Physicians face a 2.83% reimbursement cut unless Congress takes action

Another physician fee schedule cut: ©Timon - stock.adobe.com

CMS finalized the 2025 Medicare Physician Fee Schedule and physicians are facing a 2.83% cut.

In accordance with update factors specified in law, finalized average payment rates under the PFS will be reduced by 2.93% in 2025 compared to the average payment rates for most of 2024. The change to the PFS conversion factor reflects the 0% update required by statute for 2025, the expiration of the 2.93% temporary increase in payment amounts for 2024 required by statute, and a small budget neutrality adjustment necessary to account for changes in valuation for particular services. This amounts to a finalized 2025 PFS conversion factor of $32.35, a decrease of $0.94 (or 2.83%) from the current 2024 conversion factor of $33.29, according to CMS.

Primary care received a greater focus than in the past. CMS is finalizing new coding and payment policies for advanced primary care management services that advanced primary care teams may provide, such as 24/7 access to care and care plan development. The codes for these services are stratified based on patient medical and social complexity.

CMS is continuing steps to further strengthen the Medicare Shared Savings Program (Shared Savings Program), which is Medicare’s permanent Accountable Care Organization (ACO) program. For the first time, CMS will allow eligible ACOs with a history of success in the program to receive an advance on their earned shared savings. CMS says this will encourage ACO investment in staffing, health care infrastructure, and certain additional services for people with Medicare, such as dental, vision, hearing, healthy meals, and transportation. CMS is also adopting a health equity benchmark adjustment to further incentivize participation in the Shared Savings Program by ACOs that serve people with Medicare and Medicaid from rural and underserved communities.

“The Medicare physician payment final rule continues our work to strengthen primary care while also supporting preventive care and promoting better access to behavioral health care,” said HHS Secretary Xavier Becerra in a statement.

Telehealth flexibilities have also been preserved in the final rule.

Under current law, the temporary extension of flexibilities related to payment for many telehealth services is scheduled to expire at the end of 2024. This final rule reflects CMS’ goal to preserve some important, but limited, flexibilities in its authority, and expand the scope of and access to telehealth services where appropriate, according to the agency. CMS is continuing to permit certain practitioners to provide direct supervision via a virtual presence of auxiliary personnel, when required, virtually through immediate availability via real-time, audio-video technology. CMS is also finalizing temporary extensions to allow teaching physicians to be present virtually when they furnish telehealth services involving residents in teaching settings.

Absent Congressional action, beginning Jan. 1, 2025, the statutory limitations that were in place for Medicare telehealth services prior to the COVID-19 PHE will retake effect for most telehealth services. These include geographic and location restrictions on where the services are provided, and limitations on the scope of practitioners who can provide Medicare telehealth services. After that date, people with Medicare generally will need to be located in a medical facility in a rural area to receive most Medicare telehealth services, with a notable exception for behavioral health telehealth services which can continue to be provided in the patient’s home.

What advocacy groups are saying about the final rule

Physician advocacy groups are warning that the reimbursement cuts could have devastating effects for both physicians and patients.

“CMS and Congress have once again overlooked the sobering financial realities facing our nation's medical practices, finalizing a 2.83% reduction to the 2025 Medicare conversion factor, further increasing the gap between practice expenses and reimbursement rates,” said Anders Gilberg, vice president, Medical Group Management Assocation. “Today's final rule throws the financial viability of physician practices into question and threatens beneficiary access to care. On a positive note, we are pleased CMS heeded our call to finalize numerous telehealth policies, such as permanently covering audio-only services and extending flexibilities for direct supervision and home address reporting for practitioners.”

The American Academy of Family Physicians likewise shared its concerns.

“Inadequate Medicare payment rates have created untenable barriers to care for patients and threaten physician practices,” said Jen Brull, M.D., president, American Academy of Family Physicians, in a statement. “While the final 2025 Medicare physician fee schedule aims to strengthen primary care, the underlying deterioration of physician payments negates the impact of these important investments. Sadly, this is the fifth year in a row congressional intervention will be needed to preserve payment. The consequence of this year’s 2.8% reduction is dire, putting practices at risk, exacerbating physician workforce shortages and preventing patients from accessing primary care.

“The AAFP calls on Congress to act before the end of this year to avert harmful physician payment cuts and work with CMS and the physician community to invest in community-based, physician-led primary care.”

Primary Care Collaborative President and CEO Ann Greiner issued the following statement on the final rule:

“While today's rule contains harmful, statutorily mandated pay cuts — cuts that Congress can and must address this year — the Primary Care Collaborative is pleased that CMS has acknowledged the importance of primary care by finalizing new Advance Primary Care Management services. The Agency has taken an important first step down a path toward permanent payment reform, and we look forward to working with CMS to refine and improve the new services.

“At a time when more and more Americans are struggling to find primary care, both CMS and Congress must build on today’s rule and evolve still bolder payment solutions. By doing so, policymakers can help stem the erosion of the primary care workforce and give clinicians the flexibility they need to spend more time with patients.”

The American Medical Association also voiced its displeasure for the rate cuts.

“In the 3,088 pages and thousands of statistics included in the final rule of the 2025 Medicare physician fee schedule released today, there are two numbers that stand out: 2.8 and 3.5,” said Bruce A. Scott, M.D., president of the American Medical Association, in a statement. “The 2.8 is the percent payment cut for physicians that is scheduled to take place next year. The 3.5 is the estimated percent rise in the Medicare Economic Index, which is the government’s measure to gauge increases in the costs of physicians delivering care to our Medicare patients.

“To put it bluntly, Medicare plans to pay us less while costs go up. You don’t have to be an economist to know that is an unsustainable trend, though one that has been going on for decades. For physician practices operating on small margins already, this means it is harder to acquire new equipment, harder to retain staff, harder to take on new Medicare patients, and harder to keep the doors open, particularly in rural and underserved areas.”

Congress has shown some signs of life in regards to taking action on the concerns presented by advocacy groups.

A bipartisan group in the U.S. House of Representatives has introduced a bill that would provide a 4.7% payment update in 2025. The measure would eliminate the 2.8% Medicare physician payment cut slated for Jan. 1 and provide a positive payment update that is equal to one half of the Medicare Economic Index.

The physician payment increase contained in the measure—H.R. 10073, the Medicare Patient Access and Practice Stabilization Act of 2024—is similar to the recommendation made by the Medicare Payment Advisory Commission. The bill was introduced by Reps. Greg Murphy (R-N.C.), and Jimmy Panetta (D-Calif.), along with several cosponsors.

This legislative development comes on the heels of a bipartisan majority of the House of Representatives signing onto a letter urging House leadership to “expeditiously pass legislative fixes” to stop the “harmful” pay cut and give doctors an update “that takes into account the cost of actually delivering care to patients.”

The 2.8% reduction proposed in the 2025 Medicare Physician Fee Schedule marks the fifth consecutive year that the Centers for Medicare & Medicaid Services’ pay-schedule proposal lowered payments to physicians and other clinicians. Combined with CMS’ estimate that practice-cost expenses will rise by 3.6% in 2025, doctors would see a 6.4% effective cut in Medicare physician payment absent congressional action, according to the AMA.