Cuts, Band-Aids, and Fixes

In the News—

You may have heard about cuts to the Medicare Physician Fee Schedule 🙃 

A few days ago, the 2025/119th Congress’ version of the Medicare Patient Access and Practice Stabilization Act of 2024, originally introduced December of 2024 in the previous Congress, was re-introduced in the House.

Introduction means just that—introduction. The 118th Congress’ version was referred to the House Ways and Means and House Energy and Commerce Committees, but hasn’t been marked up. In other words, the bill sat there.

The 119th Congress version calls for a 6.6% increase to the conversion factor from April through December. This assumes it’s passed as part of legislation that also addresses the end of the health care extenders passed in the December 2024 Continuing Resolution.

The 6.6% is intended to both fix the cut to the conversion factor for 2025 and address the higher costs associated with medical inflation, as well as make up for no “fix” from January through March.

Will the bill become law?

When you think about the likelihood of this bill’s proposals even moving out of Committees of legislative jurisdiction, consider that the Trump Administration and Congress are trying to cut spending by trillions with a T to find money for their top priority, the “Trump Tax Cuts,” which are set to expire at the end of 2025.

Significantly increasing reimbursement for those who bill the PFS isn’t going to help them achieve this goal.

Something to keep in perspective about the “fixes” to the conversion factor—

They increase reimbursement per code multiplied by the conversion factor. That means those already earning more will benefit more financially.

A 3% improvement for a physical therapist making $100,000 a year is significantly less than that of an orthopedic surgeon’s 3% on, let’s say about $500,000.

And that’s one of the challenges of “fixing” the physician fee schedule this way. Is this really the best approach?

The sticking point in Medicare payments to those who bill the Physician Fee Schedule

Under current law, any changes to the physician fee schedule have to be budget-neutral, meaning they can't increase total Medicare spending by more than $20 million a year.

This rule was set by the Omnibus Budget Reconciliation Act of 1989, and it intended to prevent higher service volumes and per-unit costs from driving up Medicare spending over time. If projected costs go over the limit, CMS has to adjust the fee schedule, usually by lowering the conversion factor compared to the update required by MACRA.

CMS has literally no choice but to lower the conversion factor to keep the Physician Fee Schedule budget neutral. They have to. It’s in federal statute that physician fee schedule payments must be budget neutral.

There are a bunch of reasons for spending increases beyond what’s budgeted for.

Here are a few:

High utilization of high-cost specialty care

Relative Value Units for specialty care providers’ codes, especially codes for interventional services, are costly to tax payers who fund the cost of care and their own copay and co-insurance.

And as a nation, we use a lot of specialty care, and it’s not always to our benefit.

There’s no real watchdog in fee-for-service care. The money to pay for that care comes from you and me. The payer is billed by the provider for whatever the provider does or whatever tests they order or whatever interventions or medications they perform or prescribe.

Providers and clinicians who bill fee-for-service can essentially bill for whatever they want. They can prescribe tests, do procedures, order imaging, etc. for any reason they can justify. More new available tests, procedures, requests by patients equals more billing and more spending.

As a reminder, we don’t just automatically get better care or better outcomes because of this.

The right care, right tests, at the right time, by the right provider isn’t incentivized in a volume-based system.

MORE is incentivized.

Medical Cost Trend

Inflation of goods and higher utilization have led to high medical cost trend, which is reaching new heights.

I wrote about it in my last two posts, which you can check out here:

The Rates for Services are (Essentially) Set by a Group Made up of Physicians Themselves

The AMA/Specialty Society Relative Value Scale (RVS) Update Committee (RUC) is a multi-specialty group of physicians who make recommendations to CMS about the cost of services. CMS updates the weights of new and old Relative Value Units based on the recommendations of the RUC.

Here’s a super-simplistic, overly simplified equation to be familiar with:

Relative Value Units for a service times Conversion Factor equals reimbursement.

Here’s a fancier and more detailed graphic:

Remember—

The Conversion Factor is the same for everyone.

The RVU weights and utilization vary. And they vary widely.

Here are Some Other Things to Know about the RUC:

The RUC is Made up of All Physicians (Except One)

I love when I do research for this newsletter and learn something new! This was a good one.

Here’s a link to the present list of members.

30 Doctors of Medicine

1 Doctor of Osteopathy

1 Physical Therapist, who represents all non-physicians who bill the physician fee schedule. 😕 

So 31 out of 32 members who decide the weight of RVUs are physicians.

There are about 535,256 primary care physicians and 566,404 specialty care physicians in the United States in 2024.

