Medicare physician payment reform: What you need to know
The Medicare physician fee schedule is always a thorny healthcare topic each year, and 2024 is no different. A 3.37% Medicare payment cut took effect January 1, 2024 followed by a federal budget deal that reduced the cut to 1.68% beginning March 9, 2024. However, experts say the annual cycle of pay cuts inherent in the Medicare physician fee schedule must stop. Why? These cuts make running a medical practice unsustainable. When adjusted for inflation in practice costs, Medicare physician payment declined 30% from 2001 to 2024. This recent article from KFF provides deeper insights into how Medicare currently pays physicians and how Medicare payments to physicians may change in the future.
What is the Medicare physician fee schedule?
The Medicare physician fee schedule assigns payment rates for office visits, diagnostic procedures, surgical procedures, and other healthcare services. These service-specific payment rates measured in relative value units (RVU) are based on a weighted sum of three components (i.e., clinician work, medical practice expenses, and professional liability insurance), each of which is adjusted to account for geographic differences. Then, that sum is multiplied by a conversion factor. This fixed dollar amount considers the overall state of the economy of the United States, the number of Medicare beneficiaries, the amount of money spent in prior years, and changes in the regulations governing covered services. The conversion factor, which is adjusted annually, also converts numerical RVUs into payment amounts in dollars.
What’s most important to know about the Medicare physician fee schedule?
Consider the following:
The net impact of changes to the Medicare physician fee schedule vary by healthcare specialty. In 2024, those in primary care and behavioral health are projected to see a net increase in payments, while those in radiology, physical and occupational therapy, and some surgical specialties are projected to see the largest net decrease.
The 2024 Medicare physician fee schedule includes many new billing codes to improve health equity and increase support for primary care services.
Physicians can earn financial incentives above and beyond the Medicare physician fee schedule by controlling costs and improving quality.
What concerns have been raised about the Medicare physician fee schedule?
Healthcare industry experts argue that the current Medicare payment system has several flaws. Namely, that it doesn’t cover medical practice costs, nor does it incentivize participation in the Medicare program. There’s also a gap in compensation between primary and specialty care clinicians. Finally, financial incentives and bonus payments associated with quality payment programs are often nominal, and these programs often require providers to take on financial risk and incur high startup costs. Experts argue that Medicare physician payment reform is paramount to address these flaws and increase Medicare payments to physicians.
What can be done to address these concerns and promote physician payment reform?
There are several initiatives underway to address concerns about the Medicare physician fee schedule. These include:
Advocacy work by the American Medical Association (AMA) to reform Medicare payments to physicians. This includes the Physician Practice Information Survey conducted through April 2024, the results of which the association will use to advocate for Medicare physician payment updates.
Bipartisan legislation to provide physicians with an annual, permanent inflationary Medicare physician payment update.
Medicare Payment Advisory Commission (MedPAC) recommendations for significant changes to the quality payment program, permanent add-on payments for services provided to low-income Medicare beneficiaries, and more.
Medicare payment reform working group that includes a bipartisan group of senators charged with investigating long-term reforms to the Medicare physician fee schedule.
What should medical practices do now to prepare for future Medicare payments?
The AMA says physicians can—and should—contact their legislators and urge them to fix the Medicare physician payment system, specifically asking them to ensure healthcare payments keep up with the pace of inflation.
In addition, the AMA says to consider the following:
Conclusion
Regardless of how Medicare physician payments continue to evolve, medical practices must focus on providing high-quality patient care and ensuring documentation and coded data reflect that care. Learn how edgeMED can help and be sure to check the Healthy Snacks blog for more expert insights, best practices and industry trends.
