Medicare is failing both patients and physicians. After adjusting for inflation, physician reimbursement under Medicare has declined by 33% from 2001 to 2025, according to the American Medical Association. In stark contrast, Medicare payments to hospitals have surged by nearly 60%, while hospital executive salaries have skyrocketed 93% over the past decade.
How can private practice physicians continue providing care under these financial pressures? In 2025, doctors face yet another 6% reduction in take-home pay, adding to an already dire situation.
To address these concerns, lawmakers have introduced the Medicare Patient Access and Practice Stabilization Act and eight other House members. This bill aims to reverse Medicare reimbursement cuts and align physician pay with inflation, ensuring continued access to care for Medicare patients.
The Closure of Private Practices: A Growing Crisis:
The consequences of declining reimbursement are already evident:
- September 2024: A Michigan obstetrics and gynecology practice, serving its community for 74 years, shut down.
- November 2024: A Florida-based private equity firm sold a New York dermatology practice to another firm.
- December 2024: Becker’s Review published a list of 22 physician practices that were forced to close.
- February 2025: A well-respected Alabama orthopedic group, serving tens of thousands of patients for nearly 30 years, announced its closure.
The CEO of the orthopedic clinic explained the harsh reality in a public statement:
“We find ourselves in a situation that many physician groups across the country are facing—balancing costs while planning for attrition. Rising operational expenses, physician shortages, and Medicare cuts have created immense financial pressure.”
The Shift Away from Independent Practice:
Physician independence is rapidly declining:
- 85% of physicians under the age of 40 are now employed, working for hospitals or insurance companies instead of running independent practices.
- Studies show that hospital mergers and acquisitions have not improved care quality or reduced costs for patients.
The Impact of Medicare Cuts on Patient Access:
Physicians are seeing rising operational costs—including rent, staff salaries, malpractice premiums, and health insurance for employees—while being paid less for their services. These cuts directly impact patient access to care.
Private insurers set their rates using Medicare as a benchmark, but at a higher percentage. On average:
- If Medicare reimburses $100 for a procedure, private insurers typically pay $143.
- As Medicare rates decline, private insurer reimbursements follow suit, reducing financial incentives for doctors to accept Medicare patients.
The Harsh Financial Reality for Physicians:
Who can afford to do more work for less pay? The financial strain is forcing physicians to choose between:
- Seeing more privately insured patients to offset lower Medicare reimbursements.
- Offering cash-based elective services, such as dermatological treatments or light-adjustable lenses (LALs) in ophthalmology.
- Selling their practices to hospitals, insurance companies, or private equity firms—further consolidating healthcare and reducing patient choices.
How Medicare Cuts Fuel Healthcare Consolidation:
Medicare was created to ensure seniors could access care without relying solely on private insurance. However, it has evolved into a bureaucratic system with unintended consequences.
As private practices disappear, hospitals and insurers gain greater control over healthcare delivery. This consolidation results in fewer options for patients and rising healthcare costs.
Does Healthcare Consolidation Benefit Patients?
Healthcare consolidation often prioritizes financial metrics over patient outcomes. For example:
- In spinal deformity surgery, revision rates for complex cases hover around 20%.
- Proven techniques, biologics, and technologies can significantly reduce these rates but come at a high cost.
- Hospital administrators, focused on short-term financial targets, may restrict access to these expensive but effective treatments.
- Hospitals profit from revision surgeries, as they generate additional billable procedures—whether or not they were preventable.
A Bill to Protect Independent Physicians and Patients:
The Medicare Patient Access and Practice Stabilization Act seeks to level the playing field by:
- Halting Medicare reimbursement cuts that went into effect on January 1, 2025.
- Increasing payments by 2% to account for inflationary pressures.
Emphasized the urgency:
“Doctors in America are struggling like never before due to Medicare cuts. This puts millions of seniors at risk of losing access to affordable, quality healthcare.”
The Pressure on Private Practice Physicians:
A private practice neurosurgeon with Nashville Neurosurgery Associates, illustrates the financial burden:
- From 2019 to 2023, his practice saw a 22.3% increase in costs, while Medicare reimbursement decreased by 5.6%.
- He highlights the cost-saving potential of private practice:
- A spinal cord stimulator procedure performed in an office setting costs under $2,100.
- At an ambulatory surgery center, the cost jumps to nearly $5,500.
- In an outpatient hospital, the cost exceeds $6,800, yet the physician’s reimbursement remains only $400.
The 340B Drug Pricing Program: A Systemic Exploitation
A private-practice oncologist in Alabama warns of the manipulation of the 340B Drug Pricing Program:
- The program was designed to help low-income patient’s access medications at discounted rates.
- Large hospital systems exploit 340B, securing steep drug discounts while charging full price at affiliated clinics.
- This has fueled hospital profits, while private oncology practices struggle to survive.
Doctor sums up the challenge:
“Independent oncology practices have long been forced to compete on an unlevel playing field, as hospital systems receive higher reimbursements and 340B drug discounts.”
The Future of Medicare and Patient Care:
Medicare is failing patients. Its reimbursement policies devalue physician services, drive independent doctors into hospital employment, and limit patient access to care.
The Medicare Patient Access and Practice Stabilization Act is a necessary step toward reversing these damaging trends. By stabilizing physician reimbursement and curbing incentives for consolidation, this bill seeks to preserve independent practices—and ultimately, protect patient care.
Medicare Reimbursement Cuts: Impact on RCM Companies
Medicare reimbursement cuts significantly affect revenue cycle management (RCM) companies by reducing provider reimbursements, increasing claim denials, and adding administrative burdens. Lower reimbursement rates force healthcare providers to optimize revenue collection, making efficient RCM services more crucial. Revenue cycle management companies must implement advanced analytics, automation, and denial management strategies to minimize revenue losses.
Additionally, payment reductions often lead to tighter cash flow, prompting providers to outsource billing and coding to specialized RCM firms. However, these cuts also pressure RCM companies to deliver cost-effective solutions while ensuring compliance with evolving Medicare regulations. Adapting to these changes requires proactive revenue recovery strategies, enhanced payer negotiations, and streamlined workflows to maximize reimbursements.
Ultimately, Medicare reimbursement cuts reshape the financial landscape, pushing RCM companies to innovate and optimize revenue cycle operations. By leveraging technology and expertise, they help providers maintain financial stability despite declining reimbursements.