CMS' proposed 2.8% physician pay decrease for CY2025 earns quick condemnation from docs

The Biden administration is proposing a 2.8% decrease to physician payments in its newly released pay proposal for physicians, drawing near-immediate protest from the industry.

Unveiled Wednesday afternoon, the calendar year 2025 Medicare Physician Fee Schedule proposed rule outlines new policies focused on primary care, preserved telehealth flexibilities and a strengthened Medicare Shared Savings Program (MSSP).

However, the release is headlined by a proposal to decrease average base payment rates by 2.93% from calendar year 2024.

That number incorporates statutory requirements that adjustments be “budget neutral,” the expiration of a 2.93% bump included in calendar year 2024 and an adjustment related to the work relative value unit (RVU) portion of certain services, the administration explained in a news release.

Together, this places the proposed rule’s conversion factor—or the number of dollars Medicare pays per RVU—at $32.36—2.8% lower than calendar year 2024’s $33.29.

In statements quickly released after the proposed rule dropped, frustrated physician and industry groups contrasted the “dangerous” baseline reimbursement cut against financial pressures weighing on practices.

“A 2.8% reduction to the conversion factor would be alarming in the best circumstances, but to propose doing so at a time when 92% of medical groups report increased operating costs and are otherwise struggling to remain financially viable is critically short-sighted,” Medical Group Management Association Senior Vice President of Government Affairs Anders Gilberg said in a statement. “Medicare physician reimbursement is on a dire trajectory and these ongoing cuts continue to undermine the ability of medical practices to keep their doors open and function effectively—the need for comprehensive reform is paramount.”

American Medical Association President Bruce Scott, M.D., struck a similar tone, highlighting the juxtaposition between five consecutive years of pay cuts and the Centers for Medicare & Medicaid Services' (CMS') own acknowledgment that the Medicare Economic Index, which measures practice cost inflation, will rise by 3.6%.

“The death by a thousand cuts continues," Scott said. "Rural physicians and those treating underserved populations see this CMS warning as another reminder of the painful challenges they face in keeping their practices open and providing care."

Both Scott and Gilberg said the release and statutory requirements underscore a need for Congress to step in, citing a bipartisan bill (the Strengthening Medicare for Patients and Providers Act) that would tie an annual inflationary pay update to the Medicare Economic Index.

Primary care payment proposal

CMS proposes new payments that account for the complexity of primary care, it writes. To promote an ongoing patient-provider relationship—which can lead to better outcomes and reduce health disparities—CMS proposes offering an additional monthly bundled payment for advanced primary care. 

CMS writes in the proposed calendar year 2025 physician fee schedule that the advanced primary care model intentionally reflects the language of chronic care management and principle care management codes, which have not been widely used, it says. 

“Significant resources are used on virtual, asynchronous patient interactions, collaboration across clinical disciplines, and real-time management of patients with acute and complex concerns, that are not fully recognized or paid for by the existing care management codes,” CMS wrote.

Under the advanced primary care model, one physician would be responsible for a Medicare beneficiary’s care and care coordination each month, and the physician would be paid prospectively in a bundle for the month’s worth of service. Some of the responsibilities under the proposed codes include having 24/7 access to the provider’s team, coordinating care within a week of a hospital discharge, home visits, expanded hours and secure messaging options. 

The payments would be stratified into three tiers based on the severity of the patient. GPCM1 would provide approximately $10 for a patient with one or more chronic conditions; GPCM2 would provide about $50 per month for a more complex patient with two or more chronic conditions; and GPCM3 would pay roughly $110 per month for a Qualified Medicare Beneficiary with two or more chronic conditions. 

The three G-codes are not tied to the amount of time the provider spends rendering the services, CMS says, based on feedback it received from providers. 

CMS says it envisions practices providing advanced primary care to a majority of its patients rather than as a one-off scenario. Practices that participate in CMS Innovation Center Models like the Comprehensive Primary Care program and the Primary Care First Model would be eligible for the proposed program.

Under the proposed rule, CMS would allow for additional billing of remote patient monitoring codes on top of the APCM. It also puts forth a request for information from stakeholders on the APCM. One question asks whether communications-based technologies like RPM and RTM should be included in the bundled payment. 


CMS proposed continuing some Medicare telehealth flexibilities beyond the current statutory deadline (Dec. 31, 2024) for the majority of pandemic-era Medicare telehealth flexibilities.

Congress remains in the throes of negotiating a two-year telehealth extension, but it remains far from a House vote and has made no progress in the Senate. Without congressional authority to expand Medicare telehealth services beyond the end of calendar year 2024, CMS expanded telehealth where it has the authority to do so. 

CMS proposed permanently changing the definition of telecommunications in statute to allow for audio-only telehealth visits to be permanently paid for. CMS says in its proposed rule that it recognizes some patients lack access to broadband. 

CMS also proposed continuing to allow telehealth providers to use the current practice address on file for Medicare billing and enrollment purposes. It is punting the issue of requiring the provider to list their home address on publicly available Medicare documentation. 

