Ringing in the new year can usher in situations that affect your income, workflow, or staff. For 2025, those issues are likely to be physician pay cuts coming from Medicare, the rise of Medicare Advantage plans, and looming staff shortages.
Here’s how to get ready for potential challenges to your bottom line.
Medicare Physician Fee Schedule Could Cost 6%
The 800-pound gorilla is the 2025 CMS Medicare Physician Fee Schedule rule passed by Congress in 2024, and which kicked in on January 1.
To the great consternation of many physicians, the CMS final 2025 payment rule includes a 2.83% decrease from last year’s payment conversion factor. (The conversion factor is the dollar amount assigned to each relative value unit [RVU]). Last week, physicians were close to a reprieve when the pay cut was mostly reversed, but that hope was shattered when Congress passed a funding bill that didn’t offset the 2.8% pay cut.
“Based on the 2.83% reduction, if a typical E/M visit currently gets $100 payment, the 2025 reimbursement would be $97.17,” explained Pam D’Apuzzo, CPC, CPMA, managing director at VMG Health, a healthcare consulting company that helps medical practices with coding, auditing, compliance, and profitability. The change will affect some specialties more than others, she said.
“Opting out of Medicare is certainly a consideration for many providers,” said D’Apuzzo. “They [some physicians] believe the lowered reimbursement rates could make it financially difficult to continue providing care to Medicare patients.”
This cut is even more painful because it comes on top of continually rising physician operating costs.
“The biggest deal of all is that all of us are going to pay more for your staff, more for supplies, inflation continues to go up, and the Medical Economic Index (MEI) is supposed to go up 3.5% for 2025,” said Steven Furr, MD, FAAFP, board chair of the American Academy of Family Physicians (AAFP) and family physician in Jackson, AL. “So, if you take a 2.8% cut and you lose the update of the 3.5%, you’re talking about being down over 6%.”
Added Dr. Furr, “We have not had an inflation update for 21 years. Can you imagine any business still surviving after 21 years if they were not able to raise their prices?” The last physician inflation increase took place in 2004.
CMS estimates that primary care physicians may actually see a 1% increase in income, although some specialties will see more of a decline.
However, that estimate can be misleading, said Dr. Furr. “Their chart is based on everyone using the G2211 code (used to denote ongoing, long-term care or serious, complex continuing cases) to the maximum. If everyone uses those, potentially you could see an increase,” he said.
“But the bottom line is a cut is still a cut and you’d have to do extra things and extra documentation just to get up to level. And if everybody doesn’t do that, they’ll still end up with less,” said Dr. Furr.
Ways to Combat Medicare Pay Cuts
Physicians should still try to work with their Congressional representatives to bring about a pay increase, suggested Dr. Furr.
In October 2024, Rep. Gregory Murphy, MD (R-NC), Rep. Jimmy Panetta, (D-CA), and several bipartisan others, introduced H.R.10073 – the Medicare Patient Access and Practice Stabilization Act of 2024. The bill would have eliminated the planned 2.8% cut and added a 1.8% increase, which is one-half of the CMS estimate of the rise in physician practice cost expenses for 2025.
More than 230 members of the House of Representatives signed a letter to Congress asking to stop the pay cuts to physicians and to add a permanent inflationary update to the Medicare Economic Index.
Although the bill has not passed, it’s clear that there is support in Congress to ease physicians’ financial pain.
“Doctors should write to their Congressperson. Be involved with your congressperson to make them aware of this situation,” advised Dr. Furr. “Get active with your organizations, AAFP and AMA. Medical organizations are very adamant that something has to be done more towards a permanent fix. Get involved and join in their efforts to get the fix we need.”
Another step physicians can take to deal with the pay cut is to be sure to use the G2211 code, where it is appropriate and fits the situation, suggested Dr. Furr.
For instance, the G2211 code can be used when the E/M visit is part of an ongoing, longitudinal care relationship with a patient, or the clinician is managing a serious or complex condition over time, and the code accounts for the extra time, coordination, and expertise required for these visits.
The AAFP offers additional resources on the code.
