CMS Finalizes Payment Cuts for Physicians in 2025

On November 1, 2024, the Centers for Medicare & Medicaid Services (CMS) issued the final calendar year (CY) 2025 Physician Fee Schedule (PFS), which finalizes policies for physician payment and other outpatient services covered under Medicare Part B.

Specifically, CMS finalized a conversion factor of $32.3465, which is a decrease of $0.94 from the 2024 conversion factor of $33.2875. Similarly, the anesthesia conversion factor will be reduced from $20.7739 to $20.3178. This cut is largely the result of the expiration of a 2.93 percent temporary update to the conversion factor at the end of 2024 and a 0 percent baseline update for 2025 under the Medicare Access and CHIP Reauthorization Act. This means that each physician service will be paid less in 2025 than in 2024, except for services for which CMS finalizes an increase to the RVUs or otherwise specifically finalizes payment increases.
 
To avoid these drastic cuts, the American Medical Association (AMA) and their partners, including NANS, are strongly supporting the bipartisan H.R. 10073, Medicare Patient Access and Practice Stabilization Act of 2024, which would stop the cut, increase physician payment by one-half of the MEI, and result in a 12-month payment update of 4.73 percent. This bill comes on the heels of 233 bipartisan members of Congress (140 Ds, 93 Rs) cosigning a Dear Colleague letter to House leadership that requested the latest round of cuts be replaced with a payment update that reflects inflationary pressures on physician practices. The AMA is urging all physicians to ask your representatives to cosponsor H.R. 10073.    
 
CMS also finalized the following proposals:

• Extend some telehealth flexibilities and add services to the Medicare Telehealth List
• Permanently adopt virtual supervision and teaching physician policies for telehealth services,
• Expand coverage for colorectal cancer screening
• Relax direct supervision requirements for certain provider types and services
• Expand ability to bill the G2211 add-on code
• Establish new HCPCS codes to describe Advanced Primary Care Management Services
• Update the Shared Savings Program and the Quality Payment Program
• Update policies for advancing behavioral health services
• Update Medicare inflation rebate guidance with new policies
• Expand coverage of hepatitis B vaccines
• Establish fee schedule for drugs covered as additional preventative services
• Clarify payment for radiopharmaceuticals in the physician office setting
• Clarify policies on manufacturer refunds for discarded drugs
• Expand coverage of dental services linked to certain covered treatments
• Update the data reporting timeline for the Clinical Laboratory Fee Schedule, and
• Update the portable X-ray transportation rates

 
The Physician final rule is over 3,000 pages and is scheduled to be published in the Federal Register on December 9, 2024. In the coming weeks, we will continue to digest the rule and provide additional information.
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The text of the final rule can be accessed at: https://public-inspection.federalregister.gov/2024-25382.pdf  
 
Additional links include: 

• CMS Press Release  

• Physician Payment Schedule Fact Sheet  

• Medicare Shared Savings Program Fact Sheet 

• Quality Payment Program (QPP) Fact Sheet 

 
CY 2025 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Final Rule (CMS 1809-FC)
 
On November 1, 2024, the Centers for Medicare & Medicaid Services (CMS) also issued the Hospital Outpatient Prospective Payment (OPPS) and Ambulatory Surgical Center (ASC) Payment Systems final rule, which finalizes updates to the Medicare OPPS and ASC payment system for calendar year (CY) 2025.
 
In contrast to the PFS Final rule, CMS finalized an increase of 2.9 percent (2.6 percent proposed) for OPPS payment rates in CY 2025, based on a market basket update of 3.4 percent (3.0 percent proposed) reduced by a productivity adjustment of 0.5 percentage points (0.4 percentage points proposed).[1] CMS estimates this will result in a total of approximately $87.2 billion in payments ($88.2 billion proposed) to OPPS providers ($2.2 billion more than CY 2024). For CY 2025, CMS finalizes an OPPS conversion factor of $89.169 ($89.379 proposed) for hospitals that meet quality reporting requirements.
 
CMS finalizes an increase of 2.9 percent (2.6 percent proposed) for ASC payment rates in CY 2025, consistent with CMS’ policy for CYs 2019 through 2024 to update the ASC payment system using the hospital market basket update.[2] CMS estimates this will result in a total of approximately $7.4 billion in payments to ASC suppliers ($308 million more than CY 2024). For CY 2025, CMS finalizes an ASC conversion factor of $54.895 ($54.675 proposed) for ASCs that meet quality reporting requirements.
 
For CY 2025, CMS finalizes its proposal to use the most current cost report and claims data available (CY 2023) to calculate CY 2025 OPPS and ASC payment rates.
 
In addition to the rate increases, CMS finalized policies to:

• Apply a payment update of 2.9 percent for CY 2025
• Update payment rates for Partial Hospitalization Programs and Intensive Outpatient Programs
• Address the maternal health crisis through new obstetrical services specific conditions of participation
• Update the hospital, ASC, and Rural Emergency Hospital quality reporting programs
• Continue pass-through payment for certain drugs, biologicals, and devices,
• Implement payment for non-opioid pain management drugs and devices,
• exclude qualifying cell and gene therapies from Comprehensive Ambulatory Payment Classification (C-APC) packaging
• Pay separately for diagnostic radiopharmaceuticals that meet a cost threshold,
• change prior authorization timeframes for outpatient services that require prior authorization
• Add 21 surgical procedures to the ASC Covered Procedures List
• Add exceptions to the Medicaid clinic services “four walls” requirement
• Clarify payment for telehealth outpatient therapy services, and
• Provide an add-on payment for high-cost drugs provided by Indian Health Service and tribal facilities

 
OPPS/ASC:

1. Final Rule: https://public-inspection.federalregister.gov/2024-25521.pdf
2. Press Release: https://www.cms.gov/newsroom/press-releases/cms-announces-new-policies-reduce-maternal-mortality-increase-access-care-and-advance-health-equity
3. Fact Sheet: https://www.cms.gov/newsroom/fact-sheets/cy-2025-medicare-hospital-outpatient-prospective-payment-system-and-ambulatory-surgical-center-0

[1] Hospitals that fail to meet hospital outpatient quality reporting requirements will have a 2.0 percentage point reduction to their update factor.

[2] ASCs that fail to meet ASC quality reporting requirements will have a 2.0 percentage point reduction to their update factor.