberly A. Hoy, JC, CPC, director of Medicare and compliance at HCPro in Brentwood, Tennessee.

CMS believes that the policy will not add administrative burden. However, it did acknowledge commenters’ concerns that confusion about the modifiers will lead to compliance issues and delays in reimbursement. To address these concerns, modifier -JZ will not be required until July 1, 2023, and edits will be delayed until October 1, 2023.

Dental coverage

CMS is moving ahead with its proposal to clarify covered dental and oral health services for some hospitalized patients. Currently most dental and oral health services are statutorily excluded from Medicare payment, excepting services that are an integral part of a covered medical treatment such as an oral exam preceding a kidney transplant.

The final rule emphasizes the concept that the dental and oral health services must be “inextricably linked” to the covered medical services and provides clarification on when and how dentists and oral surgeons can bill Medicare for these services. CMS describes a variety of dental and oral health services that may be considered integral to specific medical treatments such as organ transplants, cardiac valve replacements, head and neck cancers, and more.

CMS also finalized a process that would allow the public to request that additional dental and oral health services be considered for coverage under the policy.

“Many of those patients who will now qualify for dental coverage under Part B have multiple comorbid conditions and may need their extractions performed in the hospital setting. Understanding ahead of the service who is responsible for payment will be crucial,” Hirsch says.

COVID-19 vaccines

CMS clarified some policies related to coverage of COVID-19 vaccines and treatments under the public health emergency and/or emergency use authorization to indicate they will be covered through the end of the calendar year in which either designation expires. The agency also made permanent payment for monoclonal antibody treatments used as pre-exposure prophylaxis for COVID-19.


Revenue integrity professionals should read the final rule and fact sheet thoroughly. Identify the provisions that will affect your organization, your department, and any specific workflows or internal policies. Ensure staff in your department are aware of the final rule and reach out to colleagues in other departments, such as coding, compliance, or finance, to alert them and discuss the changes. Develop education and make sure any affected systems or processes are updated.

Most provisions of the final rule will be effective January 1, 2023. Prioritize tasks and set deadlines to ensure that your organization will be in compliance by that date.