The 2027 fee schedule still robs Peter to pay Paul, says MGMA's Anders Gilberg

Medicare's proposed conversion factor for 2027 is $32.84 for physicians who are not qualifying participants in an advanced alternative payment model, a cut of 1.68 percent, and $33.17 for those who are, a cut of 1.19 percent. Almost all of that comes from the expiration of the 2.5 percent bump Congress attached to 2026 payment, and it arrives in a rule that also proposes to pay less when an office visit and a procedure happen on the same day.

Anders Gilberg, senior vice president of government affairs at the Medical Group Management Association, walked through the proposal with Physicians Practice: the conversion factor, the budget neutrality churn that keeps pitting specialties against one another, the end of traditional MIPS and what he expects Congress to do about any of it before the end of the year. The conversation has been edited for length and clarity.

CMS released the proposed rule July 14 and is taking comments through Sept. 14. Beyond the conversion factor, the agency's fact sheet lays out changes to practice expense relative value units, a request for information on moving away from the AMA's valuation process and a plan to sunset traditional MIPS reporting after the 2028 performance year in favor of MIPS value pathways.

The rule landed a day before the chairs of the GOP and Democratic Doctors Caucuses introduced the Patients First Act, which would tie physician payment to an inflation measure and raise the budget neutrality threshold from $20 million to $54.3 million. MGMA called the bill a critical first step. The association is also backing a separate MIPS overhaul from Reps. Mariannette Miller-Meeks, R-Iowa, and Herb Conaway Jr., D-New Jersey.

What jumps out at you in the 2027 proposed rule?

Anders Gilberg: There are a few themes. Unfortunately, the one recurring theme is the inability for Medicare to keep up with inflation in terms of the payments to physicians. This year it's a proposal on the conversion factor. It incorporates the expiration of a 2.5 percent bump that Congress has put in place now for the last five years or so, and so physicians would see a reduction depending on whether they're in a qualified APM or not. They'd see a reduction of 1.19 percent if they're in an APM and a reduction of 1.68 percent if they're outside of an APM. Obviously that's problematic, and the fix there is going to be more on the congressional side.

Overall the rule is more beneficial toward value-based care, the Medicare Shared Savings Program and ACOs. That's positive for ACOs, something we support. But it also amplifies these budget neutrality requirements that Medicare is under, which tend to exacerbate shifts from one specialty to another. You're often cutting one specialty to benefit another, or vice versa. It creates all kinds of political problems as well as care delivery problems when some specialties get cut 10 percent or more in order to fund primary care, which is very positive. But we're also pursuing legislative initiatives to fix that as well.

After five years of cuts, what are your members saying?

Gilberg: There's frustration. Some of the cuts have been averted at the last minute, the 11th hour. There's frustration overall about the state of the physician payment program, the system in Medicare. We just need a reliable system that pays based on inflation. We've seen incredible inflation over the last several years. It tempered a little bit, but it's picking up again now with the war in Iran, and we're certainly not immune to that in this industry. The fee schedule doesn't keep up with inflation.

We have practices that are independent, who have to pay their own rent, have to pay their own salaries. They're dependent on the physician fee schedule because that's how they're paid, 100 percent in Medicare at least, and it just isn't keeping up. Those practices have to find alternative revenue sources or have to subsidize the loss they take on Medicare through private insurance contracts. It's just becoming overly problematic. Decisions are often made then, when we see consolidation in the industry, that we're going to have to sell our practice, or the large health system can absorb the losses that our practices incur in order to secure a referral base or to drive ancillaries into the health system. All kinds of different things are just heaping pressure on physician practices today.

The 2.5 percent patch dies Dec. 31. Are we looking at a permanent fix or another one-year patch?

Gilberg: One of the more eventful things that's happened this past week is the introduction of the Patients First Act, which is an important bill. It doesn't address the very near term of the cut in 2027 that the fee schedule implements, but it would address some of the things I know we'll probably touch on, like the budget neutrality rules in the Medicare physician payment system, as well as dealing with the fact that we don't have an association in the physician payment system in Medicare with inflation. The inflation measure in Medicare for physicians is something called the Medicare Economic Index. Those are some of the problems that are more legislative to fix but that are resurfacing in this fee schedule.

