Policy Analysis: How the 2024 Medicare Physician Fee Schedule Will Affect You and Your Doctor

1.     Introduction

The Medicare Physician Fee Schedule (PFS) serves as the bedrock for Medicare billing, covering services offered by physicians and a variety of other medical professionals since 1992. The PFS is versatile, applying to services rendered in multiple settings from physician offices to home care. It uses relative value units (RVUs) that encompass work, practice expense, and malpractice components, which, when combined with a conversion factor and geographic adjusters, determine the payment rates for services​¹​.

The 2024 updates are particularly pivotal. They include a 1.25% decrease in overall payment rates from the previous year, with the conversion factor reducing to $32.74. However, these updates also bring significant payment increases for primary care and direct patient care, reflecting a move towards more equitable healthcare with improved access and quality​¹​. Newly finalized policies for 2024 reflect a commitment to addressing broader health-related social needs, including caregiver training services and community health integration services. This aligns with the current Administration's focus on healthcare quality, access, and affordability​¹​.

 

2.     Policy Changes in the 2024 PFS

The finalized policies in the 2024 Medicare Physician Fee Schedule (PFS) reflect a strategic shift by the Centers for Medicare & Medicaid Services (CMS) towards reinforcing primary care, addressing social needs, and updating behavioral health integration. These changes have been met with both applause and concern from key healthcare stakeholders.

The American Academy of Family Physicians (AAFP) expressed strong support for CMS's direction to enhance primary care access and quality through the full implementation of the G2211 add-on code. This code is geared to better reflect the complex, continuous care family physicians provide, which includes managing chronic conditions, medication adjustments, vaccinations, and preventive counseling. The AAFP emphasizes the clear evidence that investing in continuous, person-centered primary care results in improved patient outcomes and reduced healthcare costs. Despite the positive advancements, the AAFP also voices concern over the reduction to the Medicare conversion factor, which could lead to untenable payment cuts for family physicians, highlighting the urgent need for a reformed and modernized Medicare physician payment system​¹​.

The American Medical Association (AMA), while dissecting the voluminous PFS document, echoed concerns regarding the conversion factor reduction, which would be decreased by 3.36% for 2024. This decrease is compounded by the negative budget-neutrality adjustment due to the new evaluation-and-management (E/M) add-on code G2211. The AMA points out that these cuts come at a time when the cost of running a medical practice is projected to increase by 4.5% for 2024. The AMA President remarked on the unsustainable nature of the current system, particularly in the wake of the COVID-19 pandemic and rising inflation. The organization continues to advocate for legislative action to stabilize Medicare physician payment and ensure the ability of physicians to invest in high-value care​²​.

Moreover, the AMA is actively pushing for adjustments to budget-neutrality rules that frequently lead to payment cuts. They also highlight an error in the CMS's analysis which, if corrected, would lead to an increase in physician work MEI weight rather than a decrease, and a smaller reduction in professional liability insurance payments. CMS has delayed the implementation of the updated MEI weights, which the AMA believes should reflect the actual costs incurred by physicians more accurately​²​​³​.

The AMA also criticizes the proposed increase in the performance threshold for the Merit-based Incentive Payment System (MIPS), which would penalize a larger number of eligible clinicians. The organization deems the program unduly burdensome, particularly for small, rural, and independent practices, and argues that it exacerbates health inequities and is disconnected from meaningful clinical outcomes​²​.

Lastly, in response to advocacy efforts, CMS has proposed delaying the mandatory adoption of electronic clinical quality measures for Medicare Shared Savings Program participants. This decision acknowledges the current limitations in health IT standards for data aggregation across various practice sites, which is a relief for physicians concerned about the feasibility of electronic reporting requirements​²​.

These policy changes illustrate a complex landscape where advancements in primary care and patient services are weighed against the financial realities of running medical practices, setting the stage for continued advocacy and legislative efforts to reform Medicare's physician payment system.

