Physician Payment and Reimbursement

A projected Medicare physician payment decrease spurs more calls to reform the system

The American Medical Association cited data showing payment updates trailed inflation by 26% between 2001 and 2023.

July 24, 2023 11:07 am

Physician advocacy groups vehemently expressed concern about the financial consequences of CMS’s proposed rule for Medicare physician payments in 2024, intensifying a push to modify the payment system.

At a time of elevated expenses in healthcare, total payments would be reduced by a projected 1.25% relative to 2023. That would follow a 2% decrease from 2022 to 2023, a cut that had been set at 4.5% before Congress provided partial relief in an omnibus spending bill in December.

The estimated 2024 decrease is based on a conversion factor of 32.7476, down from 33.8872 this year and 34.6062 in 2022. A provision in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) keeps the conversion factor flat between 2020 and 2025.

CMS then incorporated a 2.17% reduction as a budget neutrality adjustment stemming from increases in certain work relative value units (RVUs) and practice expense RVUs. The adjustment would be eased by a 1.25% bump as stipulated in last December’s omnibus spending legislation.

Comments on the proposed rule are due by Sept. 11 at

Key payment factors

As is the case most years, changes in RVUs are projected to have disparate impacts on individual specialties. In general, those with a larger proportion of evaluation and management (E/M) visits would fare better next year.

One driver would be an inherent complexity add-on code for some office and outpatient E/M visits as CMS seeks to bolster primary care. The addition of this code would benefit some specialties but also would entail an estimated 2% reduction in payments across the fee schedule because of budget neutrality.

CMS initially finalized the code for 2021, but Congress tabled it until 2024. The new HCPCS code G2211 now is scheduled to debut as a mechanism “to target improved payment for primary and other similar longitudinal care for serious or complex conditions,” CMS wrote. The code, which CMS estimates would be used for 38% of office and outpatient E/M visits next year, could not be paired with Modifier 25 (used to designate services that are billed on the same day as a minor procedure or another E/M visit).

Another key difference in the payment update for various specialties is the ongoing phase-in of new clinical labor pricing values, with 2024 marking the third year of a four-year transition to a methodology that will result in higher wage values. The increase for many labor codes over the four-year period ending in 2025 will be greater than 50% (see the table on page 51 of the rule).

In addition, standard revaluing of work RVUs will affect Medicare compensation for specific procedures and, in turn, for certain specialties (see the table on page 275 of the rule).

Impact on specific specialties

CMS estimates that total allowed charges (including coinsurance and deductibles) in 2024 would rise by at least 2%, on average, for clinical psychologists, clinical social workers, endocrinologists (3%), family practice physicians (3%), general practice physicians, hematologists and oncologists, nurse practitioners, physician assistants, psychiatrists, and rheumatologists.

“The services that make up these specialties rely primarily on E/M services, behavioral healthcare or on clinical labor for their practice expense costs,” CMS wrote.

Charges would drop by at least 2%, on average, for anesthesiologists, audiologists, cardiac surgeons, chiropractors, colorectal surgeons, diagnostic testing facilities, emergency medicine physicians, interventional radiologists (4%), nuclear medicine physicians (3%), nurse anesthetists, optometrists, oral and maxillofacial surgeons, pathologists, physical and occupational therapists, radiation oncologists, radiologists (3%), thoracic surgeons, and vascular surgeons (3%).

Some of those specialties would be affected by budget neutrality relative to the new add-on code without gaining as much from the code as other specialties. Also, because their practice expense costs are more centered on supplies and equipment than on clinical labor, they would not benefit from the pricing update compared with other specialties.

Some specialties would be affected differently depending on whether the physician practice is based in a hospital facility. For example, critical care specialists would see their charges increase by 2% if they operate in a freestanding practice but drop by 2% if they’re facility-based. Conversely, allergists and immunologists would reap a better update if they’re facility-based, with an increase of 2% compared with a decline of 1% if they work in a freestanding practice (see the table on page 1286 of the rule).

Advocates sound the alarm

The American Medical Association (AMA) noted that since 2001, the aggregate Medicare physician payment rate is 26% below the Medicare Economic Index (MEI), which measures annual cost inflation for practices. The gap would increase in 2024 if the proposed payment update is finalized.

“Physicians need relief from this unsustainable journey,” Jesse M. Ehrenfeld, MD, MPH, president of the AMA, said in a written statement about the proposed rule.

The AMA supports the Strengthening Medicare for Patients and Providers Act, a House bipartisan bill that would link annual physician payment updates to the MEI.

Even if that bill does not get enacted in time to affect 2024 payments, Congress still could provide relief by updating the payment rate in legislation.

The American Medical Group Association said its members will be counting on Congress “to ensure Medicare’s reimbursement reflects the cost of delivering high-quality care to patients,” according to a statement by Jerry Penso, MD, MBA, president and CEO. Failure by Congress to act could leave practices to make “tough decisions on staffing and the services they can offer to their communities.”

The Medical Group Management Association took issue with the ramifications of the inherent complexity add-on code, saying it “highlights CMS’s flawed approach to addressing inadequate Medicare payments for primary care services using a budget-neutral methodology,” per a statement by Anders Gilberg, senior vice president for government affairs.

“Congress must reexamine existing law to provide an annual physician payment update commensurate with inflation and do away with Medicare’s ‘robbing Peter to pay Paul’ budget neutrality requirements to provide much-needed financial stability for medical practices,” Gilberg added.


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