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January 9, 2025 – Here we go again! For the second year in a row, we enter the new year without Congress enacting a doc fix or Advanced Alternative Payment Model (APM) bonus extension. While Congress did act last year on both counts (through the Consolidated Appropriations Act, 2024, enacted in March 2024), it remains to be seen whether Congress will do so again in 2025.
As discussed in our last Regs & Eggs blog post, the initial end-of-the-year healthcare package put forward by the speaker of the House included a partial doc fix of 2.5% and a one-year extension of the Advanced APM bonus. However, Congress wound up not including these policies in the short-term continuing resolution (CR)— which enacted much more limited healthcare provisions.
So where does this leave us?
The Centers for Medicare & Medicaid Services (CMS) finalized a 2.83% reduction to the conversion factor (CF) in the Calendar Year (CY) 2025 Physician Fee Schedule (PFS) final reg. This marked the fifth year in a row in which CMS finalized a reduction to the PFS CF. Since Congress did not act, the 2.83% reduction went into effect as scheduled on January 1, 2025.
Cuts to the PFS CF
| Cut Finalized in PFS Final Rule | Congressional Fix | Final Cut | |
| CY 2021 | -10.2% | +6.9% | -3.3% |
| CY 2022 | -3.8% | +3.0% | -0.8% |
| CY 2023 | -4.5% | +2.5% | -2.0% |
| CY 2024 | -3.37% (final cut for services delivered between January 1, 2024, and March 8, 2024) | +1.68% (only applicable to services delivered on or after March 9, 2024) | -1.69% (only applicable to services delivered on or after March 9, 2024) |
| CY 2025 | -2.83% | 0% | -2.83% |
| 2021 | 2022 | 2023 | 2024 up to March 8 | 2024 after March 8 (32.7442 increased by 1.68%) | 2025 | |
| CF | 34.8931 | 34.6062 | 33.8872 | 32.7442 | 33.2875 | 32.3465 |
Because Congress included several “healthcare extenders” in the short-term CR that expire at the end of March 2025, Congress will have another chance to avert at least part of the 2.83% reduction to the CF.
Since any fix would occur after the start of the year, Congress could decide to apply the fix either:
A prospective fix would mean that only claims going forward would be paid at the new higher CF. Claims that had already been paid would not be impacted. Congress took the prospective approach in its fix to the 2024 CF, only applying the patch to 2024 claims that had a date of service on or after March 9. As a result, CMS did not have to reprocess any claims before that date at the higher PFS CF. Conversely, a retroactive fix would mean that all claims, even those already processed, would need to be paid at the new higher CF. CMS would potentially have to reprocess some claims, depending on the timing of the fix. Reprocessing claims takes time and resources, so it could take a while for clinicians to be made whole. Given that reprocessing claims is “messy” and expensive, it may be more likely that Congress would enact a prospective fix. If Congress were ultimately to provide a prospective fix, one open question is whether that fix would be higher than the 2.5% full-year patch included in the initial healthcare package since the fix would only apply to part of 2025.
Even though Congress did not act on the PFS CF, some physicians may still get a little help with their Medicare payments. The short-term CR included an extension of the work geographic practice cost index (GPCI) floor of 1.0. The work GPCI updates physician payments to take into account the cost of a physician’s labor. It is based on each of the 109 GPCI localities’ costs compared to the national average – that effectively means that higher cost areas have higher work GPCI values (and thus higher Medicare payments). Since rural areas tend to have lower costs compared to the national average, the work GPCIs would be less than 1.0 in those areas, meaning that physician payments would be reduced. To help preserve access to care in rural areas and not disadvantage physicians who choose to work in these areas, Congress enacted a work GPCI floor of 1.0. This floor was set to expire at the end of December 2024 (meaning that some physicians’ payment would have been reduced further), but the short-term CR extended the floor through March 31, 2025. Presumably, Congress would revisit this provision along with all the other healthcare extenders that expire at the end of March 2025 and continue to extend the floor through the end of the year.
Stakeholders expressed disappointment that the short-term CR did not include an extension of the Advanced APM bonus. To encourage participation in Advanced APMs, Congress has provided incentive payments to clinicians who are able to tie a certain percentage of their payments or patients to these models. Clinicians who meet the thresholds for participation in Advanced APMs are called qualifying APM participants (QPs) and are exempt from the Merit-based Incentive Payment System (MIPS) reporting requirements. QPs receive these incentive payments two years after they actually participate in the model (for example, QPs will receive bonus payments for the 2025 performance year in 2027).
The initial year-end healthcare package would have provided a 3.53% incentive payment for QPs for performance year 2025 (payment year 2027). The initial package also would have frozen the payment- and patient-count-based thresholds necessary to be a QP for performance year 2025 (payment year 2027). Prior to 2025, to become a QP, providers had to receive at least 50% of Medicare Part B payments or see at least 35% of Medicare patients through an Advanced APM during the year. Since Congress didn’t act, the QP thresholds increased to 75% of Medicare Part B payments or 50% of patients as of January 1, 2025.
As with the doc fix, Congress could still act later this year to extend the Advanced APM bonus. Even without congressional action, clinicians who participate and meet the QP thresholds are eligible for a slightly higher PFS CF update and are exempt from MIPS. However, should Congress fail to act, clinicians who need to invest resources into boosting their technology and care coordination capabilities to successfully participate in an Advanced APM will not have access to that additional funding. Even if clinicians do participate in Advanced APMs, the new higher QP thresholds may be hard to surpass. Some specialists who participate in Advanced APMs only see certain types of patients or provide certain procedures, and therefore may not have the majority of their patient population or payments tied to one Advanced APM. Since it may not even be possible for these specialists to achieve the QP status, they may not think it is even worth it to participate in an Advanced APM given their potential exposure to downside financial risk.
Clinicians also may need to decide soon whether to participate in an Advanced APM this year. CMS reviews a clinician’s or practice’s APM participation four times throughout the year for purposes of determining QP status (each review is called a “snapshot.”) The later in the year that a clinician or practice decides to join an APM, the harder it becomes to achieve QP status for that year.
All in all, Congress’ lack of action before the end of 2024 combined with the hope that Congress may still decide to act in the coming months has created uncertainty for providers. Questions that might be going through their minds include:
Providers may need to make financial decisions that impact their practices with incomplete information, as the current payment levels and incentives for 2025 could wind up changing.
Until next time, this is Jeffrey saying, enjoy reading regs with your eggs.
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