The Centers for Medicare and Medicaid Services (CMS) is moving forward with a 2.9% cut to physician payments in 2025 despite protest from major industry groups.
CMS announced Friday it finalized the calendar year 2025 Medicare Physician Fee Schedule rule that sets payment rates for next year and also outlines new policies focused on primary care, preserved telehealth flexibilities and a strengthened Medicare Shared Savings Program (MSSP). A CMS fact sheet on the rule outlines the key provisions.
“The Medicare physician payment final rule continues our work to strengthen primary care while also supporting preventive care and promoting better access to behavioral health care. In addition, the final rule codifies and builds on guidance to continue our ability to use rebates from drug manufacturers to strengthen Medicare,” said HHS Secretary Xavier Becerra in a statement. “This is made possible by the Biden-Harris Administration’s historic prescription drug law, the Inflation Reduction Act. This rule ensures that everyone can get health care, regardless of the color of their skin, what language they speak, or where they were born. And, it encourages more participation in the Medicare Shared Savings Program by accountable care organizations serving people in rural and underserved communities – to the benefit of millions.”
But, provider groups were quick to condemn CMS' decision to go ahead with the pay cut, which was proposed in the draft rule released in July.
Under the rule, which is 3,088 pages long, the average payment rates will be reduced by 2.93% in 2025, compared to the average amount these services were paid for most of calendar year 2024, CMS said.
That number incorporates statutory requirements that adjustments be “budget neutral,” the expiration of a 2.93% bump included in calendar year 2024 and a small budget neutrality adjustment necessary to account for changes in valuation for particular services, CMS said.
Together, this places the proposed rule’s conversion factor—or the number of dollars Medicare pays per RVU—at $32.35—2.83% lower than calendar year 2024’s $33.29.
“CMS and Congress have once again overlooked the sobering financial realities facing our nation's medical practices, finalizing a 2.83% reduction to the 2025 Medicare conversion factor, further increasing the gap between practice expenses and reimbursement rates," Anders Gilberg, the Medical Group Management Association (MGMA) senior vice president of government affairs, said in a statement. "Today's final rule throws the financial viability of physician practices into question and threatens beneficiary access to care."
He added, "Congress must immediately return from recess to pass H.R. 10073, averting the 2025 cut to the conversion factor and stabilizing physician practices until a more permanent, sustainable solution to the Medicare physician payment system can be realized.”
In a statement, Bruce Scott, M.D., president of the American Medical Association, pointed out that that while physicians are receiving a 2.8% payment cut next year, medical practice costs for physicians will increase by 3.5% in 2025. After adjusted for inflation Medicare reimbursement to physicians has decreased 29% since 2001, the AMA says.
"To put it bluntly, Medicare plans to pay us less while costs go up. You don’t have to be an economist to know that is an unsustainable trend, though one that has been going on for decades. For physician practices operating on small margins already, this means it is harder to acquire new equipment, harder to retain staff, harder to take on new Medicare patients, and harder to keep the doors open, particularly in rural and underserved areas," Scott said.
AMA urged the administration to work with Congress to enact a permanent, annual inflation-based update to Medicare physician payments.
“Now there are only a precious few legislative days left. Unless Congress acts during the lame duck, the cuts will go through. Physicians and patients are watching, wondering if Congress is up to the task of fixing this broken reimbursement system. Thankfully, there are signs that lawmakers recognize the gravity of the situation," Scott said.
Soumi Saha, senior vicew president of government affairs at Premier Inc. said providers are grappling with rising inflation, labor shortages and the demands of an aging population, challenges CMS fails to adequately address.
"This update misses the mark, failing to recognize the real cost pressures providers face—particularly labor. It’s time CMS adopted more realistic methodologies and data sources to keep up with these escalating challenges," Saha said in a statement. "If CMS continues to implement payment updates of this nature, the future of American healthcare will be jeopardized."
The American Academy of Family Physicians echoed other groups' calls for comprehensive payment reform.
"Sadly, this is the fifth year in a row congressional intervention will be needed to preserve payment. The consequence of this year’s 2.8% reduction is dire, putting practices at risk, exacerbating physician workforce shortages and preventing patients from accessing primary care," AAFP said in a statement provided to Fierce Healthcare.
“Family physicians find themselves stuck in gridlock—facing harmful cuts and temporary Congressional intervention year after year. Without an annual inflationary update from Congress, this dangerous cycle will continue and further sever access to care, increase costs and endanger our primary care physician workforce," AAFP said.
Primary Care Collaborative President and CEO Ann Greiner noted that PCC’s Better Health – NOW Campaign has called on the Administration and Congress alike to remove barriers to reform — cost-sharing, lack of behavioral health integration, outdated budget neutrality requirements and the persistent, systematic undervaluation of primary care — and stand up well-designed hybrid payment options broadly available across Medicare and other payers.
