2025 CMS Draft Physician Fee schedule-Another Year, Another Cut

AKA: Annual notice of Medicare payment decrease

Last week, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), proposed new policies and payment proposals in the calendar year (CY) 2025 Medicare Physician Fee Schedule (PFS). It is a proposal because it is subject to feedback and comments. In prior years, feedback has changed some items. Still, it is also important to remember that the most essential items (payment) are, to a large extent, legislatively mandated through an incredibly outdated formula that remains the most significant detriment to common sense payment reform. When CMS sets these rates, it triggers a lot of market reactions. Medicare Advantage, the private payors get rich scheme where they take in more than it costs the government to administer its own Medicare plan and then bilks even more money from them in the form of upcoding, is mathematically a more significant threat because they have a higher percent of medicare patients than the government and their payment of 25–30% less than medicare. This means the physical therapy community will be asked to continue to see the patients that need us most for below their cost-not exactly a sustainable business model and tugs at the heartstrings of PT’s-we want to treat all patients that need us but no margin means no mission.

Let’s examine some recent and crucial updates that are bound to significantly impact our field. The Centers for Medicare & Medicaid Services (CMS) have proposed changes to the Physician Fee Schedule (PFS) for 2025, and we need to discuss what this means for physical therapists. Spoiler alert: it’s not looking good.

The Reality of Reimbursement Cuts

Despite facing unprecedented inflation, increasing salaries, and severe shortages of physical therapists, we’ve been hit hardest by Medicare reimbursement cuts since 2021. In 2021, a federal process aimed at redistributing Medicare physician payments disproportionately affected physical therapy. Cuts to physical therapists essentially funded budget-neutral increases to primary care. In essence, we’ve become the collateral damage of these efforts.

Impact by the Numbers

Let’s calculate the cumulative impact on the conversion factor for physical therapists by 2025, including inflation. Here’s the breakdown:

• Proposed CY 2025 Cut: An average impact on payment rates of 2.93%.
• Conversion Factor Cut: A reduction from $33.29 in 2024 to $32.36 in 2025, equating to a 2.8% cut or $0.93 decrease.
• Cumulative Conversion Factor Cut: The decrease from 2020 to the proposed 2025 rate is approximately 10.33%.
• Medicare Economic Index (MEI): This index measures practice cost inflation and is predicted to increase by 3.6% in 2025.
• Therapeutic Activities and NMS Re-Education. My rough math now has these most important and higher-order interventions, which allow PTs to be at the top of their licenses as disproportionately cut around 5%. The slippery slope says that at some point they will be paid the same as therapeutic exercise! This will be the subject of a future post as there is a clear attempt to “dummy down” neck up skills of physical therapists.

Considering these factors, the total impact, including inflation, on physical therapists by 2025 will be approximately 13.93% (10.33% cumulative conversion factor cut + 3.6% inflation increase). This figure represents a significant reduction in real terms for physical therapists, combining direct cuts to the conversion factor and the increased costs of running a practice. This is due to an unprecedented inflation rate of 7% in 2021, 6.5% in 2022, 3.4% in 2023, and roughly 3% YTD in 2024.

This situation has raised concerns among many medical associations outside of our own. The arguments are rational and consistent: These ongoing cuts, combined with rising inflation and operating costs, are putting significant financial pressure on medical practices and may impact their ability to provide quality care to patients or even care at all to Medicare patients. This also has unintended consequences separately in that providers are even less likely to accept risk under “value-based” reforms while they are getting their shins kicked in by CMS and balancing the viability of their practice.

PTA Supervision: A Small Victory

CMS proposes to allow for general supervision of physical therapy assistants (PTAs) and occupational therapy assistants (OTAs) in private practice to the extent permitted under state law. This is a small but sensible victory, as CMS should always defer to state regulations. It’s a step in the right direction, acknowledging the expertise and governance at the state level. Kudos to many organizations like APTQI, APTA, and PPS that have fought for this for years.

Plan of Care Certification: A Minor Change

While CMS’s proposal to accept a signed and dated order/referral from a physician and documentation in the patient’s medical record might make things a bit easier, it doesn’t address the real issue. The plan of care itself is outdated and no longer relevant to modern physical therapy practice. This minor change falls short of providing the regulatory relief we desperately need as it does nothing to materially reduce costs for physical therapy practices, leaving us burdened with unnecessary paperwork and bureaucracy.

Telehealth and Coding Updates

• Telehealth: Unfortunately, no provisional codes will be moved to permanent status in the proposed rule. CMS is claiming they will do some additional investigation. Hope they read this article as well as the Peterson Health Technology Institute recently released the Virtual Musculoskeletal Solutions Health Technology Assessment
• Coding Update: CMS agreed to propose updates to the direct PE inputs for all 19 Physical Medicine and Rehabilitation codes. While 16 codes received increases, 3 saw decreases. Given the complexity of determining appropriate direct PE inputs, this code family may benefit from additional review.

MSK MVP and MIPs: There appear to be significant changes to MIPS and its successor, the MVP program, but nobody in physical therapy cares or pays much attention because participation is de minimus, and only exceeded by even greater de minimus realization of any payments for actually participating. In an almost satirical sense, CMS did a press release: HHS Proposes Physician Payment Rule to Drive Whole-Person Care and Improve Health Quality for All Individuals with Medicare espousing commitment to wellness and protecting and expanding Americans’ access to quality, affordable health care and then giving specifics on the payment cuts!

The Bigger Picture

So, what’s the big picture here? The proposed cuts and changes will undoubtedly challenge our field. The financial strain could lead to decreased access for patients who need our services the most. However, staying informed and engaged during the comment period is crucial to advocate for better outcomes.

Our Call to Action

We must collectively voice our concerns and push for higher payments to physical therapists. Investing in physical therapy benefits patients by providing essential care and represents significant savings for the healthcare system. Did you know that roughly 12% of Medicare patients receive benefits at less than 4% of the cost of the Medicare budget? Talk about value!

The total proposed rule can be found in the Federal Register, and I encourage everyone to review it and participate in the comment process. For ease of doing so, stay close to APTA’s advocacy page (if you are not a member, join as this is when we need you most!), Private Practice Section, or if you are a member of APTQI.

Thoughts?

@physicaltherapy