On Thursday, the Centers for Medicare and Medicaid Services (CMS) released proposed changes to its physician fee schedule for 2024, as well as the proposed rule for next year’s Outpatient Prospective Payment System (OPPS). The federal agency is planning to raise reimbursement rates for hospital outpatient departments and cut payments for physicians.

The agency will be taking comments on both of the proposed rules until September 11. So far, provider groups are unhappy with the two plans, arguing that both physicians and provider organizations need more monetary relief.

CMS’ physician fee schedule conversion factor for 2024 is $32.75, which is down from $33.89 in 2023. This marks a decrease of $1.14 — or 3.34%. The agency calculates a new conversation factor each year when it creates a new physician fee schedule. The factor is used to determine payment rates based on the cost and difficulty of a medical service or procedure. 

Overall, CMS plans to decrease physicians’ pay by 1.25% next year. This goes against the recommendations given earlier this year by MedPAC, an industry group that advises Congress on Medicare policy — the group called on CMS to raise payment rates by 1.45%.

But the agency said that the cuts to physician pay are a result of its efforts to maintain budget neutrality as it increases reimbursement rates for other services, such as primary care. Not surprisingly, provider groups’ reactions were mainly negative.

When adjusted for inflation, Medicare physician payment has already dropped by 26% from 2001 to 2023, said Dr. Jesse Ehrenfeld, president of the American Medical Association, in a statement. He added that physicians are “one of the only providers” who don’t receive an automatic inflationary payment increase.

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

As a part of the changes to its physician fee schedule for next year, CMS is also proposing to establish a separate add-on payment for healthcare common procedure coding system code G2211. This new code will better account for the resource costs associated with visits having to do with the primary and longitudinal care of complex patients, the agency said.

But providers don’t seem to agree with this approach. Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association, said that the new add-on code will do a poor job of ensuring fair compensation for physicians.

“Implementation of a new add-on code (G2211) for complex patients highlights CMS’ flawed approach to addressing inadequate Medicare payments for primary care services using a budget neutral methodology. Congress must reexamine existing law to provide an annual physician payment update commensurate with inflation and do away with Medicare’s ‘robbing Peter to pay Paul’ budget neutrality requirements to provide much-needed financial stability for medical practices,” he argued in a statement.

As for its proposed changes to OPPS, CMS plans to boost outpatient payment rates by 2.8% in 2024. This planned increase includes a 3% market payment update, offset by a 0.2% cut for productivity. 

Under the proposed plan, CMS would pay acute care hospitals $88.6 billion for outpatient services next year — which is 2.8% more than this year. Medicare payments for hospital outpatient departments would grow by $6 billion next year, and Medicare payments for ambulatory surgery centers would increase by $170 million.

Provider organizations aren’t too thrilled about this plan either. For example, the American Hospital Association issued a statement declaring that an outpatient hospital payment update of only 2.8% won’t be sufficient. 

“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. Without a more robust payment update in the final rule, hospitals’ and health systems’ ability to continue caring for patients and providing essential services for their communities may be jeopardized,” said AHA Executive Vice President Stacey Hughes.

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