2025 Medicare reimbursement cuts spark concern among physicians

Editor's Note

Doctors facing inflationary and operational cost increases are decrying recently finalized 2025 Medicare reimbursement rates, according to a November 4 report in Healthcare Dive.

The 2025 rates reduce physician payments by 2.9% while increasing rates for hospital outpatient departments and ambulatory surgery centers (ASCs) by 2.9%, the outlet reports. The adjustment for physicians means a $1.8 billion reduction. Meanwhile, hospitals will see a $2.2 billion funding increase in 2025, slightly more than the initial 2.6% proposal.

Although hospitals are expected to benefit from both outpatient and inpatient rate increases, many argue the adjustments fall short of addressing their financial needs. The American Hospital Association (AHA) criticized the outpatient rate update, emphasizing that Medicare underfunding hampers hospitals’ ability to invest in patient care, workforce improvements, and cybersecurity.

Despite concerns, healthcare analysts note that many large hospitals have maintained high profit margins due to returning patient volumes, favorable investments, and outpatient service contributions. For-profit hospitals, in particular, will see the highest increase in Medicare payments at 4.9%, potentially benefiting earnings, while nonprofits and government hospitals will receive smaller adjustments of 3.1% and 2.6%, respectively.

Physicians, especially those in smaller or independent practices, remain particularly strained. The American Medical Association highlighted that Medicare’s adjusted payments for physician services have declined by 29% since 2001, raising concerns over the sustainability of small practices. Due to statutory requirements, Medicare is unable to provide additional relief to physicians without offsetting the cost elsewhere, creating an ongoing challenge in addressing healthcare inflation.