Some of the other professionals who bill the Physician Fee Schedule are:

Psychologists: 106,500

Nurse Practitioners: 284,626

Physician Assistants: 128,090

Physical Therapists: 240, 820

Occupational Therapists: 144,840

Speech and Language Pathologists: 172,100

Do you think 1/32 of the voices is enough to represent the interests and contribution of these and all others providing high-value care to Medicare beneficiaries? 🫤 

Me neither.

And did you know—

Physicians may opt out of Medicare and Medicaid. They may choose not to accept assignment and still be allowed to treat those beneficiaries if they are willing to pay them private payment rates.

The other providers?

As a doctor of physical therapy, if I didn’t want to accept insurance as reimbursement for my professional services normally covered by a third party payer, that’s my choice. However, I then could NOT treat through private payment rates any Medicare or Medicaid beneficiary for any service reimbursable under the Physician Fee Schedule.

If I was a doctor of medicine or osteopathy, no problem!

Again, physicians are providing 31/32 of the recommendations about reimbursement that they may choose to opt out of.

Should we continue to decide the monetary value of services based on the RUC?

The recommendations of the RUC are based on fee-for-service reimbursement. This incentivizes MORE care, not the BEST care, no outreach to patients proactively, not communication between providers.

Services with low reimbursement per unit are also those that contribute to high spend avoidance. This isn’t avoidance like “deny care” or “restrict access.” Services that avoid high spend and are standard of care for treatment or prevention contribute to spend avoidance because they eliminate and/or prevent the need.

Healthcare provider services are either preventive and primary care or urgent/emergent, interventional, and usually downstream. The former creates value and help mitigate risks of poor patient outcomes and downstream spend. Investing higher dollars in the former reduces spending in the latter.

In this estimate, every one dollar increase in primary care spending reduces total healthcare spending by thirteen dollars.

Addressing depression via behavioral health integration helps avoid progression to severe major depressive disorder and all its downstream negative consequences.

Addressing low back pain by a physical therapist who, after screening for red flags indicating a medical condition requiring physician care (like red flags for spinal infection, cancer, fractures, etc), treats the patient with mechanical and manual treatment, therapeutic exercise, and self-treatment techniques. This often avoids unnecessary oral medications, imaging, injections, specialty care visits, and surgery.

Addressing type II diabetes management with tools like the Diabetes Self-Management Program, chronic care management services, dietician services to support better self-management through diet and avoid expensive and often endless oral and injectable medications, can help reduce the likelihood of consequences of poorly controlled diabetes like hypertension, peripheral vascular disease, retinopathy, emergency room and hospital care, etc.

Addressing goals near the end of life by a speech and language pathologist, who discusses the risks and benefits of comfort feeding for someone with dysphasia or the potential outcomes of choosing or choosing not to opt for a feeding tube.

We have decided that there is a lower value to the patient and the taxpayer for services that are preventive and primary care based.

Is that what we all still want?

Spending more upstream to save costs and patients’ quality and quantity of life downstream is more a more reasonable solution, don’t you think?

There’s Obviously Opposition

As you can imagine, this is unpopular with a large portion of specialty medical providers. Remember, as the law dictates now, the PFS updates must take from Peter to pay Paul to remain budget neutral. But since Peter often earns double or more than Paul, should we rethink what we’ve always done?

I covered some examples in this post last year. 

I explained there that by adding and re-weighting codes, CMS can make some shifts to the physician fee schedule for fee-for-service reimbursement. G2211 is an example. This code was added to the Physician Fee Schedule to cover visits that are more complex for longitudinal patient care physicians and advanced practice providers, mostly in primary care.

By adding this code and approximating the impact on direct spend (not how it could save money downstream by reducing specialty care, etc), they had to reduce the weight of other codes to maintain budget neutrality.

Below is a great visual from a January 2025 MedPAC slide deck demonstrating the offset needed to implement G2211. As a reminder, MedPAC is a non-partisan organization that advises Congress on Medicare issues.

I recommend skimming through the short deck, linked above and below.

In the deck, MedPAC outlines their draft recommendations for a payment “fix” and what it would cost above what’s currently allowed in statute.

From my article last year, here are examples of where cuts were made for 2024 to pay for that to be implemented:

So PT and OT professionals took a hit for primary care provider codes added.

My fellow therapists—please be alarmed! If my job was advocating for therapy professionals, I’d be advocating for a higher weight for therapy codes as one near-term goal.

If you are interested in reading more about this, I wrote more about it recently here:

Additional References:

What to Know About How Medicare Pays Physicians | KFF

Timeline | Fix Medicare Now

MedPAC Payment Basics | Medicare Physician Fee Schedule

United States Code | Chapter 7

RVS Update Committee