Medical groups and physician practices say cumulative cuts to Medicare Part B reimbursements are affecting the care they provide to patients.
At a recent American Medical Group Association (AMGA) board meeting, several large, successful members shared something concerning to the group – they were running out of money. “These are seasoned leaders,” said Chet Speed, chief policy officer. “They’re not alarmists. They don’t panic. They’re reasonable. They take measured moves as far as their operation’s concerned. But this is what they say is happening.”
It’s happening in large part because over the past four years, medical groups and health systems have experienced almost 8% in cumulative cuts to Medicare Part B reimbursements, which is not factoring in the 2.8% cut that implemented in early 2025. That’s essentially a half-decade of cuts totaling 11% over those years.
“How many industries can take on 11% cuts over five years?” asked Speed. “This constant drip, drip of cuts is becoming problematic for our members.”
According to data from the recent AMGA 2024 Medical Group Operations and Finance Survey, medical groups continue to face challenges related to providing quality, cost-effective care in a constantly evolving healthcare environment. Medical groups are strained from internal and external pressures, such as rising labor costs, increasing demand/access issues, and regulatory changes, including those from the Centers for Medicare & Medicaid Services (CMS). With a stifled reimbursement environment and continued financial pressures, medical groups are forced to double down on operations and expense management, the AMGA said.
In the survey, respondents were asked what they did in 2024 because of the cuts, and what they might do in 2025 if the cuts were not eliminated. “We were actually surprised by the severity of the impact that these cuts are having on the group practices that we represent,” Speed said. “These aren’t just superficial cuts. These are getting into the meat of the operations of patient delivery and employment.”
Speed identified two areas where the cuts were forcing members to make particularly difficult decisions. The first is related to patient-level services. Approximately 42% of AMGA members surveyed revealed they had eliminated some type of patient-facing service in 2024; two-thirds indicated they might be forced to eliminate patient-facing services in 2025. A total of 15% of AMGA members stopped accepting new Medicare beneficiaries, and a quarter said they’ll do that in 2025 if nothing changes.
The second category affected is employment. Approximately 55% of AMGA members surveyed said they implemented hiring freezes in 2024, and 67% said they’d have to do it in 2025 if the cuts continued. What’s more, 25% of respondents furloughed administrative staff last year, and 40% said they’d do it this year.
“If you’re a member of Congress, you’re concerned about two things; one, your Medicare beneficiaries having access to care, and secondly, that there is robust employment in the health sector within your state or district,” Speed said. “It’s pretty clear these cuts are having the opposite impact, that you do have beneficiary access issues becoming a consistent problem and hiring and firing becoming an issue as well.”
‘A compounding effect’
For a brief moment in December 2024 there seemed to be a resolution at hand. Speed said members of Congress had agreed to eliminate almost the entire 2.8% cut set to go into effect January 1, extend telehealth services for two years, and offer an ACO-like bonus for an additional year. “Those were all agreed to,” he said. “Those were all in legislation. They were all in a budget bill that was going to be passed.”
But the legislation fell apart in the span of 24 hours due to some fierce debate about the overall proposed budget between legislators and political commentators (including Billionaire Elon Musk).
And in late March 2025, AMGA expressed “deep disappointment” in Congress’ failure to address the 2.8% cut to the Medicare conversion factor, saying that legislators were missing “a key opportunity to protect patient access and the healthcare workforce during [the] Continuing Resolution vote.”
In a letter to House and Senate leadership, AMGA underscored the urgent need to alleviate their members’ financial pressures resulting from the cuts that took effect on January 1.
“These Medicare cuts are having an immediate and detrimental impact on patients and providers,” said Jerry Penso, MD, MBA, AMGA president and CEO. “Reversing these cuts will significantly enhance patient access to care and provide essential financial relief, ensuring that AMGA members can maintain staffing levels and continue delivering the high-quality care their patients expect. Congress must act now to restore stability to our healthcare system.”
