Many leaders feel physician pay is not keeping up with the rising cost of practice, and CMS and other payer moves indicate this trend could continue.
CMS cut overall physician pay by 1.25% for 2024. The rule updates the Medicare conversion factor to $32.74, a 3.4% decrease from 2023. Additionally, some physicians could face more cuts due to the cost-performance category of the merit-based incentive payment system, which could potentially reduce Medicare payments by up to 9%.
"Unfortunately, physicians are losing money in multiple scenarios in medicine," Taif Mukhdomi, MD, interventional pain physician at Columbus, Ohio-based Pain Zero, told Becker's. "The most prominent loss of physician revenue is Medicare's consistent decreasing of physician reimbursement in office settings while supporting hospital-setting healthcare services. This trend affects all insurances, as Medicare is the benchmark of most if not all healthcare insurance reimbursement."
Physician pay cuts will likely continue next year. In July, CMS released its annual proposed changes to the physician fee schedule for 2025, which includes a proposed 93 cent (2.8%) conversion factor decrease from 2024. The proposed physician fee schedule conversion factor for 2025 is $32.36, down from $33.29 in 2024.
"This is a recipe for financial instability. Patients and physicians will wonder why such thin gruel is being served," American Medical Association President Jesse Ehrenfeld, MD, wrote in a Nov. 2 statement. "Physicians routinely have faced cuts in the last two decades. Yet, there is nothing routine about the past few years. Physicians have faced the COVID pandemic and subsequent burnout. They have seen the costs soar for running a medical practice, while Medicare payment updates have offered too little relief."
The 10 specialties with the most salary growth in 2024 saw year-over-year pay increases between 7.2% for psychiatrists and 12.4% for hematologists, but still many physicians aren't happy with their current pay, according to Doximity’s 2024 "Physician Compensation Report." Around 35% of physicians said they were not satisfied with their current compensation, and 62% said their current pay did not reflect their level of expertise and the amount of effort required in their roles.
According to May 12 data from the Bureau of Labor Statistics, the Consumer Price Index, also known as inflation, increased by 3.4% in the last year. This means the 13 specialties that saw year-over-year pay increases of 3.4% or less — such as gastroenterologists, urologists and rheumatologists, all with pay increases of 2%, according to Medscape's "Physician Compensation Report" — essentially received pay cuts compared to their salaries last year.
Overall, physician reimbursement amounts per Medicare patient decreased around 2.3% between 2005 and 2021 when accounting for inflation, according to a new study from the Harvey L. Neiman Health Policy Institute.
While some physician specialties experienced reimbursement growth, 16 experienced reimbursement declines. Of these, 13 experienced reimbursement declines despite higher volumes per beneficiary. These included psychiatrists, cardiologists, urologists, OB-GYN, internal medicine, internists, pulmonologists, radiologists, gastroenterologists and anesthesiologists.
Physicians are worried about how this decline in pay with affect patient access.
"There are multiple dangers in different time horizons," Mohammad Agha, MD, medical director of care coordination for SSM Health, told Becker's. "In the short to medium term, this will lead to a ripple effect impacting the setting of physician practices. In the short term, as cuts to physician pay continue, more physicians will opt for employment or direct-care models. Medium term, as these direct models proliferate, there is the risk that e wealthier patients will access these physicians while those who aren’t will continue to go to hospital systems. I acknowledge that not all cash pay models cater to the wealthy, but with declining reimbursement, the incentive to switch due to reimbursement reasons will increase."
Leaders also predict that this decline will exacerbate the exodus of private practice physicians to employed models.
"Continued cuts in the face of unprecedented consolidation while at the same time facing high inflation will lead to a continual collapse of private practice," Adam Bruggeman, MD, CEO and surgeon of San Antonio-based Texas Spine Care Center told Becker's. "This leads to reduced access, increased costs and lower quality. Physicians are rapidly leaving independent practice and this will only accelerate the run to the exits. Congress must stop putting the thumb on the scale of corporatized medicine."