The proposed rule would also make permanent virtual direct supervision for a subset of services for established patients. This allows a supervising clinician to meet their oversight requirements through telehealth. CMS is proposing to extend virtual direct supervision for other services through calendar year 2025. 

The agency also proposed extending the ability of teaching physicians who oversee residents to use a three-way telehealth visit to meet the billing definition of critical parts of the visit.

Under its behavioral health section, CMS said it wants to extend incident-to billing capabilities for digital mental health treatment devices, which could include payment for digital therapeutics, which have so far lacked Medicare coverage. 

CMS also proposed adding more codes to the Medicare telehealth list on a provisional basis and to continue suspending frequency limitations for follow-up visits in certain care settings like nursing facilities, inpatient visits and critical care consultations.

Medicare Shared Savings Program

CMS said it wants to create a “prepaid shared savings” option to incentivize ACOs to invest in beneficiaries through quarterly payments.

These quarterly payments can go toward staffing or healthcare infrastructure, but at least 50% of savings must go to direct services for beneficiaries like meals, transportation or other supplemental benefits.

“Part of our intent with this proposal is to improve beneficiary engagement while allowing ACOs the flexibility to better address patient needs,” a CMS fact sheet said. Applications for prepaid shared savings are due at the beginning of 2026.

The changes are designed to grow participation in rural areas and reduce inequities.

Financial methodology could also change to remove barriers for ACOs in underserved communities. The Health Equity Benchmark Calculation (HEBA) was crafted to encourage active participation in the program. Under this calculation, ACOs’ benchmark would be adjusted based on the proportion of beneficiaries in Part D low-income subsidy or dual eligible plans. A variation of HEBA is also present in the ACO REACH Model, the agency explained.

Complemented by a recent rule to hold ACOs harmless by bad actors through fraudulent billing in the urinary catheter space, CMS unveiled a new improper payments calculation for performance year and benchmark expenditures, as well as removing payments for HCPCS and CPT codes with suspicious activity.

“In general, we anticipate that billing activity that meets the high bar to be considered an SAHS [significant, anomalous, and highly suspect] billing activity will be a rare occurrence,” the fact sheet continues.

While the National Association of ACOs (NAACOS) said it approved the plan to regard MSSP and suspect billing activity changes, the organization remains worried ACOs will leave the MSSP.

“In the next two years, a majority of ACOs will enter new agreements and have their benchmarks ratcheted down, ultimately being penalized for past strong performance,” said NAACOS President and CEO Clif Gaus in a statement. “Additionally, the change in quality reporting options and requiring reporting on beneficiaries outside of the ACO, will cause ACOs and their providers to make significant investments in technology that will not result in useful quality data. These looming crises deter clinicians from participating in ACOs and hamper progress towards CMS’ goal of all payments in an accountable care relationship by 2030.”

The MSSP has 480 accountable care organizations. ACOs now deliver care to 50% of people with traditional Medicare, with the goal of reaching 100% of people by 2030, CMS said.

Additionally, CMS hopes to better align quality measure reporting with the Universal Foundation of quality measures and prop up more digital quality measure reporting.

Premier, Inc. expressed concerns that increasing the number of quality measures for ACOs results in a “larger broken system.”

“This approach could ultimately undermine the Administration’s goals for expanding ACO participation, as it may force ACOs to reconsider their provider networks or potentially push them out of the program entirely,” said Soumi Saha, senior vice president of government affairs for Premier.

Inflation Reduction Act

Under the proposed rule, CMS also codifies changes (PDF) to the Medicare Prescription Drug Inflation Rebate Program for Part B and D drugs. Each quarter CMS announces a selection of drugs will be discounted because drug companies raised prices faster than the rate of inflation.

These changes address and clarify how rebates are calculated. For example, the proposed rule defines how to remove 340B units from total rebate Part D calculations and defines how to process rebate reconciliation 

CMS will charge drug companies for rebates owed to Medicare for Part B drugs from 2023 until Sept. 30, 2025, and Part D drugs from October 2022 through the end of 2025. These rebates will go toward the Federal Supplementary Medical Insurance Trust Fund.

Other notable proposals

CMS requests feedback from stakeholders on a proposal to engage specialists in value-based care through the Merit-based Incentive Payment System’s Value Pathways (MVPs). The proposed model would adjust specialist payment based on MVP measures and performance against other specialists. 

CMS is also proposing new codes and payments for caregiver training services and supports that could be provided via telehealth.

CMS is issuing a request for information on its Community Health Integration services, Principal Illness Navigation services and Social Determinants of Health Risk Assessment.

Opioid treatment programs scored proposals to permanently allow telehealth and audio-only visits for follow-up visits with patients in their programs. Moreover, CMS proposes to align payment for OTPs with the Substance Abuse and Mental Health Services Administration’s February 2024 rule that allows for audio-only initiation of buprenorphine treatment and audio-visual initiation for methadone.

This is a breaking story and will be updated with more information about the proposed rule's other policy changes.