Implications on the 2025 Medicare Physician Fee Schedule Final Ruling

On November 1st, The Centers for Medicare & Medicaid Services (CMS) released the final 2025 Medicare Physician Fee Schedule (PFS) ruling.

Although most healthcare organizations’ governmental affairs lobbying groups issued commentary and requests of CMS through September 9^th, 2024 to not make any material negative changes for the 2025 PFS, it seems as though this year’s final ruling will continue to have material negative payment implications for providers and the related hospital and health systems, similar to 2024.

As stated by Anders Gilberg, Senior VP of Government Affairs for the Medical Group Management Association, which represents over 15,000 group practices, “This final rule throws the financial viability of physician practices into question and threatens beneficiary access to care…On a positive note, we are pleased CMS heeded our call to finalize numerous telehealth policies, such as permanently covering audio-only services and extending flexibilities for direct supervision and home address reporting for practitioners. Congress must immediately return from recess to pass HR 10073, averting the 2025 cut to the conversion factor and stabilizing physician practices until a more permanent, sustainable solution to the Medicare physician payment system can be realized.”

Below is a summary of highlights related to the final ruling:

• Sets the 2025 Medicare payment rates for physician services. For 2025, CMS has finalized a conversion factor of $32.3562 and $20.334 for Anesthesia (a decrease of 2.83% and 2.1%, respectively, over final 2024 rates of $33.89 and $21.12. As an additional reference, the 2022 Conversion Factors were $34.61 and $21.39, a 3-year decrease of 6.5% and 4.94%, respectively.
• Implements E/M add-on code (HCPCS) G2211 when the base CPT codes 99202-99205,99211-99215 are reported by the same practitioner on the same day as an annual wellness visit, vaccine administration or any Medicare Part B preventative service, furnished in the office or outpatient setting. It also defines the “substantive portion” of a split (or shared) E/M visit to mean more than half of the total time spent by the physician or nonphysician practitioner or a substantive part of the medical decision making.
• Absent Congressional action, beginning January 1, 2025, the statutory limitations that were in place for Medicare telehealth services prior to the COVID-19 PHE will take effect again for most telehealth services. These include geographic and location restrictions on where the services are provided, and limitations on the scope of practitioners who can provide Medicare telehealth services.
• Beginning January 1, 2025, CMS will permanently reimburse for audio-only services, and interactive telecommunications systems may include two-way, real-time, and audio-only communication technology for any Medicare telehealth service furnished to a beneficiary in their home, if the distant site physician or practitioner is technically capable of using an interactive telecommunications system, but the patient is not capable of, or does not consent to, the use of video technology.
• Permanently adopts new virtual direct supervision rules for incident to services for level 1 established patient visits (99211) and for office or other outpatient visits for the evaluation and management of an established patient who may not require the presence of a physician or other qualified health care professional.
• Adds additional CPT codes and HCPCS codes for Advanced Primary Care Management Services (APCM) models to take effect in 2025.
• Adds Medicare payments for digital mental health treatment devices, as well as finalizes three additional HCPCS codes to describe these services.

Providers and healthcare organizations will be well served to review these changes in detail and identify which, if not all, will significantly impact their practices and clinics. Your practice or group cannot count on Congress to fully roll back the scheduled fee changes for 2025. Remember that inflation and employee cost increases have already cut into practices’ margins. Regardless of Congress’ actions or inactions, now is a good time to review your operations. A thorough review can help you prepare for the impacts of the 2025 final rule, plan for CY 2025 from a financial budgeting perspective, and set your organization up for success in the coming year.

Here are actions you can take as part of your review:

1. Develop a written practice budget for 2025 and conduct a thorough review of all expenses.
2. Assess each position to determine if the position is needed to achieve practice goals.
3. Review all maintenance and service contracts.
4. Review all business, life, and disability insurance policies (this should be performed annually).
5. Take advantage of practice slow periods (down time) to call back inactive patients for physicals, screenings, etc.
6. Review the billing and collections area for potential revenue that may be missing. Review all denial reports.
7. Evaluate cash generators. These include factors such as physician productivity, volume, billing, and collections. Ensure you are collecting all money that is due to your practice.
8. Assess your mid-level providers’ schedules and their productivity. Calculate a return on investment to the practice to ensure you are maximizing both their and the physician providers’ schedules appropriately.
9. Review patient workflows from time of appointment scheduling through payment of the E/M or procedural service performed by the practice providers.
10. Develop an action plan. This should be a detailed strategy for success complete with dates, assignment of responsibilities and expected results. This plan will be the road map for your group for 2025. Review the plan bi-weekly.

As in 2024, we expect the possibility to see some conversion values of certain CPT codes’ WRVUs increase over the 2025 base conversion rates. Therefore, it will not surprise us to see the gap continue to widen – between the decrease in reimbursement under CMS 2025 guidelines and the increase in median WRVUs expected to be produced by providers for both primary care and specialty services.

For practices and health systems that have a compensation model built around productivity and reimbursing providers on their WRVUs being produced, we suggest the following steps to prepare for 2025:

1. Evaluate your current compensation methodology at the provider, specialty, and group level for your employed providers, for any Physician Service Agreements (PSA) in play or other arrangements that are built around a compensation per WRVU factor.
2. If your organization is still using the 2020 Medicare Professional Fee Schedule for the purpose of compensating your providers, consider developing a transitional plan.
3. Consider various economic adjustments to ensure financial success for the medical groups and providers directly relating to their compensation.

While the 2025 final rule presents negative payment implications for providers, taking initiative-based steps to review operations and prepare for the changes can help put practices and health systems on a path to success.

This article and the information included in it are for educational purposes only. If you have any specific questions or concerns regarding the final rule implications on your group or system’s reimbursement or compensation models, please reach out to Ronnen Isakov at risakov@medicmgmt.com.

Click here for more details on the 2025 Medicare Physician Fee Schedule final rule. 

Ronnen Isakov is Managing Director Advisory Service of Management Group, LLC. His background includes extensive work in areas including business advisory, valuation, network optimization, transaction support, and project management.