CMS Proposes Increased Reimbursement for Hospitals but a Decrease for Physicians in 2025

The Centers for Medicare & Medicaid Services (CMS) released its proposed changes to the fee schedule for 2025 on July 10. Hospital compensation will increase by 2.6% from 2024 for hospital outpatient services and 2.8% for inpatient services (1). In contrast, physician payment will DECREASE 2.8% (2). This continues the trend in CMS reimbursement. Over the past 20 years, physician pay has plummeted by 26% when adjusted for inflation while hospital reimbursement has surged by 70% (3).

The proposal drew quick criticism from the American Medical Association (AMA) and the Medical Group Management Association (MGMA) (3). "With CMS estimating a fifth consecutive year of Medicare payment reductions — this time by 2.8 percent —  it's evident that Congress must solve this problem," AMA President Bruce Scott, MD, said. "In addition to the cut, CMS predicts that the Medicare Economic Index — the measure of practice cost inflation — will increase by 3.6 percent. Facing this widening gap between what Medicare pays physicians and the cost of delivering quality care to patients, physicians are urging Congress to pass a reform package that would permanently strengthen Medicare." MGMA's Senior Vice President of Government Affairs, Anders Gilberg, said the 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. Gilberg added "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".

Over the time period of decreasing physician reimbursement, there has been a dramatic change in physician employment. Now 77% of physicians are employed, a dramatic increase from 26% only 10 years ago (5). The reason most often cited has been declining reimbursement. Although cost containment is often cited as a reason for the decline in physician payments. It should be apparent that CMS’ “cost containments” have done little to stem the rising costs of healthcare (6).  Some have associated increasing physician employment for decreasing access and quality of care (4,7).

A recent comment from George Parides asserts “what is happening now is what the government, Centers for Medicare and Medicaid Services (CMS) and all hospital systems want to happen. They want full, and I mean FULL control of all physicians …” (8). Nothing has really changed with the proposed changes in fee schedules. The trend of healthcare away from a charitable, not-for-profit 501c to a not-for-profit in name only business focused on revenue and profits continues (7). 

Richard A. Robbins MD

Editor, SWJPCC

References

1. CMS. CY 2025 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Proposed Rule (CMS 1809-P). July 10,2024. Available at: https://www.cms.gov/newsroom/fact-sheets/cy-2025-medicare-hospital-outpatient-prospective-payment-system-and-ambulatory-surgical-center (accessed 7/11/2024).
2. CMS. Calendar Year (CY) 2025 Medicare Physician Fee Schedule Proposed Rule. July 10, 2024. https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2025-medicare-physician-fee-schedule-proposed-rule (accessed 7/11/2024).
3. Cass A. CMS pitches 2.8% physician payment cut for 2025. Medscape. July 10, 2024. Available at: https://www.beckershospitalreview.com/finance/cms-pitches-2-8-physician-payment-cut-for-2025.html?origin=BHRE&utm_source=BHRE&utm_medium=email&utm_content=newsletter&oly_enc_id=6133H6750001J5K (accessed 7/11/24).
4. G Grossi. Dr David Eagle: CMS Reimbursement Cuts Encourage Trend of Independent Physician Exodus. American Journal of Managed Care. Feb 12, 2024. Available at: https://www.ajmc.com/view/dr-david-eagle-cms-reimbursement-cuts-encourage-trend-of-independent-physician-exodus (accessed 7/11/24).
5. Physicians Advocacy Institute. Updated Report: Hospital and Corporate Acquisition of Physician Practices and Physician Employment 2019-2023. April 2024. Available at: https://www.physiciansadvocacyinstitute.org/Portals/0/assets/docs/PAI-Research/PAI-Avalere%20Physician%20Employment%20Trends%20Study%202019-2023%20Final.pdf?ver=uGHF46u1GSeZgYXMKFyYvw%3d%3d (accessed 7/11/24).
6. McGough M, Winger A, Rakshit S, Amin K. How has U.S. spending on healthcare changed over time? Peterson-KFF Health System Tracker. December 15, 2023. Available at: https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/#Total%20national%20health%20expenditures,%20US%20$%20Billions,%201970-2022 (accessed 7/11/24).
7. Robbins RA. A Call for Change in Healthcare Governance. Southwest J Pulm Crit Care Sleep. 2024;28(6):91-93. [CrossRef]
8. Parides GC. Only a Snowball’s Chance in Hell: Comment on A Call for Change in Healthcare Governance. Southwest J Pulm Crit Care Sleep. 2024;28(6):94. [CrossRef]

