Doctors and hospitals slam 2025 Medicare payment rates

The Biden administration has finalized 2025 Medicare reimbursement rates for physician and hospital practices that providers agree are not large enough given rising costs.

Physician Medicare rates will fall by 2.9% next year. The reduction is in line with regulators' initial proposal this summer and would mean $1.8 billion less in funding going to doctors in 2025.

Meanwhile, CMS finalized a 2.9% rate update for hospital outpatient departments and ambulatory surgery centers, up from the 2.6% proposed by regulators this summer. CMS says hospitals could earn an additional $2.2 billion next year from the new fees.

This comes on top of a 2.9% rate hike for inpatient care that regulators finalized in August to drive $2.9 billion in additional funding.

Despite the increase in payments, hospitals blamed insufficient up-to-date information. The American Hospital Association lobbied heavily, arguing that the fees would make it difficult for hospitals to invest in patient care, cybersecurity, and employees.

“Medicare's gross underpayments to hospitals have been ongoing for nearly 20 years, and today's final outpatient rule addresses this chronic It will only make the problem worse.”

Complaints from health care providers about insufficient updates to Medicare rates are not new and should be taken with a grain of salt. While U.S. health care providers are certainly struggling with rising inflation and labor shortages, earnings reports from major hospital operators show that most chains have experienced a rebound in patient volume, high investment returns, and It has been shown that high profit margins are recorded thanks to the contribution from the facility.

And for-profit facilities are expected to see a higher rate of increase in Medicare payments next year than other types of operators, at 4.9%, according to the 2025 outpatient payment rules finalized Friday.

By comparison, nonprofit and government-owned hospitals would see an estimated 3.1% and 2.6% increase in payments, respectively.

TD Cowen analyst Ryan Langston said in a note Sunday that the rate hike will help for-profit hospitals' profits slightly next year.

However, physicians, especially those in self-practice, tend to be in a more difficult position and have the ability to easily centralize administrative functions, diversify revenue, and take similar steps to reduce costs. face the same inflationary pressures as large organizations without.

Experts say physician practices tend to have low profit margins overall, and rising costs are making it more difficult to stay open.

Meanwhile, Medicare reimbursement for physician services fell 29% from 2001 to 2024, after adjusting for inflation, according to the American Medical Association.

“Frankly, Medicare plans to pay us less while costs go up. You don't need to be an economist to know this is an unsustainable trend.” AMA President Bruce Scott said in a statement.

However, given the legal requirement that annual physician fee schedule rate updates be budget neutral, regulators' hands are somewhat tied.

Congress typically intervenes to block the worst cuts before they take effect. A bipartisan bill has already been introduced in the House that would halt payment cuts next year and increase Medicare reimbursement for doctors.

But lawmakers have until the end of the year to take action. This tight deadline causes “year-end panic,” Scott said.

Physician groups, including the AMA, are lobbying for Medicare physician payments to be permanently updated annually based on inflation, instead of the current system.

Other changes to the outpatient expected payment system

CMS on Friday finalized its first maternal health and safety standards for hospitals, including staffing requirements for maternity wards, more rigorous quality assessments, staff training requirements and more.

The regulator also set requirements for emergency services preparedness, aimed at helping hospitals be better prepared to treat patients in emergencies, including pregnant women. Improper emergency medical care for pregnant women has become a hot topic of public attention since the Supreme Court overturned the constitutional right to abortion two years ago, restricting access to life-saving medical care in some conservative states. It has become.

Hospitals praised the focus on maternal health but expressed concerns that the new standards were coupled with overly punitive enforcement measures.

Facilities that do not meet obstetric standards will be excluded from Medicare and lose access to approximately 68 million program beneficiaries.

“We appreciate that the final rule gives hospitals additional implementation time and greater flexibility in how they meet certain requirements, but we appreciate that CMS will participate in advancing the policy agenda.” We remain concerned that we are overusing the terms,” said AHA’s Thompson.

But regulators said the changes were necessary to improve the U.S.'s poor maternal and child health outcomes, which are among the worst in the developed world.

The final rule also strengthens the requirements for continued coverage for children in safety-net insurance programs from the Consolidated Appropriations Act passed two years ago.

States are now required to keep children covered by Medicaid and the Children's Health Insurance Program for 12 consecutive months, regardless of the family's ability to pay premiums. Previously, continuing coverage was optional for states.

CMS issued guidance last fall for states to implement continuous coverage requirements, which went into effect earlier this year. As of May, 46 states had implemented 12-month extensions, but some states have delayed or are seeking more limited expansions, according to health policy research firm KFF. Florida also sued CMS to block enforcement of this requirement in a case currently on appeal.

Regulators also finalized increased payments for non-opioid treatments for pain relief and high-cost drugs dispensed by the Indian Health Service and outpatient departments of tribal hospitals.

This rule should make it easier for recently incarcerated individuals to access Medicare services.

Other changes to physician fee schedules

In the physician payment rules, CMS tweaked the Medicare Shared Savings Program, the largest value-based arrangement in traditional Medicare, to encourage provider participation.

Growth in this model has slowed in recent years as provider buy-in has been volatile and many have been reluctant to take on financial risks.

Regulators say accountable care organizations that have been saving money can now take that money upfront from the government and invest it in staffing and additional services. CMS is also raising benchmarks for ACOs serving more patients from rural and underserved communities as an incentive for providers to enter and remain in MSSPs.

CMS also established billing for advanced primary care management services, such as 24-hour access to care and care plan development.

Physician groups praised the move as a way to weave value-based care models into traditional Medicare. The Primary Care Collaborative, a trade group representing the primary care industry, called it “an important first step toward permanent payment reform.”

CMS also finalized several expansions to telehealth access, including permanently covering audio-only services.

F is confirmed by another rule.Today, CMS increased fees for home health care providers by 0.5% next year. This is significantly higher than the 1.7% rate cut proposed by regulators in June.

CMS also increased payments by 2.7% to health care providers who treat Medicare beneficiaries with end-stage renal disease.