Medicare Advantage Takeover
Mehmet Oz, MD, who has been nominated to serve as head of CMS, has been a vocal advocate of Medicare Advantage plans.
“Many physicians don’t like Medicare Advantage plans for one big reason: they have markedly increased the number of prior authorizations, which makes our work much harder, much more difficult,” Dr. Furr told MedCentral. “When Medicare Advantage came on the scene, the percent of prior authorizations had a huge increase and it increases every year.” This change has forced physicians to spend more time and money dealing with prior authorizations.
Almost 99% of patients on Medicare Advantage programs require prior authorizations for medical services, while with traditional Medicare, only a limited group of services require prior authorization.
Dr. Oz has hosted Medicare Advantage proponents on his YouTube show, where he encouraged his audience to use Medicare Advantage.
In 2020, Dr. Oz and George Halvorson, former CEO of Kaiser Permanente, wrote a business policy piece published in Forbes, titled “Medicare Advantage for All Can Save Our Health-Care System.” In the article, they endorsed a Medicare Advantage for All form of healthcare insurance, run by private insurers.
“Medicare Advantage is different from traditional Medicare,” said Brian Kern, Esq., healthcare attorney and a partner with Acadia Professional, LLC, a medical professional liability brokerage based in Morristown, NJ, and the CEO of a value-based healthcare risk consulting firm called Deep Risk Management.
“Medicare Advantage is a commercial payer managing a Medicare population, and the commercial payer is given a certain amount of money from Medicare to run that population,” explained Kern. “The commercial insurer goes to CMS and says, ‘We want to run a Medicare population on your behalf.’
“There’s much more incentive in Medicare Advantage to deny claims and coverage because the insurers want to keep as much of the money that Medicare is paying them, They just don’t have as much money in the Medicare Advantage space. So, the insurers go to hospitals and say, ‘We are not going to reimburse this, we’re not going to negotiate this, and we want preauthorization.’ That’s where a lot of the tension is occurring.”
Is it Possible to Prevent the Rise of Medicare Advantage?
Dr. Furr said that his advice to doctors is to continue to fight for an increase in Medicare reimbursement; this can help limit the rise of Medicare Advantage programs. Physicians an also stay active with their medical organizations and let their congresspeople know that this is an important issue.
Staff Shortages Aren’t Going Away
The shortage of nurses and other healthcare professionals is likely to grow. A Health Workforce Analysis projects a national shortage of 78,610 full-time equivalent (FTE) RNs in 2025 and a shortage of 63,720 FTE RNs by 2030.
Physician practices may find it harder to find and hire qualified staff. This means you may have to spend more on recruitment and retention. Being short-staffed could also impact scheduling, wait times, and patient care.
Strategies to Overcome Shortages
Pay attention to keeping your staff happy and averting turnover, advises Kathryn I. Moghadas, RN, CLRM, a senior consultant and principal with Associated Healthcare Advisors, Lake Helen, FL.
“People leave a job because they’re fed up,” said Moghadas. “It’s never one big thing, it’s a series of whatever, until a person says, ‘enough.’” Moghadas said that in her work as a consultant, clinical staff has told her they get fed up with things like, ‘If the physician doesn’t document for a week, or is not closing out their records, and the staff always has to pick up a large workload all at once.’”
“In today’s environment, doctors will want to treat staff with higher regard and respect,” she added. “Is the environment conducive for the staff to work together without strife? Is everyone aware of expectations and if they’re not met, what can be done to correct it?”
Creating a good work environment is crucial to keeping the staff you have, said Moghadas.
One way to help create a good working environment is, “Find out what benefit each employee wants, and figure out a way to get it to them,” she said. “In one practice, a doctor realized that his nurse had a hard time paying all the tolls during her drive to work. At holiday season, he gave her $300 for her tolls. She was very appreciative. You can come up with those types of things.”
“Always throwing money and praise at someone is a good thing and goes a long way.”
Patty Knecht, PhD, RN, ANEF, chief nursing officer of Ascend Learning, wrote that Congress should prioritize funding for programs that train, retain, and better support healthcare educators. Such efforts are additional ways that physicians can work with their Congressperson to avert future income and practice problems.