The Centers for Medicare and Medicaid Services (CMS) has proposed a series of changes to the Medicare physician fee schedule, including a 2.8 percent cut to physician payments that has drawn criticism from industry groups who complain of increased operating costs due to inflation.
CMS said in a July 10 statement that its proposed updates to the Medicare Physician Fee Schedule (PFS) for 2025 include the creation of additional primary care management services, such as new payments for safety planning interventions, telehealth flexibilities for opioid treatment programs, and incentives to improve access to care in rural areas.
“The Calendar Year 2025 Physician Fee Schedule proposed rule supports physicians and other practitioners in delivering care that meets the needs of people with Medicare, including through telehealth flexibilities, strengthened primary, behavioral, and oral health care, and improved access to caregiver training services,” CMS Administrator Chiquita Brooks-LaSure said in a statement.
A key part of the proposal—and one that sparked criticism from some in the medical community—pertains to the so-called “conversion factor” or multiplier that is used to determine provider reimbursement in Medicare. The conversion factor will drop from $33.29 this year to $32.36 next year, which amounts to a decrease of 2.8 percent.
Several medical industry groups issued critical statements, arguing that the cut to Medicare physician fees is burdensome, given the toll of inflation and worker shortages on health care providers.
“A 2.8 percent reduction to the conversion factor would be alarming in the best circumstances, but to propose doing so at a time when 92 percent of medical groups report increased operating costs and are otherwise struggling to remain financially viable is critically short-sighted,” Anders Gilberg, senior vice president of government affairs at the Medical Group Management Association (MGMA), said in a statement.
Higher labor costs were the key factor driving up expenses for medical practitioners, according to a recent report from MGMA, in addition to rising prices of medical supplies and various types of service and maintenance fees. The report also showed that the “bottom line”—measured as median net income/loss, excluding financial support per full-time equivalent physician—fell from $11,223 in 2021 to a negative $343 in 2022, the year inflation peaked above 9 percent.
“Medicare physician reimbursement is on a dire trajectory and these ongoing cuts continue to undermine the ability of medical practices to keep their doors open and function effectively—the need for comprehensive reform is paramount,” Mr. Gilberg said, calling on Congress to pass laws that would implement an annual inflation-based physician payment update.
Higher operating costs also featured prominently in criticism from the American College of Rheumatology (ACR), whose president pointed out that Medicare physician payments have declined by 29 percent since 2001.
“Physicians are currently grappling with rising overhead costs, workforce shortages, and increasing administrative burdens,” ACR President Dr. Deborah Dyett Desir said in a statement, while also calling for Medicare reimbursement levels that are adjusted for inflation.
“The ACR had hoped that CMS would propose Medicare reimbursement levels that more accurately reflect the cost of providing care.”
CMS defended the proposal, saying its hands were bound by factors specified in law. A CMS spokesperson told The Epoch Times in an emailed statement that the update proposed in this year’s physician fee schedule is “predominantly due to factors specified in law, and not at CMS’ discretion.”
Medicare programs are required by law to be “budget neutral,” meaning that any increase in reimbursement for one service must be offset by a decrease in reimbursement for another service, ensuring no overall increase in spending. Physician groups have been pushing for changes to this rule for years.
“The statute specifies that the update to the conversion factor for CY 2025 is 0.00 percent,” the spokesperson said, noting that the change to the conversion factor incorporates the overall update required by law, as well as the expiration of a one-time 2.93 percent increase in payment that was in effect for most of 2024.
“Previously, the Consolidated Appropriations Act, 2024 provided a single year, temporary 2.93 percent increase in MPFS payments that applies for most of CY 2024. This one-year increase to MPFS payments is due to expire for CY 2025.”
Another factor behind the physician fee cut was an estimated 0.05 percent adjustment necessary to account for changes in the relative value units (RVUs) due to proposed changes in work relative value units, the spokesperson said.
RVUs are a measure used to determine the value of services provided by physicians and ensure fair compensation based on the complexity and time required for each service.
The CMS proposal is subject to a 60-day comment period that ends on Sept. 9.
