Let me get this out of the way: Yes, physicians earn a very good living. Many, if not most, physicians make way more money than the overwhelming majority of the population. In fact, many specialists make way more than the President of the United States.
In order to make that money, however, it takes literally decades of schooling and many years of training, racking up hundreds of thousands of dollars in debt. In order to become a specialist, it can take more than half a decade of training to get there. It is not an easy path.
And, it is also true that primary care physicians are among the least paid of the profession. Primary care physicians are the bulwark of the healthcare system, the load bearing walls of our field, and it is truly unfortunate that, sometimes, they can make less than many other professionals.
Having said all of that, it is also true that the latest rounds of physician pay cuts announced by the Centers for Medicare and Medicaid Services (CMS) are quite distressing and truly unsustainable.
They state that these cuts are mandated by federal law:
By factors specified in law, overall payment rates under the PFS are proposed to be reduced by 1.25% in CY 2024 compared to CY 2023. CMS is also proposing significant increases in payment for primary care and other kinds of direct patient care.
The proposed CY 2024 PFS conversion factor is $32.75, a decrease of $1.14 (or 3.34%) from the current CY 2023 conversion factor of $33.89.
The conversion factor is multiplied by relative value units, which quantify how much “work” something a physician does, to arrive at a payment from CMS. And, CMS only pays 80% of that rate, the rest being paid by supplemental insurance (if a patient has it).
Immediately, physician groups decried the cuts:
“While the ACR [American College of Rheumatology] appreciates CMS’ continued recognition of the value of complex care provided by rheumatologists and other cognitive care specialists … we are gravely concerned that the proposed rule’s physician payment cuts contained in CMS’ conversion factor would add to physicians’ uncertainty about their continued ability to provide the highest quality of care to Medicare patients,” ACR president Douglas White, MD, PhD, said in a statement.
The President of the American Medical Association also weighed in with a statement, saying:
When adjusted for inflation, Medicare physician payment already has effectively declined 26% from 2001 to 2023 before additional inflation and these cuts are factored in. Physicians are one of the only providers without an automatic inflationary increase … Physicians need relief from this unsustainable journey.
Anders Gilberg, MGA, senior vice president for government affairs at the Medical Group Management Association chimed in as well:
The proposed 2024 Medicare Physician Fee Schedule (PFS) raises significant concerns for medical groups related to its 3.4% reduction to the conversion factor, which further increases the gap between physician practice expenses and Medicare reimbursement rates. Medicare already largely fails to cover the cost of furnishing care to beneficiaries, and the proposed cut to the 2024 conversion factor compounds the problem.
This is the key to understanding why physicians are upset about these cuts. It is not about greedy physicians. It’s not about a doctor previously earning $400,000 and now earning $388,000.
It is about the costs of running a practice. When adjusted for inflation, physician reimbursement has declined significantly, as the AMA correctly pointed out. But, the costs of running a physician practice has not decreased by the same amount. They have, in fact, dramatically increased: there has been 7% inflation in healthcare labor costs, and now CMS answers this increase in costs with another 3% payment cut. This math is not sustainable.
I used to be a partner in a small private practice. Yes, I earned a comfortable living. But, it costed a lot of money to keep the practice open: the salary of the office staff; the rent of the office space; the utilities; office supplies; among many other costs. Those costs didn’t go down. Ever.
Yet, our reimbursement from CMS and other payers did. Eventually, if the costs of running a practice exceed its income, the practice closes. Or, they stop taking Medicare because the reimbursement was not enough to cover the costs.
In very large practices, there are other costs – such as interest on loans to cover payroll – have increased dramatically in the past few years. With every cut in reimbursement, it makes staying in business that much more difficult.
This is what physician groups mean when they say these payment cuts by CMS threaten access to care for seniors. If practices close their doors because the math is not sustainable, then that means less doctors are available to care for seniors. There is already a shortage of physicians, especially in rural areas, and these payment cuts could make it worse by making it impossible to run a practice.
Now, it is great that CMS is paying primary care physicians more. It is high time they get the proper reimbursement they deserve. What I don’t understand is why the law forces CMS to pay PCPs more by taking the money from other physicians, most notably specialists. This makes no sense to me.
“Well,” some may say, “specialists make too much money anyway.” That’s a non-argument. The whole formula under federal law needs to be changed for something much more sustainable for everyone.
Physicians can’t just keep working harder for less reimbursement. That is part of what is driving physicians to burn out and leave the profession. How does this help our patients? And, no one tells a plumber, after he or she fixed your leaky shower or faucet, “Well, your bill is $200, but I’m only going to pay you $120.”
Yet, that’s what happens to physicians all the time, and the math is not sustainable. CMS spends only 1 out of every 5 dollars on physician and clinical services. It is not right to keep cutting physician reimbursement to reduce healthcare spending. There has to be a better way.