Providers offer 4 key payment reforms to support practices

The American Medical Association, along with 50 state medical societies and 76 other healthcare organizations, recently provided congressional leaders with legislative priorities for supporting the sustainability of physician practices. The letter to leaders offered four key pillars of physician payment reform, including enacting an annual, permanent inflationary payment update.

“The current Medicare Physician Payment System (MPPS) is increasingly unsustainable and the necessary policy reforms can no longer be delayed without severe repercussions for patient access and quality of care,” the groups wrote in the letter.

Tying the Medicare Economic Index (MEI), a measure of inflation in physician practice costs and general wage levels, to annual payment updates under the Medicare Physician Fee Schedule would significantly help practices, they continued.

“The cost of practicing medicine has risen dramatically over the past two decades with the Centers for Medicare & Medicaid Services (CMS) estimating that the MEI increased by 4.6 percent in 2024. Despite this steep increase, physician payment rates were reduced by 3.37 percent in early 2024 followed by Congress only mitigating a portion of this cut for the remainder of the year,” the letter stated.

However, the proposed rule for the Physician Fee Schedule in 2025 would reduce rates further by 2.8%, without Congressional intervention. The groups called the proposed cuts “inexcusable” and urged Congressional leaders to pass legislation like H.R. 2477, the “Strengthening Medicare for Patients and Providers Act,” which would link the annual physician payment update to the MEI.

“This reform would stabilize physician payments, allowing for long-term planning, investment in practices, and the delivery of high-quality, patient-centered care,” the groups explained.

Additionally, the groups are seeking passage of H.R. 6371, the “Provider Reimbursement Stability Act.” The legislation would require CMS to perform a two-year look-back before unbundling services within the Physician Fee Schedule and applying them in a budget-neutral manner.

The groups argued that the budget neutrality requirement often leaders to “inaccurate utilization predictions that have led to compounding financial losses.” They said the look-back period would result in more accurate utilization assumptions, using 12 months of actual claims data.

The legislation would also update the budget-neutrality limit, which currently stands at $20 million since its establishment in 1989. Accounting for inflation, the legislation would increase the limit to $53 million and require CMS to update elements of direct practice costs, like clinical wage rates and supply prices. Finally, the legislation would prevent the conversion factor from shifting by more than 2.5% in a given year, providing more stability and predictability to the Physician Fee Schedule.

The groups also called for reforms to physician payments made through the Quality Payment Program, including the Merit-Based Incentive Payment System (MIPS) and Alternative Payment Models (APMs). They criticized the program for disproportionately penalizing small, rural and underserved practices, as well as placing undue administrative burdens on physicians.

The letter recommended a “Data-Driven Performance Payment System,” or DPPS, to replace elements of MIPS. Under the proposed system, CMS would freeze performance thresholds for three years to allow practices to recover from the COVID-19 pandemic and the more recent Change Healthcare cyberattack. The system would also replace the tournament model of MIPS with payment penalties of up to 9% with payment adjustments assessed as a percentage of statutorily mandated payment updates, like the MEI.

The groups also suggested the DPPS provide at least three quarters of claims feedback reports and align program requirements with other CMS hospital value-based programs to simplify reporting.

For APMs, the groups called on Congress to pass legislation that would extend the incentive payments for transitioning to Advanced APMs and freeze the current revenue threshold for bonus qualification. The current bonus ends this year, and CMS plans to up the revenue threshold from 50% of revenue to 75% of revenue.

They asked Congress to pass S. 3503/H.R. 5013, the “Value in Health Care (VALUE) Act,” to extend current bonuses and revenue thresholds for another two years.