 

3.     Financial Impacts

The 2024 Medicare Physician Fee Schedule (PFS) presents significant financial implications for healthcare providers due to the reduction in the conversion factor (CF). The finalized CF of $32.74 represents a 3.4% decrease from 2023, which further exacerbates a long-standing trend of declining Medicare physician payment when adjusted for inflation​¹​.

Over the past two decades, physician payments from Medicare have not kept pace with inflation. Since 2001, payments have declined by 26% when adjusted for inflation, contrasting starkly with the 47% increase in practice costs as estimated by the Medicare Economic Index (MEI). In the context of the 2024 updates, the CMS proposed a CF reduction of 3.36% despite an estimated increase in practice costs of 4.5% for the same year, as dictated by the MEI. This widening gap presents a sustainability challenge for medical practices already struggling with inflationary pressures​²​.

The American Academy of Family Physicians (AAFP) has recognized the investments in primary care, such as the full implementation of the G2211 add-on code which better reflects the complex services provided by family physicians. However, they caution that the reduced CF will lead to untenable payment cuts for family doctors, emphasizing the urgent need for a long-term reform of the Medicare payment system. The AAFP argues for modernization of the system with annual inflationary adjustments and relief from budget neutrality requirements to maintain practice viability and patient access​³​.

For anesthesiologists, the financial impact is compounded by the finalized cuts to the Anesthesia Conversion Factor, resulting in a decrease of 3.27% from the previous year. This reduction is part of a broader trend that has seen consistent reductions in Medicare reimbursement for specialties such as radiation oncology, which reports a 25% drop in Medicare physician payments from 2013 to 2024. The American Society for Radiation Oncology (ASTRO) and other specialty societies continue to lobby for legislative reform to ensure the stability and viability of specialized medical care​⁴​​⁵​.

In summary, the 2024 PFS CF reduction has broad implications across various medical specialties. While the rule aims to support primary care and expand access to certain health services, it has been met with concern by physician groups who see the reduction as further straining the financial viability of medical practices. These concerns underscore the need for legislative intervention to modernize the Medicare physician payment system to align with the economic realities of healthcare provision.

  

4.     Telehealth and Technology Integration

The 2024 Medicare Physician Fee Schedule (PFS) continues to support telehealth, reflecting a broader strategy to enhance access to care, quality, and innovation. Key telehealth provisions include:

• Community Health Integration and Social Determinants of Health Assessments: CMS is finalizing coding and payment changes to support services involving community health workers, care navigators, and peer support specialists, which align with the HHS Social Determinants of Health Action Plan and the Biden-Harris Cancer Moonshot initiative​¹​.
• Expansion of Telehealth Services: Health and well-being coaching services will be added to the Medicare Telehealth Services List on a temporary basis, and Social Determinants of Health Risk Assessments will be added permanently​¹​.
• Telehealth Flexibility Extensions: Policies from the COVID-19 Public Health Emergency (PHE) will continue until the end of 2024, including the temporary expansion of telehealth originating sites and the inclusion of additional telehealth practitioners. Importantly, services provided in individuals' homes will be paid at the non-facility PFS rate, and direct supervision will be permitted via real-time audio and video through December 31, 2024​¹​.
• Teaching Settings: Teaching physicians can use audio/video real-time communications technology to be present when residents furnish Medicare telehealth services in all residency training locations through the end of 2024​¹​.
• Preventive Vaccine Administration: CMS is maintaining additional payment for in-home COVID-19 vaccine administration and extending it to the administration of pneumococcal, influenza, and hepatitis B vaccines when provided in the home​¹​.

These policy changes underscore the commitment to integrating telehealth into patient care, ensuring continued access for rural and underserved populations, and recognizing the role of technology in managing health-related social needs.

For further details, you can review the CMS fact sheet on the 2024 Medicare Physician Fee Schedule Final Rule​²​.

