Healthcare Policy


Physician practices are rapidly heading toward financial insolvency. This trend has been slowly coming since the 1980’s with the advent of Medicare’s revolutionary physician payment models; the payment system that was purported to favor primary care physicians! It did anything but that! Instead, over the many decades since the Resource-Based Relative Value System (RBRVS) was implemented, physician payment for services has gone nowhere but down. It has reached the critical point where the death knell for physician autonomy and financial sustainability is looming nearby. The end of private practice medicine is coming!

In November 2021, I published a two-part article on how Medicare pays physicians. It might be wise to go back and read those articles because they explain the framework of the RBRVS payment system, and how relative value units (RVU’s) and conversion factors figure into it. Basically, all physician work is valued by complexity and difficulty and is assigned a number, the RVU. The harder the task, the higher the RVU. The RVU is then multiplied by a number called the conversion factor (CF). The CF is a dollar amount. It is determined by Congress and defines how much (actually, how little) Medicare pays physicians for services performed. For years, RVU’s have remained the same, the CF has been steadily declining, and physicians are consistently paid less.

The Center for Medicare and Medicaid Services (CMS) just announced the new CF for 2023, and true to form, it is $1.55 less than 2022. That means, CMS, with the approval of Congress, has devalued physician work by $1.55. That means, across the board, for every task a physician performs, he is being paid 4.5% less than 2022. This comes at a time of record high inflation resulting in increased costs for medical supplies, rent, utilities, and employee salaries.

Here are the Medicare Conversion Factors for 2020 to 2023.

The CF for 2023 is $33.06

The CF for 2022 is $34.61

The CF for 2021 was $34.89

The CF for 2020 was $36.08

As you can clearly see, the CF has dropped over $3.00 in the last 4 years. That’s a 10% reduction in what Medicare pays the doctor. That doesn’t sound like much, but remember the CF is multiplied by the RVU for each service the doctor performs. For simplicity, let’s say a routine office visit has an RVU of 1.29. In 2020, the approved Medicare charge would have been 1.29 X $36.08 = $46.54. In 2023, however, the same office visit approved charge would be 1.29 X $33.06 = $42.64, a difference of $3.90. Do you know any business being paid less, or selling a product that costs less now, than four years ago? Of course you don’t! There aren’t any.

Physician payment has declined gradually every year since the RBRVS system started. What Medicare pays physicians is an insult and insufficient to pay practice expenses. The government, in the form of CMS, always has an excuse/reason for the reduction, and this time it’s “to maintain budget neutrality required by the law.” The only way to counteract this reduction is to see more patients. Medicare isn’t going to pay doctors a cent more than 80% of the approved charge so the only way to make enough to pay the bills is to see more patients. More patients translates into either shorter visits for the patient or longer hours in the office for the doctor. Which one do you think will prevail? Today’s doctors aren’t going to stay in the office until 8:00 pm. 

Dr. G’s Opinion: Physician reimbursement has reached a level that has forced doctors to adopt alternatives—the concierge practice model, hospital or multi specialty group employment, retirement, another profession/career. It appears that CMS has bled physicians to a point of insolvency, and they are throwing in the towel. Paranoia leads me to think this is intentional and an effort by the government and healthcare policy “experts” to end private practice, fee-for-service medicine. They prefer a national health service model where physicians become government employees. I do see that happening soon. Until then, powerless to influence RVU’s and the Conversion Factor, physicians will have to do whatever they can to remain in business. But when you get paid less each year and your costs go up, it’s hard to keep your practice in business.

Reference: “DRG’S and RVU’s” 2021 November 9.

AAFP Family Medicine Today. “CMS releases CY 2023 PFS Final Rule Reducing Conversion Factor by $1.55” 2022 November 1. 

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