Still, many House of Representatives members have indicated they would support getting rid of the cuts, so the AMGA and other like-minded organizations are hopeful the issue will be addressed in future legislation.
AMGA COO Mike Coppola said one of the often-overlooked challenges related to the Medicare Fee Schedule is that most commercial reimbursement rates are tied to it. So, for example, if a group practice is being paid 125% of Medicare from a commercial payer, over the last five years as the Medicare rate has shrunk, so too has the commercial side.
“It’s a compounding effect,” Coppola said. “It’s not just the Medicare rate. It’s the commercial payers and tying their fee schedules to the same Medicare rate that keeps declining. The cuts have created a snowball effect of declining reimbursement overall. Every time the Medicare fee schedule is reduced, the commercial fee schedule is also reduced.”
It’s this double-edged sword that Medicare groups are faced with, declining reimbursement across the board and increasing operating costs. “If you look at inflation over wages over the last several years, those costs aren’t coming back down,” Coppola said. “The funding mechanisms aren’t there to support the inflationary increases.”
When it comes to rising operating costs, the labor market remains the most disruptive to a medical group’s bottom line. Physician practices are having trouble maintaining staff at two key positions – the individual who sits at the front desk and the medical assistant who supports the doctors in provision of clinical care. Their turnover rate is anywhere from 20% to 30%, Coppola said. These employees are often leaving physician practices for 25 cents to a $1 an hour more for a retail job just so they don’t have to deal with the challenges and complexities of healthcare.
“They don’t want to have to ask, ‘Did I get the group ID number right?’ ‘Did the doctor code the visit appropriately so we can get paid a declining amount from every payer?’ To many employees, it’s not worth the stress,” Coppola said.
Potential fixes
In the next budget bill, AMGA would like to see three main things addressed:
- First, the Part B conversion factor cut must be reversed.
- Second, waivers to existing telehealth services regulations should be extended for another two years at least.
- Third, the Advanced Alternative Payment Models (APMs) bonus that rewards value-based care must be maintained.
But to truly reform physician reimbursement beyond the budget bill, legislators and healthcare stakeholders will have to start with the basics, said Darryl Drevna, senior director, Regulatory Affairs, AMGA. “The first thing you need is a stable, predictable fee schedule update,” he said. “That’s why you need a predictability inflationary aspect or component of the fee schedule. If you don’t have that right, it’s going to be very difficult to do all the other exciting things that you could do with value-based care. So, step one is an inflationary piece that should be baked into the Medicare physician payments reimbursement system.”
AMGA has also continued to advocate for regulatory administrative relief. Physician practices believe there are too many burdens and criteria currently in place for quality measure reporting. A few years ago, an AMGA task force identified 14 simply but effective measures they believe would work well in a value-based arrangement, and could be used across programs, “so you’re reporting on a smaller set of more relevant outcomes-based measures,” said Drevna.
Prior authorization, specifically in Medicare Advantage, has been another massive headache for physician practices in recent years and something they call the AMGA office about frequently to ask about potential reforms. “This isn’t so much of a factor on the fee-for-service side of things, but in MA and then commercial payers as well, we are seeing providers appealing the denials, winning on appeal and that care eventually getting delivered, but it’s just slowing the process down,” Drevna said. “It’s delaying the ability of patients to get care they need.”
A lot of the work needed involves simply bringing rules and regulations into the modern era. There are plenty of other statutory things to address, many that don’t make sense when delivering care in 2025 because they came out of a program that was built in the 1960s, Drevna said. One example is the three-day stay requirement for skilled nursing care. “This was put in place because back in the day you were an inpatient for two weeks and they wanted to make sure that you got the care you needed as an inpatient before you were discharged into a post-acute care setting,” he said. “That is just not how care is delivered anymore. So now you’ve got this crazy game that providers, patients, payers pay to make sure patients are getting to the right spot. It’s those types of things that we’re looking to eliminate.”