 

5.     Analysis by Specialty

Starting with urology, the outlook appears cautiously optimistic. The specialty is projected to see a 1% increase in overall Medicare payments. However, this projection must be considered in light of individual practice types, patient mixes, and services provided. The AUA (American Urological Association) played a pivotal role in advocating for the valuation of new and revised CPT codes through the RUC process, ensuring appropriate payment for services like cystourethroscopy and neurostimulator services for bladder dysfunction​¹​.

Cardiology, on the other hand, is setto experience a neutral impact with overall reimbursement for cardiovascular services projected to remain flat compared to 2023. Notably, the cardiology field has seen adjustments in work relative value units (RVUs) and practice expense inputs for new and revised codes. The American College of Cardiology (ACC) successfully advocated for the finalization of work RVUs on certain procedures, such as Venography Services for Congenital Heart Defects, and Phrenic Nerve stimulation System Implantation, at rates recommended by the RUC, reflecting a responsiveness to stakeholder feedback in the rule-making process​²​.

Anesthesiology faces a more challenging scenario. The American Society of Anesthesiologists (ASA) is raising alarms over a significant cut of 3.27% in the Anesthesia Conversion Factor. This reduction is mainly attributed to the new G2211 payment code for office and outpatient “evaluation and management,” which is criticized for destabilizing the payment system by shifting funds disproportionately. Nearly 90% of the negative budget neutrality adjustment to the Conversion Factor for anesthesiologists is due to this new bonus payment. The ASA’s advocacy efforts now include calls for legislative support to block these cuts and to re-evaluate the budget neutrality clauses that continue to pressure payment systems​³​.

For each specialty, the reaction to the 2024 PFS is telling of the distinct challenges they face. Organizations representing these specialties remain active in dialogue with CMS, advocating for adjustments that acknowledge the unique aspects of their fields and pushing for policies that ensure fair compensation and sustainability in the face of  rising operational costs. 

6.     Impact on Patient Care

The 2024 updates to the Medicare Physician Fee Schedule (PFS) have significant implications for patient care. The final rule, effective from January 1, 2024, reflects an overarching strategy aimed at fostering a more equitable healthcare system that enhances access, quality, affordability, and innovation​¹​.

Notably, there is a reduction in the overall payment rates under the PFS by 1.25% in comparison to the previous year. This is complemented by a decrease in the conversion factor by 3.4%, which sets the new rate at $32.74. This reduction is substantial as it directly impacts how Medicare compensates physicians and could potentially strain resources for patient care​¹​. The American Society of Anesthesiologists has expressed concern, calling on Congress to block these payment cuts, highlighting that the financial strain could adversely affect seniors' access to surgical care​²​.

Despite the reduction in the conversion factor, CMS is also finalizing increases in payment for primary care and other direct patient care types. This move indicates an effort to prioritize primary care services, which are vital for maintaining the health of Medicare beneficiaries​¹​.

One of the more positive changes includes finalizing payment for training caregivers. This is aimed at supporting patients with specific diseases, such as dementia, in carrying out their treatment plans, which underscores the commitment to high-quality care and support for caregivers​¹​.

Moreover, CMS is implementing coding and payment changes to better reflect resources involved in furnishing patient-centered care that involves a multidisciplinary team. This includes separate payments for Community Health Integration, Social Determinants of Health Risk Assessment, and Principal Illness Navigation services. These changes acknowledge the essential roles of healthcare support staff, like community health workers and care navigators, in providing necessary care, aligning with broader health initiatives like the Biden-Harris Cancer Moonshot goal​¹​.

In summary, the 2024 Medicare PFS final rule presents a complex picture. It involves cuts that might challenge the financial viability of healthcare providers, yet it also makes advances in supporting primary care and caregiver training. The impact on patient care will likely be multifaceted, with potential benefits from enhanced support for primary care, alongside concerns about how the reduced payments may affect access to and quality of care for Medicare beneficiaries.