Industry groups have pressured lawmakers to help reverse the doc pay cut for months and update the Medicare Economic Index for 2025. The latest effort to accomplish this was introduced in the House last week through the Medicare Patient Access and Practice Stabilization Act. The proposed bill seeks to block planned Medicare pay cuts next year and would provide the first inflationary update to physician pay in years.
“The bill is written in the same way as the last few one-year fixes, meaning that come 2026, we will be facing a bigger cut … In other words, this bill is great for 2025, but the physician community again will be asking Congress for another fix for 2026—and we will need to dig out of a bigger hole,” said Jeffrey Davis, health policy director for McDermott+ Consulting, in a post on X.
Scott noted that a bipartisan collection of 233 members of Congress signed a Dear Colleague (PDF) that called for a legislative fix to the cut and a payment update to reflect inflationary pressures.
"The end-of-year panic over pending Medicare cuts faced by physicians year after year is getting old for patients, physicians and members of Congress. There needs to be a systematic reform that makes Medicare payment rational, predictable and sustainable," Scott said.
Telehealth
There are some provisions in the Medicare PFS that provider groups cheered, including telehealth flexibilities.
Under current law, the temporary extension of flexibilities related to payment for many telehealth services is scheduled to expire at the end of 2024.
CMS' rule finalizes numerous telehealth policies, such as permanently covering audio-only services and extending flexibilities for direct supervision and home address reporting for practitioners.
"This final rule reflects CMS’ goal to preserve some important, but limited, flexibilities in our authority, and expand the scope of and access to telehealth services where appropriate," CMS said.
CMS noted that, absent Congressional action, beginning January 1, many telehealth flexibilities Congress authorized during the COVID-19 pandemic would expire at the end of the year. These include geographic and location restrictions on where the services are provided, and limitations on the scope of practitioners who can provide Medicare telehealth services.
After that date, people with Medicare generally will need to be located in a medical facility in a rural area to receive most Medicare telehealth services, with a notable exception for behavioral health telehealth services which can continue to be provided in the patient’s home, CMS said.
Advancing primary care
In the rule, CMS finalized new coding and payment policies for advanced primary care management services that advanced primary care teams may provide, such as 24/7 access to care and care plan development. The codes for these services are stratified based on patient medical and social complexity.
"Overall, these policies incorporate lessons learned over the last decade of Innovation Center value-based primary care models, and as such, these finalized codes also represent the beginnings of a new permanent pathway towards accountable care in the PFS," CMS said.
Primary Care Collaborative's Greiner praised the new services. "The Agency has taken an important first step down a path toward permanent payment reform, and we look forward to working with CMS to refine and improve the new services," she said in a statement.
AAFP also cheered CMS' efforts to better support primary care.
"We’re grateful that CMS will allow payment for the G2211 code when billed on the same day as other services integral to comprehensive primary care, including an annual wellness visit, vaccine administration or any Medicare Part B preventive services. This is a meaningful change that helps provide resources family physicians need to serve as a focal point of longitudinal care for patients," AAFP executives said in a statement.
The organization also said the new Advanced Primary Care Management codes for 2025 represent an "important step toward achieving hybrid primary care payment within the framework of traditional Medicare."
Medicare Shared Savings Program
CMS also made changes to the Medicare Shared Savings Program (Shared Savings Program), which is Medicare’s permanent Accountable Care Organization (ACO) program. For the first time, CMS will allow eligible ACOs with a history of success in the program to receive an advance on their earned shared savings. The agency said this will encourage ACO investment in staffing, health care infrastructure, and certain additional services for people with Medicare, such as dental, vision, hearing, healthy meals, and transportation.
CMS is also adopting a health equity benchmark adjustment to further incentivize participation in the Shared Savings Program by ACOs that serve people with Medicare and Medicaid from rural and underserved communities.
The agency also finalized methodology for adjustments to account for the impact of improper payments when reopening an ACO’s shared savings and shared losses calculations, and to mitigate the impact of significant, anomalous, and highly suspect (SAHS) billing activity in CY 2024 or subsequent calendar years on annual ACO financial reconciliation.
The National Association of ACOs (NAACOS) praised the changes in the Medicare PFS rule. "We are encouraged by CMS’s commitment to advancing the Medicare Shared Savings Program, particularly through reducing the burden of beneficiary notifications, offering prepaid savings for successful ACOs, incorporating upward benchmark adjustments for ACOs serving rural and underserved populations, and establishing billing for advanced primary care," Aisha Pittman, NAACOS' senior vice president of government affairs, said in a statement.
But, Pittman noted that are still unresolved issues that threaten ACO participation in the Shared Savings Program.
"Historically successful ACOs are faced with increasingly reduced financial targets over time. Current policies fail to adequately account for prior success, leaving ACOs unable to sustain robust clinical interventions and enhanced benefits for beneficiaries," she said. "Additionally, new quality reporting requirements will necessitate costly technology investments without producing actionable quality data. These challenges discourage clinician participation in ACOs and hinder progress toward CMS’ goal of all Medicare payments in an accountable care relationship by 2030."