Provider groups warn proposed Medicare payment cuts will pinch docs, hamper access to care

Provider groups are urging the Biden administration to reconsider proposed cuts to physician payments in its annual fee schedule rule, arguing that the cuts could force service and staffing reductions as practices feel the financial pinch.

In July, the Centers for Medicare & Medicaid Services (CMS) proposed a 3.34% cut to the fee schedule's conversion factor, which is used to calculate Medicare payouts to docs. Under the proposed rule, payments overall would decrease by 1.25% compared to 2023. However, CMS set the conversion factor at $32.75, down $1.14 or 3.34% from last year.

Under the physician fee schedule, the conversion factor is the number of dollars assigned to the relative value unit, a key element in how CMS calculates payouts for physicians in Medicare. In the release, CMS said that while it is decreasing overall payments and adjusting the conversion factor, it is proposing pay hikes for primary care and other services. These increases require cuts elsewhere to achieve budget neutrality, CMS said.

"The proposed cuts are bad policy, bad timing and bad for patients. Physicians are facing a triple whammy as pay reductions are pending on several fronts. This unsustainable approach is threatening access to care," the American Medical Association (AMA) said in a press release after it submitted a 120-page public comment letter about the proposed rule.

"With higher costs for everything associated with practicing medicine, another year of Medicare payment cuts jeopardizes patient access and imperils the physician practices on which so many seniors rely,” said AMA President Jesse M. Ehrenfeld, M.D. “These cuts are unsustainable and unconscionable.”

Data compiled by the AMA showed that after adjusting for inflation in practice costs, Medicare payments to physicians declined 26% from 2001 through 2023. Additionally, physicians saw a 2% payment reduction for 2023. 

"Worse, the AMA is hearing that more physicians and group practices will be hit with a MIPS penalty in 2024 based on the newly released 2022 performance period feedback. These penalties can reduce Medicare payment by as much as 9%. The MIPS program was largely paused during the 2020 and 2021 performance periods due to the COVID-19 public health emergency, and the AMA has serious concerns that it may unfairly penalize physician practices—particularly small, independent, and rural practices—due to a lack of awareness of the expiration of the automatic COVID-19 flexibilities," AMA executives said in the press release.

While CMS is constrained by statutory budget neutrality requirements, the Medical Group Management Association (MGMA) urged the agency to work with Congress to provide a positive update to the Medicare conversion factor in 2024 and all future years.

"MGMA is deeply concerned with the estimated reduction to the CY 2024 conversion factor and its potential impact on medical group practices. The cuts stemming from the 3.36% decrease to the CY 2024 conversion factor paired with the current inflationary environment are simply unsustainable.," the organization said in its public comment letter

A MGMA survey (PDF) of 517 medical group practices assessing the impact of potential Medicare payment cuts found that the majority of practices would consider limiting the number of new Medicare patients, reducing charity care, reducing the number of clinical staff and closing satellite locations.

The organization also pushed CMS to reverse its proposal to increase the MIPS performance threshold from 75 points in 2023 to 82 points in 2024. "The agency’s own estimates suggest that over half of MIPS-eligible clinicians will be penalized. We strongly urge CMS to reduce the performance threshold and work to alleviate the overwhelming burden of MIPS during the 2024 performance period," MGMA wrote in its comments.

The American Hospital Association (AHA) also advocated that CMS work with Congress to eliminate the budget neutrality cut to the payment update.

“This negative update would pose significant risks to patients’ access to care and health systems’ financial stability, particularly for providers serving historically marginalized communities,” AHA wrote in its public comment letter. “Our concern is heightened by the fact that this cut is coming in the wake of over three years of unrelenting financial pressures on the health care system due to COVID-19, along with rising inflation, increasing input costs, and persisting staffing shortages and supply chain disruptions.”

Another industry group, AMGA, said the multispecialty medical groups it represents are not in a position to absorb the cuts, and the decrease will likely result in a reduction of services, staff or both. 

"This is no longer a theoretical problem for AMGA members,” AMGA President and CEO Jerry Penso, M.D., said in a press release about the proposed rule. “AMGA members provide vital services to their communities, and the cost of doing so has continued to increase. Medicare’s reimbursement system needs to reflect this reality. This annual cycle of cuts limits AMGA members’ ability to provide care and impedes investment in the future.  Congress needs to prevent these cuts.”   

In its public comment letter, the National Association of ACOs expressed concerns that continual cuts create a disincentive for clinicians to adopt population health models. "When physician payment is cut, clinicians face an untenable financial landscape on which to adopt value-based care, which takes investment in staff, extra services, and technology. Additionally, as future ACO benchmarks are set on declining FFS rates, benchmarks may not adequately reflect the costs of providing comprehensive coordinated care. We must ensure that clinicians in FFS receive adequate payment and build additional financial and nonfinancial incentives for clinicians to adopt accountable care," the organization wrote in its letter.

Momentum seems to be building for payment reform. In March, the Medicare Payment Advisory Commission recommended a physician payment update tied to the Medicare Economic Index (the government’s index of inflation in medical practice costs) for the first time.

In April, a bipartisan group of House members introduced a bill that seeks to tie physician payment rates to inflation as doctor groups have implored lawmakers to overhaul the federal pay process. The Strengthening Medicare for Patients and Providers Act aims to address concerns amid the industry that Medicare payments have not kept pace with financial challenges such as inflation.

Despite opposition to the payment cuts, many provider groups applauded CMS' proposal, as outlined in the rule, to continue paying for telehealth services provided nationwide and to patients in their homes.

"Telehealth has become a vital tool for AMGA member physicians. AMGA greatly appreciates CMS’ willingness to maintain payment parity between telehealth services and in-office care, as these services are equally resource intensive for physicians," the group wrote.

“Keeping telehealth and in-office payments equivalent will help ensure telehealth remains a viable option for AMGA members and their patients,” Penso said. “We appreciate CMS’ willingness to reconsider its earlier policy to revert to a pre-pandemic telehealth payment policy.”

MGMA, which also approved of CMS' telehealth proposals, noted in its comments that medical groups continue to utilize telehealth services to best serve their patients. In an August 2023 MGMA poll, 81% of medical groups reported that reimbursement for telehealth services at the facility rate, rather than the non-facility rate, would deter them from offering those services.

Many groups, including the AHA, encouraged CMS to work with Congress on permanent adoption of waiver provisions such as eliminating the originating and geographic site restrictions for all telehealth services and expanding telehealth eligibility to certain practitioners.