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Medicare Announces 3.4% Payment Cut for Doctors and Hospitals

Last Updated on November 4, 2023 by SPN Editor

Medicare recently unveiled its decision to cut payments to doctors and hospitals by 3.4%. In particular, the finalized calendar year 2024 physician fee schedule conversion factor is set at $32.74, representing a reduction of $1.15, equivalent to a 3.4% decrease compared to the previous year.

This cut has significant ramifications not only for physicians but also for hospitals. Starting in 2026, Medicare is planning to reduce payments for numerous hospital outpatient services. This move is intended to provide compensation to safety-net hospitals that were adversely affected by prior reductions in a discount drug purchasing program. This program had been declared illegal by the Supreme Court.

The financial impact of these hospital pay cuts is substantial, estimated at $7.8 billion over the course of approximately 16 years. As part of the plan, hospitals affected by the reductions in the drug discount program will receive one-time lump sum payments totaling $9 billion.

Medicare has also finalized a 3.1% increase in hospital outpatient and ambulatory surgical center rates for 2024. These adjustments to the rates are aimed at addressing various facets of Medicare reimbursement for healthcare services.

The American Medical Association has been vocal in its criticism of the final physician payment plan, labeling it as a “recipe for financial instability.” Similarly, the Medical Group Management Association has accused the plan of “dangerously impeding beneficiary access to care.” Healthcare providers have been actively lobbying against both of these policies for months, expressing concerns that the cuts will exacerbate the challenges already faced by a healthcare system grappling with high inflation and labor costs.

However, there is some reprieve for healthcare providers within the finalized policies. Medicare has responded to stakeholder feedback by delaying the onset of hospital payment cuts by a year. Additionally, Medicare is extending several telehealth provisions to accommodate doctors. Furthermore, family physicians anticipate benefiting from the full implementation of a new billing code designed to augment payment for complex patient office visits.

Nonetheless, there remains a glimmer of hope for healthcare providers to potentially receive relief should Congress intervene to delay or alleviate the scheduled payment cuts before the year’s end. Professional associations have been swift in seeking Congressional support to forestall these reductions, recognizing the adverse consequences they could have on the healthcare system.