Cite as: Robbins RA. CMS Proposes Increased Reimbursement for Hospitals but a Decrease for Physicians in 2025. Southwest J Pulm Crit Care Sleep. 2024;29(1):8-9. doi: https://doi.org/10.13175/swjpccs033-24 PDF

Court Overturns CMS' Site-Neutral Payment Policy

On Tuesday of this week (9/17/19) a federal district court judge ruled in favor of an American Hospital Association (AHA) and Association of American Medical Colleges (AAMC) complaint that the Centers for Medicare & Medicaid Services (CMS) had overstepped its bounds by implementing site-neutral payments in January. US District Judge Rosemary M. Collyer said in her decision, "The Court finds that CMS exceeded its statutory authority when it cut the payment rate for clinic services at off-campus provider-based clinics" (1).

Under its site-neutral policy, CMS had begun paying the outpatient provider-based departments of hospitals the same for visits that it paid to independent physician practices. Previously, the hospital providers had been paid significantly more for these services than to community practices and the change in CMS policy was expected to level the playing field between independent offices and hospital-employed practices. In addition, it lowered the incentive of healthcare systems to acquire more physicians and their practices, according to some health policy experts.

The difference in costs is substantial with hospitals charging 2-6 times more than an independent physician office (2). The site-neutral payments were expected to cost hospitals $760 million in 2020, according to the suit.

The Medicare Payment Advisory Commission had advised Congress that hospitals were buying physician offices and converting them to off-campus provider-based departments partly because payments were higher than independent physician offices. In the Bipartisan Budget Act of 2015, Congress allowed hospitals to bill CMS at the higher outpatient department rate if they existed prior to Nov. 2, 2015. The law permitted CMS to change the payment system for newly established hospital-based outpatient departments. However, one expert told Medscape Medical News last year that this provision of the budget act hadn't had much impact, because many hospitals just added newly recruited physicians to the PBDs that had been grandfathered in (1).

Asked to comment on the court ruling, a CMS spokesperson told Medscape Medical News, "We are aware of the decision and are determining next steps" (1).  The AHA and the AAMC were jubilant. In a joint statement, they said, "We are pleased with the District Court's decision that the Department of Health and Human Services exceeded its statutory authority when it reduced payments for hospital outpatient services provided in grandfathered, off-campus, provider-based departments. The ruling, which will allow hospitals to maintain access to important services for patients and communities, affirmed that the cuts directly undercut the clear intent of Congress to protect hospital outpatient departments because of the many real and crucial differences between them and other sites of care."

John Cullen, MD, president of the American Academy of Family Physicians, said in a statement that the AAFP is disappointed with the court ruling. "The decision preserves a system that both costs patients more in out-of-pocket expenses and limits their choice of physicians by paying hospital outpatient departments more for the same services provided by community-based physicians." he said. He added, these payment disparities across sites of service "force many community clinics to close their doors or sell their practices to hospitals. The small private practices, which provide high-quality care at a lower cost, are most at risk as a result of this decision." Robert Doherty, senior vice president, governmental affairs and public policy, for the American College of Physicians, tweeted, "This is very bad news for all the patients harmed by hospitals adding 'facility fees' for visits to doctors in practices they acquired."

Richard A. Robbins, MD

Editor, SWJPCC

References

1. Terry K. Court overturns CMS' site-neutral payment policy; doc groups upset. Medscape Medical News. September 19, 2019. Available at: https://www.medscape.com/viewarticle/918744?nlid=131645_5401&src=wnl_dne_190920_mscpedit&uac=9273DT&impID=2101100&faf=1#vp_2 (accessed 9/19/19).
2. Carey MJ. Facility fees: the farce everyone pays for. Medical Economics. August 16, 2018. Available at: https://www.medicaleconomics.com/blog/facility-fees-farce-everyone-pays (accessed 9/19/19).

Cite as: Robbins RA. Court overturns CMS' site-neutral payment policy. Southwest J Pulm Crit Care. 2019;19(3):101-2. doi: https://doi.org/10.13175/swjpcc060-19 PDF