Budget neutrality is driving a lot of these cuts. Is this the rule that finally fixes it?

Gilberg: I don't think it fixes it. It further highlights it. You have winners and losers. There are all kinds of different moving pieces in a rule like this, but certainly dermatology is going to be hurt under this rule. Different surgical specialties would be hurt under this rule, and some of the sub proposals dealing with practice expense RVUs, and some of the legacy things from last year dealing with work RVUs, are still affecting the specialties in different ways. It gets amplified by the budget neutrality requirements, which I would say is a continued theme where you're going to always have to rob Peter to pay Paul. You may have a very laudable reason to increase, let's say, primary care, but again, at the expense of surgical or other specialties. It's not a very effective or sustainable system.

CMS admits it is working with practice expense data that is 20 years old. Does the rebuild fix that or just shuffle it around?

Gilberg: Candidly, I'm not sure I see them using any new legitimate data sources to justify the proposals they have in place, for example dealing with the measures that are the inputs for the practice expense RVUs. Just to refresh, so people know what I'm talking about: in Medicare, in the RBRVS system, the relative value system, you have work RVUs, practice expense RVUs and then malpractice RVUs. The vast majority goes into physician work, and then practice expense goes into overhead. A lot of this is relative, which is the relative system we have.

It's almost as I see in this fee schedule and other things the administration has done, they want to move away from the AMA processes, the Relative Value Update Committee, the CPT Editorial Panel, but they don't really have the data to back it up. There's criticism of those processes, which I would remind people, they sit at the table and are not the AMA. It's the specialties that sit at the table. It's not just one big monolithic entity. It's the specialty organizations that sit at the table and talk about the relative aspects of these codes. CMS has indicated they want to move away from it. There's an RFI in this rule that talks about that, that solicits input. But in justifying their proposals, they don't really have any support data to support what they're trying to do. They just say they don't necessarily like what the AMA has come up with in the last couple of years, which I find kind of disingenuous, to be honest. It's unfortunate that they don't come up with their own alternative data sources but are quick to criticize some of the existing processes.

So in short, to answer your question, they don't really present a bunch of new data to fix the problem they perceive to exist. Instead they just criticize the current system and then go ahead with the changes that don't have a lot of underlying data underneath it.

Traditional MIPS sunsets. MGMA has called it costly, irrelevant and punitive. Is this a real win or the same burden in a fancy wrapper?

Gilberg: Keith, it's not a win at all. Yes, we've been critical of MIPS, but MIPS, and I feel like a history professor these days, was only meant to be a temporary bridge back in the day, 10 years or more ago, when we repealed the SGR to fix and repair the Medicare payment system at the time. It was meant to be a bridge to allow physicians and physician practices like our members to get into alternative payment models that had a reward for providing high quality care and reducing costs. Unfortunately, MIPS has just been a reporting exercise, a compliance exercise, reporting quality measures, and it can be punitive. It benefits those practices that are good at reporting quality measures more than there is necessarily a direct correlation to care.

Insofar as this rule, it does implement along the next several years the expiration of MIPS into something called MVPs, value pathways. But what are value pathways? They're just MIPS on steroids. Think about some of the concerns we have that we're still trying to determine. For a typical practice, and practices are larger now, but let's say a 30-physician practice with multiple physician specialties, under this new value pathway approach, will all of those different specialties within the practice now have to report a MIPS-like measure set? A practice might have to report dozens of measures, 100 measures, and just exponentially increase the burden that occurred in MIPS, after all this time moving these practices into actual value-based care.

We are not the biggest fans of the value pathway approach, even though it is an alternative to MIPS. We've been working with Congress and some of the physician specialties, as well as the AMA, at supporting legislation that was introduced by Representatives Miller-Meeks and Conaway that would have more direct reforms in the MIPS program without pushing it into MVPs, which we feel like is doubling down on a problematic part of the fee schedule.

