https://www.kaufmanhall.com/insights/infographic/medicare-physician-payment-not-keeping

Following the US Senate Finance Committee’s recent white paper on Medicare physician payment reform, the graphic above shows how Medicare payments to physicians have not kept pace with inflation. 

The Medicare physician fee schedule conversion factor, which is used to assign dollar amounts to relative value units, decreased by eight percent between 2000 and 2024. 

Over the same period, the Medicare Economic Index (MEI), which measures practice cost inflation, and Consumer Price Index rose 57 percent and 83 percent, respectively. Reductions to the conversion factor contributed to a 20 percent decline in Medicare physician pay relative to practice cost inflation from 2000 to 2021. 

Physician practice margins in general have also worsened since COVID, not just due to Medicare payments. 

Although net revenue per physician at system-affiliated clinics increased about 10 percent from 2020 to 2023,total expenses per physician rose about 27 percent, driven by a per physician clinical staffing expense increase of nearly the same amount. 

Both the Senate Finance Committee’s white paper and a recently introduced House bill suggest tying the Medicare physician fee schedule conversion factor updates to the MEI, either partially or fully, but immediate legislative action in an election year appears unlikely. 

In the meantime, physician practices continue to face a difficult operating environment with costs rising faster than revenues.