Medicare Finalizes 3.4% Payment Cut for Physician Fees in 2024

Derick Alison
Derick Alison
9 Min Read

Physicians would receive a 3.4% cut in their Medicare reimbursement under a final rule released Thursday by the Centers for Medicare & Medicaid Services (CMS).

Overall, the finalized calendar year 2024 physician fee schedule conversion factor is $32.74, a decrease of $1.15, or 3.4%, from 2023, CMS said in a press release.

CMS’s Positive Spin

The press release cast the final rule in a generally positive light, noting that it would “support primary care, advance health equity, assist family caregivers, and expand access to behavioral and certain oral health care … [The] final rule also provides payment for principal illness navigation services to help patients and their families navigate cancer treatment and treatment for other serious illnesses.”

“CMS remains steadfast in our commitment to supporting physicians and ensuring that people with Medicare have access to the care they need to stay healthy as well as navigate health conditions they are facing,” said CMS Administrator Chiquita Brooks-LaSure in a statement. “CMS is taking important steps toward those goals in this rule.”

Meena Seshamani, MD, director of the Center for Medicare, said “the impact of these changes means that people with Medicare will be able to access Marriage and Family Therapists and Mental Health Counselors for behavioral health treatment, access culturally sensitive care from community health workers, care navigators, and peer support workers, access primary care where the provider is invested in a long-term, trusting relationship, and that caregivers for persons with Medicare will have access to appropriate training.”

Physician Groups Pan Reimbursement Cut

But physician groups were not so positive. “The finalized reduction to the Medicare conversion factor will result in untenable payment cuts for family physicians and reiterates the urgent need for long-term Medicare payment reform,” Steven Furr, MD, president of the American Academy of Family Physicians, said in a statement. “Practices across specialties report challenges meeting growing patient needs as practice costs rise and annual, compounding Medicare payment cuts undermine practice viability and patient access. With this in mind, Congress must modernize Medicare’s outdated physician payment system by enacting annual inflationary adjustments and providing relief from budget neutrality requirements.”

The American Society for Radiation Oncology (ASTRO) noted that the rule included an additional 2% reimbursement cut for radiation therapy. “The consistent decline in Medicare reimbursement for radiation oncology threatens to undermine patients’ access to vital cancer care across the country,” Jeff Michalski, MD, MBA, chair of ASTRO’s board of directors, said in a statement. “The time has come for Congress to intervene with reform legislation to ensure short-term stability and long-term viability.

“The additional cuts finalized today ensure that radiation oncology Medicare physician payments will have dropped by 25% from 2013 to 2024, more than nearly all other medical specialties,” he said. “The continued trend of reduced reimbursement further underscores the critical need for a legislative fix for radiation oncology payments.”

Not all of the comments were negative, however. The seniors’ group AARP applauded the final rule’s inclusion of payments to health professionals to compensate them for time spent training family caregivers.

“As the backbone of our nation’s long-term care system, family caregivers are increasingly taking on medical duties at home, including giving injections, tending to wounds, and managing multiple medications,” AARP Executive Vice President Nancy LeaMond said in a statement. “They provide an estimated $600 billion in unpaid care each year, but most caregivers don’t receive the training and education they need to manage these complex tasks or other daily activities like bathing and feeding … This is a huge step forward for America’s over 48 million family caregivers, who are an essential but often invisible part of almost any care team.”

Changes to the 340B Program

Also on Thursday, CMS released a final rule dealing with the 340B program, which gives prescription drug discounts to hospitals that care for large numbers of low-income patients. The agency explained in a fact sheet that before 2018, the Medicare payment rate for Part B-covered outpatient drugs provided in outpatient hospitals was usually the drug’s average sales price (ASP) plus 6%. In 2018, CMS adjusted that payment down, to ASP minus 22.5%, to reflect the discounted prices hospitals were paying for those drugs. To adhere to the budget neutrality rule, CMS also raised payments to all hospitals — including non-340B hospitals — for non-drug items and services. This policy was in effect from 2018 to 2022.

However, in June 2022, the Supreme Court unanimously ruled that the differential payment rates for 340B-acquired drugs were unlawful because, prior to implementing the rates, HHS failed to conduct a survey of hospitals’ acquisition costs under the relevant statute, CMS said. “As a result, all calendar year 2022 claims for 340B-acquired drugs paid on or after Sept. 28, 2022, were paid at the default rate (generally ASP plus 6%).” That payment rate was finalized in the 2023 final outpatient payment rule, along with a 3.09% reduction to the payment rates for non-drug items and services to achieve budget neutrality.

Because of the 2018-2022 payment change, “CMS estimates that for calendar year 2018 through the approximate third quarter of 2022, certain 340B providers received $10.6 billion less in 340B drug payments than they would have without the 340B policy,” the agency noted. Some of that money — $1.6 billion — was made up when the payment rate was switched back in September 2022. For the other $9 billion, “CMS is making a one-time lump-sum payment to each 340B-covered entity hospital that was paid less due to the now-invalidated policy.”

Mixed Reviews for the Remedy

However, CMS said it also has to make up for some of that lump-sum payment in order to maintain budget neutrality, so “to carry out this required $7.8 billion budget neutrality adjustment, CMS will reduce future non-drug item and service payments by adjusting the OPPS [Hospital Outpatient Prospective Payment System] conversion factor by minus 0.5% starting in calendar year 2026.”

That remedy drew mixed reviews from hospital groups. “The AHA [American Hospital Association] is very pleased that 340B hospitals finally will be reimbursed in full for what HHS unlawfully withheld from them for 5 years,” AHA president and CEO Rick Pollack said in a statement. “The one-time, lump-sum repayment hospitals will soon receive will help them to continue providing high-quality care to their patients and communities.”

“However, HHS made a grievous mistake in choosing to claw back billions of dollars from America’s hospitals, especially those that serve rural, low-income, and other vulnerable communities,” he continued. “HHS decided to ignore hundreds of comments from hospitals and other providers explaining why this Medicare cut is both illegal and unwise. The AHA will continue to review this rule and consider all available options going forward.”

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    Joyce Frieden oversees MedPage Today’s Washington coverage, including stories about Congress, the White House, the Supreme Court, healthcare trade associations, and federal agencies. She has 35 years of experience covering health policy. Follow

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