Small and rural practices always fare worse in these transitions. What should they do now?

Gilberg: When you think about small practices in general, rural or urban or whatever, you look at a rule that is 2,000 pages long, in its entirety has all these moving pieces. There are all kinds of initiatives with this administration to double down on fraud because they want to fix the health care system by dealing with what I consider much more bad actors than a typical small practice. It just becomes the cumulative effect of all these policies and cuts to physician payment, or moving pieces, or new modifiers, or new changes to the practice expense RVUs. It just becomes more and more cumbersome to administer for those practices, and so they're being challenged to do more with less. This rule does not do anything to address the administrative burden for those practices.

The payments are relatively flat now for many years, and there becomes a breaking point when you have to pay staff, pay rent, and you are solely paid under the physician fee schedule. They have to make tough decisions about should we continue to participate in Medicare, should we sell our practice to a larger health system. This rule does not do much to help the trajectory that smaller practices have been on now for several years.

What is the sleeper provision in this rule that nobody is watching?

Gilberg: There are some positive things, so maybe a sleeper in terms of this conversation, because I do think that there is a renewed focus on the Medicare Shared Savings Program. Those are going to be things that we support in the end in our comments. Is it a real sleeper? It's the tinkering under the hood of this engine. It's not a sleeper because we can identify what they're doing, but their end goal might be laudable, and given the budget neutrality rules, given the way the system works, it does create winners and losers.

For your audience, I would be very interested, depending on what specialty a physician practices in, what focus that practice has, what codes they bill, to just pay attention when CMS makes these under-the-hood adjustments. They can be quite dramatic. There are new proposals dealing with the use of the 25 modifier, for example, which would limit payment in circumstances when a practice does an office visit and a procedure in the same day, and that could be substantial for a dermatology practice. It's very important for your readers and listeners to just be aware that these changes can have dramatic effects. Some specialties will get a slight increase and some will see a dramatic decrease.

Comments are due Sept. 14. What do you think CMS would actually budge on?

Gilberg: That's a great question. This administration in particular is kind of set in its ways. I haven't seen a lot of movement so far in the last year's fee schedule in terms of the difference between the proposal and the final. For example, I thought they would address something from last year's fee schedule called the efficiency adjustment, which is on work RVUs and has a substantially negative effect on especially surgical and other proceduralists, and I thought they might address some of that in this fee schedule. They did not. They tinkered around with some of the practice expense RVU adjustments from last year, but I don't think they address some of the underlying concerns.

Last year on the practice expense side, it really hurt those practices that are independent. Let's say a surgical practice where a surgeon has his or her own independent practice, where you're still seeing patients, you're still doing pre-op and post-op visits, those kinds of things, but then going to do your surgery in a hospital or hospital outpatient department. That cuts payment significantly for those types of physicians, with the notion that somehow they were being subsidized by the hospital itself, and I thought this rule would address some of that, and it did not.

So I have not seen a lot of course corrections so far with the administration. I hope they do listen to us. The first Trump administration and this Trump administration use enormous amounts of RFIs, requests for information. What they do with that information often is a mystery.

Last year the cliff was telehealth. What is the next thing Congress sets up and then veers away from at the last minute?

Gilberg: I'm not entirely sure they're going to act to avert this cut this year. I am concerned about that. There is a history. The cut is the notion of death by 1,000 cuts, which is what we feel. I think we're going to have to double down and make sure that physician practices and physicians do not receive a cut next year, because these smaller cuts sometimes can be overlooked, but they're real cuts. They're not like these cuts that you often hear maybe the managed care plans talk about, that they didn't get an increase like they wanted in the MA rule. These are actual cuts, not cuts in growth rate, and they happen at a time when there's inflation in the industry, so I am concerned about that.

That will need to be addressed in the lame duck session this year. I don't expect it before the election, but we will have extenders like every year: the work RVU, the geographic adjustments on the work RVU, the cut to the conversion factor, not telehealth because that's a two-year extension that's going on through 2027. But there is work to be done, Keith, and we're going to be back at it here at the end of the year.