The Centers for Medicare & Medicaid Services (CMS) has finalized its 2025 Medicare Physician Fee Schedule, which includes a 2.9% Medicare Physician Pay Cuts to physician payments. This decision, despite opposition from major industry groups, will impact healthcare providers and potentially patient access to care.
The rule also includes several positive provisions, such as expanded access to primary care, extended telehealth flexibilities, and strengthened incentives for accountable care organizations in the Medicare Shared Savings Program. However, the pay cut remains a significant concern for healthcare providers.
HHS and CMS Release Medicare Physician Fee Schedule Final Rule
The Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) have finalized the 2025 Medicare Physician Fee Schedule (MPFS) rule. The rule aims to strengthen primary care, promote preventive care, and improve access to behavioral health services. Additionally, it leverages the provisions of the Inflation Reduction Act to use drug manufacturer rebates to strengthen Medicare.
However, healthcare provider groups have criticized the rule’s 2.93% reduction in average payment rates for 2025. This reduction, which is necessary to maintain budget neutrality, has raised concerns about the financial viability of medical practices and the potential impact on patient access to care.
The rule’s complex calculations and numerous provisions have been met with mixed reactions from the healthcare industry. While the rule aims to improve healthcare access and affordability, its impact on physician reimbursement and practice sustainability remains a significant concern.
Healthcare Groups Decry Medicare Physician Pay Cuts
The Medical Group Management Association (MGMA) and the American Medical Association (AMA) have strongly criticized the recent Medicare Physician Fee Schedule final rule, which includes a 2.83% reduction to the 2025 conversion factor.
The MGMA warns that this Medicare Physician Pay Cuts will further exacerbate the financial challenges faced by medical practices, potentially leading to reduced access to care for patients. The organization is urging Congress to swiftly pass legislation to avert the cut and stabilize the Medicare physician payment system.
The AMA echoes these concerns, highlighting the significant disparity between the proposed Medicare Physician Pay Cuts and the rising costs faced by physicians. The association emphasizes that this trend of decreasing Medicare reimbursement, coupled with increasing expenses, is unsustainable and threatens the viability of medical practices, particularly in rural and underserved areas.
AMA and Premier Urge for Medicare Payment Reform
The American Medical Association (AMA) has urged the administration and Congress to implement a permanent, annual inflation-based update to Medicare physician payments. The AMA warns that without immediate congressional action, significant cuts to physician pay will take effect.
Premier Inc. has also expressed concern over the proposed Medicare payment update, arguing that it fails to adequately address the rising costs faced by healthcare providers. The organization contends that CMS needs to adopt more realistic methodologies and data sources to ensure that payment rates keep pace with inflationary pressures and labor shortages.
Both organizations emphasize the importance of a sustainable Medicare payment system to maintain access to quality healthcare for patients.
Primary Care Groups Sound Alarm on Medicare Physician Pay Cuts
The American Academy of Family Physicians (AAFP) has joined other healthcare organizations in calling for comprehensive Medicare payment reform. The AAFP warns that the annual cycle of short-term fixes and impending cuts is unsustainable and threatens patient access to care.
The organization emphasizes the need for a permanent solution that addresses the persistent undervaluation of primary care services. They highlight the impact of these cuts on physician burnout, workforce shortages, and ultimately, patient care.
Primary Care Collaborative (PCC) has also advocated for systemic changes, including removing barriers to reform, integrating behavioral health services, and implementing well-designed hybrid payment models.
Industry groups have been actively lobbying Congress to reverse the planned Medicare physician pay cut and update the Medicare Economic Index. While a recent bill aims to address these issues for 2025, experts caution that it is a temporary solution and that long-term, sustainable reforms are essential.
Telehealth: A Mixed Bag of Permanent and Temporary Changes
While the Centers for Medicare & Medicaid Services (CMS) has made some permanent improvements to telehealth coverage, many temporary flexibilities implemented during the COVID-19 pandemic are set to expire at the end of 2024.