 

7.     Calls for Reform

 

The finalized 2024 Medicare Physician Fee Schedule (PFS) has amplified calls for systemic reform from a wide range of healthcare organizations and professionals. The American Physical Therapy Association (APTA) has acknowledged both the setbacks and victories within the new rule, recognizing that while the 3.4% reduction to the conversion factor indicates a continuation of what they see as an unsustainable path for Medicare Part B payments, there are also elements that remain positive, including potential future  changes around PTA supervision​¹​.

Despite the acknowledgement of some positive aspects, the conversion factor cuts are seen as harmful, affecting over 27 specialties, including physical therapy. While the actual reduction was less severe than expected (3.4% instead of 4.2%), it still represents a significant challenge to the financial viability of various medical practices​¹​. APTA and other associations, like the American Occupational Therapy Association and the American Speech-Language-Hearing Association, have presented Congress with a set of policy principles as a first step toward an overhaul of the payment system, suggesting that the cuts are symptomatic of an outdated system​¹​.

Moreover, physician groups have expressed strong disapproval of the finalized payment cuts, with the Medical Group Management Association (MGMA) highlighting that the reduction to the Medicare conversion factor increases the gap between practice expenses and reimbursement rates, which could dangerously impede beneficiary access to care​²​. The American Medical Association (AMA) has described the situation as a continuation of a two-decade trend making Medicare unsustainable for both patients and physicians, pointing out that the payment cuts are compounded by an increase in the Medicare Economic Index (MEI), which reflects inflation in medical practice costs​²​.

The fear is that these payment cuts could lead to service and staffing reductions, disproportionately affecting small, independent, and rural physician practices, as well as those serving historically marginalized communities​³​. Data from the AMA indicates that, after adjusting for inflation, Medicare payments to physicians have declined significantly over the past two decades, underscoring the need for a long-term solution that addresses the financial realities of medical practices​²​.

In light of these concerns, there is a push for legislative action to counteract the detrimental aspects of the PFS. There are calls for both short-term fixes and long-term reforms that could potentially align Medicare payments with the current and future costs of providing care, ensuring the sustainability of practices and the continued access to care for Medicare beneficiaries.

 

8.     Conclusion

 

The 2024 Medicare Physician Fee Schedule (PFS) has generated a spectrum of responses, particularly with its implications for patient care and healthcare provider reimbursement. Key points include the finalized reduction of the conversion factor by 3.4%, which has raised concerns across various healthcare organizations about the sustainability of practices, especially considering rising practice costs. Despite  this, there have been increases in payment for primary care and direct patient care, and the addition of the G2211 add-on code for complex care services, which the American Academy of Family Physicians (AAFP) has commended for its potential to improve patient access and outcomes.

Healthcare policy analysts have emphasized the need for a balance between budgetary constraints and the necessity to maintain quality patient care. The nuanced perspective acknowledges the positive steps towards investing in primary care while simultaneously calling for long-term reforms to address an outdated payment system. Analysts seem to converge on the viewpoint that while the PFS includes critical investments in primary care, the overall approach may still fall short in ensuring the long-term viability of healthcare practices, particularly given the current trajectory of payment cuts and rising expenses.

In conclusion, policy analysts suggest that while the 2024 PFS reflects a recognition of the essential role of primary care, the continued path of payment reductions underscores an urgent need for a re-evaluated and reformed Medicare payment system. The goal would be to ensure that it not only supports the healthcare providers financially but also continues to improve access to care for Medicare beneficiaries in a sustainable and equitable manner.

 

References

1. American Academy of Family Physicians. (n.d.). 2024 Medicare Physician Fee Schedule Final Rule Delivers Critical Investment in Primary Care. Retrieved from https://www.aafp.org
2. Centers for Medicare & Medicaid Services. (2023). Calendar Year (CY) 2024 Medicare Physician Fee Schedule Final Rule. Retrieved from https://www.cms.gov 
3. Fierce Healthcare. (n.d.). Physician groups decry finalized Medicare payment cuts for 2024 as expenses rise. Retrieved from https://www.fiercehealthcare.com