CMS Proposes 1.25% Cut to Physicians in 2024 Physician Fee Schedule, Industry Reacts

The Centers for Medicare and Medicaid Services (CMS published its proposed physician fee schedule (PFS), which add up to a 1.25% decrease in pay for Medicare physicians for 2024. Physician groups and industry leaders met the news with frustration, with some doubling down on calls to reform the entire payment formula. CMS also posted the 2024 Outpatient Prospective Payment System (OPPS), which hospitals were also quick to condemn as inadequate.

The physician fee schedule conversion factor, or the baseline cost of physician care, will be reduced to $32.75 in 2024, down from $33.89 in 2023. Revcycle Intelligence explains that the changes include a 2.5% payment increase for CY 2023, a 1.25% statutory payment increase for 2024, and a 2.17% reduction for budget neutrality.

Budget neutrality was the leading cause of payment shuffling, as the agency tries to shuffle payment increases for primary care and other direct care providers, it lowered payments from other specialties like radiation oncology and emergency medicine.

The cuts go against the recommendations of the Medicare Payment Advisory Committee (MedPAC), which recommended that CMS raise rates by 1.45% earlier this year, MedCity News reports.

The American Medical Association (AMA) was particularly alarmed by the CMS proposal, noting the 4.5% expected increase in the Medicare Economic Index, which measures medical practice costs. Chief Healthcare Executive notes that the inflation jump is one of the highest in the past century and follows a 3.8% increase just last year.

From Jesse Ehrenfeld, AMA president:

This is almost biblical in its impact. Seven lean years that include a pandemic and rampaging inflation. Physicians need relief from this unsustainable journey.

Just last week, at the AMA’s Annual Meeting, physicians renewed calls to overhaul the Medicare payment system. According to an AMA press release, inflation concerns are the major driver for the association’s calls to offer overtaxed physicians productive economic relief. While organizations like hospitals and other providers’ rates are formulated by accounting for inflation, physician rates are not. From former AMA President Jack Resneck, Jr., MD:

We are deeply worried that many practices will be forced to stop taking new Medicare patients — at a time when access to care is already inadequate. Physicians have diagnosed the problem and are offering solutions, but obviously the body politic must respond.

Hospitals and ambulatory surgical centers (ASCs) are set to receive a 2.8% payment increase for outpatient services, but hospitals are also saying that costs incurred from inflation and the pandemic have also not yet abated, and the increase doesn’t match the losses, Healthleaders Media reports.

From American Hospital Association President Stacy Hughes:

The AHA is concerned that CMS is proposing an outpatient hospital payment update of only 2.8% in spite of persistent financial headwinds facing the hospital field. Most hospitals across the country continue to operate on negative or very thin margins that make providing care and investing in their workforce very challenging day to day.

The proposals Medicare come as the nation’s leading private health insurers are taking note at rising health costs and demands. The Wall Street Journal notes UnitedHealth Group logged a spike in its medical loss ratio, primarily from outpatient care and seniors.

Axios notes that providers were also upset by the codes for medically complex cases that will go into effect in 2024, but expressed gratitude that CMS addressed complex care in its determination.