Positive Changes:
- Permanent Coverage for Audio-Only Services: CMS has finalized a rule permanently covering audio-only telehealth services.
- Expanded Flexibilities for Direct Supervision and Home Address Reporting: The agency has extended flexibilities for direct supervision and home address reporting for practitioners.
Temporary Changes:
- Expiration of Pandemic-Era Flexibilities: Many telehealth flexibilities, including relaxed geographic and location restrictions and expanded scope of practitioners, are set to expire on January 1, 2025.
- Limited Access to Telehealth Services: After this date, Medicare beneficiaries will generally need to be located in a rural medical facility to receive most telehealth services, with exceptions for behavioral health services.
CMS has emphasized its goal of preserving and expanding access to telehealth services where appropriate, but the agency’s actions are constrained by current law. To maintain broader access to telehealth services, Congress will need to take further action.
CMS Expands Medicare Coverage for Advanced Primary Care:
The Centers for Medicare & Medicaid Services (CMS) has taken a significant step towards supporting advanced primary care by finalizing new coding and payment policies. These policies will enable primary care teams to provide a wider range of services, including 24/7 access to care and comprehensive care plan development.
The new codes are stratified based on patient complexity, allowing for more accurate reimbursement. CMS has stated that these policies are informed by the lessons learned from previous value-based primary care models and represent a move towards a more accountable care system within the traditional Medicare framework.
Primary Care Collaborative and the American Academy of Family Physicians (AAFP) have both praised CMS’s decision. They believe that these new services and payment models will help primary care providers deliver higher-quality care and address the complex needs of their patients.
CMS Enhances Medicare Shared Savings Program
The Centers for Medicare & Medicaid Services (CMS) has made several improvements to the Medicare Shared Savings Program, a key component of its Accountable Care Organization (ACO) initiative.
- Advance Payments for Successful ACOs: To encourage investment in healthcare infrastructure and patient services, CMS will allow eligible ACOs with a proven track record to receive advance payments on their earned shared savings.
- Health Equity Incentives: The agency is introducing a health equity benchmark adjustment to incentivize ACOs serving rural and underserved communities.
- Addressing Improper Payments and Fraudulent Billing: CMS has finalized a methodology to account for improper payments and fraudulent billing, ensuring fair financial reconciliation for ACOs.
The recent announcement of Medicare Physician Pay Cuts has sparked mixed reactions from healthcare providers and organizations. While the National Association of ACOs (NAACOS) welcomes certain changes like advance payments, health equity incentives, and simplified quality reporting requirements, they express concerns about the increasingly stringent financial targets and the burden of new quality reporting requirements. These factors could potentially hinder ACO participation and long-term success, further complicating the landscape for healthcare providers navigating the complex Medicare reimbursement system.
Medicare Pay Cuts Impact RCM Companies
The proposed Medicare Physician Pay Cut has significant implications for revenue cycle management (RCM) companies like Allzone, as it directly affects healthcare providers’ revenue streams and payment cycles. When Medicare reduces physician reimbursements, providers face tighter financial margins, compelling them to seek optimized billing practices and efficient claim management to offset revenue loss. This situation increases the demand for RCM services that focus on accurate coding, faster claims processing, and effective denial management, enabling providers to recover as much revenue as possible.
Moreover, these pay cuts intensify the challenges of managing underpayments, especially as Medicare represents a substantial portion of payer mixes for many healthcare facilities. RCM companies play a crucial role by assisting providers in tracking reimbursement rates, identifying and appealing underpayments, and ensuring that claims align with the latest Medicare rules. Additionally, the anticipated pay cut could spur providers to adopt value-based care models, pushing RCM companies to adapt and support more complex reimbursement methodologies, including performance-based metrics.
In this evolving landscape, RCM companies that offer robust analytics, innovative solutions, and consulting services to mitigate the impact of Medicare pay cuts can strengthen their partnerships with providers, helping them maintain financial viability amid reimbursement reductions.