Damaging 2024 Medicare Cuts Finalized at 3.4%

On November 2, 2023, CMS released the CY 2024 Medicare Physician Fee Schedule (PFS). While anticipated, ACG is still angered by the 3.4% cut to the CY 2024 Medicare Physician Conversion Factor (CF) compared to last year ($32.74 reduced from $33.89).

The Medicare CF is a dollar conversion factor used to calculate payment rates for Medicare PFS services. To calculate rates, geographically adjusted relative value units (RVUs) representing work, practice expense (PE), and malpractice costs are multiplied by the CF.

As a reminder, by law, the Medicare PFS must be budget neutral, so any increases greater than $20 million must be balanced by cuts elsewhere. This $20 million threshold is written in statute and has not been updated in decades.

ACG supports and has worked with Congress to pass legislation that updates this threshold and ties it to an inflationary update.

Value of Medicare Physician CF Chiseled Down Annually

YearMedicare Physician Conversion Factor% Change
5 Year Change-$3.3454-9.27

Will Congress Step in to Avert Cuts?

While Congress has addressed physician payment cuts in year-end legislation before, the picture is less clear this year.

On November 17, Congress averted a government shutdown with a temporary package that funded HHS until February 2nd. Physician pay was not addressed in that deal, nor do we expect action before the end of the calendar year.

However, Congress is expected to include a package of health care bills as part of a permanent funding package for FY 2024, which may address physician reimbursement.

Would Congressional Intervention Be Retroactive?

Maybe – it depends.

 If Congress acts in February, the timeline means that claims processed before then would be processed under the new Physician CF of $32.74. If Congress acts and if such action is made retroactive to January 1, 2024, these claims would need to be reprocessed.

Is ACG Taking Action?

ACG meets with legislators and policymakers daily, continually imploring Congress and the Biden Administration to address this and other challenges facing practicing gastroenterologists and their patients.  

Working alongside the AMA and other stakeholders, ACG has urged Congress to address this inherent flaw in Medicare’s physician payment system and establish a financially stable and predictable system (insert link to group letters). In particular, we believe positive annual updates are necessary to reflect inflation in practice costs and that budget neutrality requirements should be eliminated, replaced, or revised to allow for appropriate changes in spending growth.

There is some momentum heading into 2024, as various bills on these issues are circulating in Congress. In November, the Senate Finance Committee considered a proposal to partially reduce the negative adjustment to the physician CF (but would still result in an approximately 2.15% negative adjustment). In the House, a recently introduced bill would avert the full 3.4% cut in 2024 if passed – urge Congress to pass this bill, HR 6683: The Preserving Seniors’ Access to Physicians Act.

Practicing physicians know better than anyone what it takes to provide excellent care. We have committed ourselves to the hard work of providing high quality care in the face of record high inflation, wasteful and unhelpful administrative burdens, and ever-dwindling resources.

It’s easy to be frustrated by the broken Medicare reimbursement system. At times, we assume our voices have been drowned out by stakeholders that benefit from the status quo and devote more advocacy resources in D.C. We are also getting tired of the lip service we are so often given.

ACG has regularly laid out the facts to Congress, but they remain unwilling to take the necessary actions. Should we give up? No! When we personally know so many good practices closing or selling and when we encounter the frustrations of our patients in the face of critical shortages of physicians serving vulnerable populations, we press on.

ACG colleagues and members, I again encourage you to push Congress toward action. Contact your House Representative today and urge them to pass these desperately needed reforms.

Hungry to Learn More?

Read on for a deeper dive into what caused the Physician CF reduction, looming sequestration cuts, and 2024 MIPS adjustments.

What Else Drove the Physician CF Reduction?

Estimated spending for a new add-on code for complex patients, G2211, is largely responsible for the 2024 physician CF reduction. This code is for complex patients to be reported with evaluation and management (E/M) services effective January 1, 2024.

CMS estimates this code will be billed with 38% of all E/M visits. Since G2211 is expected to be reported so frequently, budget neutrality again caused a significant redistribution of dollars in the Medicare PFS. Please note that gastroenterologists will be able to report this new code, which may help mitigate some of the losses from the reduced Physician CF.

G2211 is an add-on code that can be reported with office/outpatient (E/M) services. It can be reported for ongoing medical care related to a patient’s single, serious condition as well as for visits of a discrete or time-limited nature. While CMS has not released detailed coding guidance for this code, one reporting example related to gastroenterology services provided in the final rule was for a visit of a new or established patient for the initial onset of gastroesophageal reflux disease. ACG will provide members with more information on code G2211 as it becomes available.

ACG and the GI Societies prepared a table of 2024 Medicare payment rates for physician services, available here.

Another contributing factor the Physician CF cut is the absence of an inflationary update that would reflect the rising costs of running a practice. In fact, all other Medicare payment systems (e.g., hospital outpatient and inpatient) have inflationary updates, and they are all receiving positive updates in 2024.

Are There Additional Cuts Looming in 2024?

Unfortunately, yes.

As if the Physician CF reduction weren’t enough for 2024, Medicare physician payments will also be subject to a 2% sequestration payment adjustment, and Merit-based Incentive Payment System (MIPS)-eligible physicians will also be subject to a positive, neutral, or negative payment adjustment.

2% Sequestration Reduction Continues in 2024

All fee-for-service Medicare items and services on claims, including drugs, are subject to the 2% sequestration cut. The payment reduction is taken from the calculated payment amount after the approved amount is determined and the deductible and coinsurance are applied. Thus, every $100 of payments a practice receives directly from Medicare is reduced by $2.

The sequestration reduction can be identified by claim adjustment reason code (CARC) 253 (Sequestration-Reduction in federal payment) on the electronic remittance advice and the standard paper remittance physicians receive from their Medicare Administrative Contractor. Application of Sequestration adjustments on Medicare Advantage payments depends on the terms of your contract with the payor.

The Budget Control Act of 2011 established mandatory across-the-board cuts in certain types of federal spending, referred to as Sequestration cuts. Medicare claims with dates of service on or after April 1, 2013, incur a 2% reduction in payments. Sequestration cuts are scheduled through FY 2030, although this date could be pushed out further if Congress uses it to offset short-term fixes for payment cuts.

2024 MIPS Adjustments

Identifying Payment Adjustments on Claims
Sequestration Adjustment
• CARC 253 – Sequestration –
reduction in federal payment
MIPS Payment Adjustment
• CARC 144 – Incentive Adjustment
(e.g. preferred product / service)
• CARC 2237 – Legislative / Regulatory Penalty

Your 2022 MIPS final score will determine your 2024 MIPS payment adjustment. MIPS-eligible clinicians received their 2022 MIPS final scores and 2024 MIPS payment adjustment information from CMS in August 2023 as part of their final performance feedback.

If you billed under multiple TIN/NPI combinations, a distinct MIPS adjustment might be applied to each combination. The MIPS adjustment is applied to the Medicare paid amount after calculating the deductible and coinsurance amounts but before sequestration is applied. In the table, bonuses are reflected in CARC 144, whereas penalties are CARC 253 and CAR 2237.

By law, 2024 MIPS payment adjustments will range from +/-9%. In reality, due to the budget neutrality nature of the program, where negative adjustments are needed to fund positive payment adjustments, positive payment adjustments are typically well under the maximum positive payment adjustment allowed by law.

MIPS payment adjustments are applied to professional services, drugs or other separately billed items are excluded. The adjustment does not apply to the facility payment when the service is provided in the ambulatory surgical center or the hospital outpatient department. Nor does it apply to Medicare Advantage payments.