The U.S. government is the largest payor of medical costs, through Medicare and Medicaid, and has a strong influence on reimbursement to hospitals. In 2023, Medicare and Medicaid accounted for an estimated $1.03 trillion and $871.8 billion in healthcare spending, respectively.1 The prevalence of these public payors in the healthcare marketplace often results in their acting as a price setter, and being used as a benchmark for private reimbursement rates.2
Medicare pays for physician services, including cardiovascular services, through the Physician Fee Schedule (MPFS), which calculates payments according to Medicare’s Resource Based Relative Value Scales (RBRVS) system, which assigns relative value units (RVUs) to individual procedures based on the resources required to perform each procedure. Under this system, each procedure in the MPFS is assigned RVUs for three categories of resources: (1) physician work (wRVUs); (2) practice expense (PE RVUs); and, (3) malpractice expense (MP RVUs). Further, each procedure’s RVUs are adjusted for local geographic differences using Geographic Practice Cost Indexes (GPCIs) for each RVU component. Once the procedure’s RVUs have been modified for geographic variance, they are summed, and the total is then multiplied by a conversion factor (CF) to obtain the dollar amount of governmental reimbursement.
The methodology for calculating the Medicare physician reimbursement amount for a specific procedure and location is illustrated below in Exhibit 1.
The wRVU component represents the physician’s contribution of time and effort to the completion of a procedure. The higher the value of the code, the more skill, time, and work it takes to complete.
The PE RVU is based on direct and indirect physician practice expenses involved in providing healthcare services. Direct expense categories include: clinical labor, medical supplies, and medical equipment. Indirect expenses include: administrative labor, office expenses, and all other expenses.
MP RVUs correspond to the relative malpractice practice expenses for medical procedures.4 These values are updated at least every five years and typically comprise the smallest component of the RVU.5 Due to the variation in malpractice costs among states and specialties, the malpractice component must be weighted geographically and across specialties.6
The GPCI accounts for the geographic differences in the costs of maintaining a practice. Every Medicare payment locality has a GPCI for the work, practice, and malpractice component.7 A locality’s GPCI is determined by taking into consideration median hourly earnings of workers in the area, office rents, medical equipment and supplies, and other miscellaneous expenses.8 There are currently 109 GPCI payment localities.9
The CF is a monetary amount that is multiplied by the RVU from a locality to determine the payment amount for a given service.10 This CF is updated yearly by a formula that takes into account: (1) the previous year’s CF; (2) the estimated percentage increase in the Medicare Economic Index (MEI) for the year (which accounts for inflationary changes in office expenses and physician earnings); and (3) an update adjustment factor.11 All physician services, except anesthesia services, use a single CF.12
The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) contains a predetermined schedule of updates to the CF. However, these annual updates have been 0% since 2020, and will continue through 2025.13 It should be noted that, although the annual updates to the MPFS will be stagnant for at least the next couple of years, MACRA includes several provisions related to financial rewards for providers who furnish efficient, high quality healthcare services.
For 2025, payment amounts were cut for the fifth straight year, with the MPFS conversion factor decreasing by 2.83%.14 For cardiovascular providers specifically, the American College of Cardiology (ACC) stated that “Overall reimbursement for cardiovascular services is projected to remain flat compared to 2024, with changes to policies and individual services roughly balancing out. However, individuals and groups will see different impacts depending on patient populations and services offered.”15 Reimbursement may be ameliorated for 2025 if the Medicare Patient Access and Practice Stabilization Act (H.R. 879) is passed. The bipartisan bill, which is supported by the ACC, would increase Medicare physician payments by 6.62% from April through December 2025, which increase would also serve to offset the pay cut physicians experienced between January and March.16
As alluded to above, the reimbursement environment is strongly driven by the complex regulatory environment, with both the executive and legislative branches at the mercy of shifting political tides. Accordingly, the current state of the regulatory environment in which cardiovascular providers operate will be addressed in the next installment of this five-part series.
“NHE Fact Sheet” Centers for Medicare & Medicaid Services, December 18, 2024, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet (Accessed 1/9/25).
“Medicare’s Role in Determining Prices Throughout the Health Care System: Mercatus Working Paper” By Roger Feldman et al., Mercatus Center, George Mason University, October 2015, https://www.mercatus.org/research/working-papers/medicares-role-determining-prices-throughout-health-care-system (Accessed 1/9/25), p. 3-5.
“Physician and Other Health Professional Payment System” Medicare Payment Advisory Commission, MedPAC Basics, October 2024, available at: https://www.medpac.gov/wp-content/uploads/2024/10/MedPAC_Payment_Basics_24_Physician_FINAL_SEC.pdf (Accessed 2/18/25), p. 2.
“Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2011; Final Rule” Federal Register Vol. 75, No. 228 (November 29, 2010), p. 73208.
Ibid; “Introduction to Relative Value Units and How Medicare Reimbursement is Calculated” American College of Radiation Oncology, http://www.acro.org/washington/RVU.pdf (Accessed 12/8/23).
“Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2011; Final Rule” Federal Register Vol. 75, No. 228 (November 29, 2010).
“Documentation and Files: NATIONAL PHYSICIAN FEE SCHEDULE AND RELATIVE VALUE FILES” Centers for Medicare & Medicaid Services, January 8, 2025, https://www.cms.gov/medicare/physician-fee-schedule/search/documentation (Accessed 2/10/25).
“Physician Reimbursement Under Medicare” By Alan M. Scarrow, MD, Neurosurgical Focus, Vol. 12, No. 4 (April 2002), p. 2.
“Medicare PFS Locality Configuration” Centers for Medicare & Medicaid Services, September 10, 2024, https://www.cms.gov/medicare/payment/fee-schedules/physician/locality-configuration (Accessed 2/10/25).
“Physician Reimbursement Under Medicare” By Alan M. Scarrow, MD., Neurosurgical Focus, Vol. 12, No. 4: Article 8 (April 2002), p. 2.
“Part B Payments: General Limits and Payment Rules” In “2009 Master Medicare Guide” CCH Health Editorial, Wolters Kluwer, 2009, p. 901.
“Medicare Access and CHIP Reauthorization Act of 2015” Pub. L. No. 114-10, § 101, 129 Stat. 87, 89-90.
“Calendar Year (CY) 2025 Medicare Physician Fee Schedule Final Rule” Centers for Medicare & Medicaid Services, November 1, 2024, https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2025-medicare-physician-fee-schedule-final-rule (Accessed 11/12/24).
“2025 Medicare Physician Fee Schedule Final Rule Deep Dive” American College of Cardiology, ACC News Story, November 7, 2024, https://www.acc.org/latest-in-cardiology/articles/2024/11/07/14/52/2025-medicare-physician-fee-schedule-final-rule-deep-dive#:~:text=The%20Centers%20for%20Medicare%20and,patient%20populations%20and%20services%20offered. (Accessed 2/18/25).
“Bipartisan lawmakers introduce bill boosting physician pay by 6.6% from April through December” By Dave Muoio, Fierce Healthcare, January 31, 2025, https://www.fiercehealthcare.com/providers/bipartisan-lawmakers-introduce-bill-boosting-physician-pay-66-april-through-december (Accessed 2/18/25); Letter from Cathleen Biga, MSN, FACC, ACC President, to Representatives Murphy, Panetta, Miller-Meeks, Bera, Miller, Ruiz, Joyce, Schrier, Tenney, and Krishnamoorthi:t, dated February 4, 2025, available at: https://www.acc.org//-/media/Non-Clinical/Files-PDFs-Excel-MS-Word-etc/2025/02/ACC-Letter-of-Support-for-Medicare-Patient-Access-and-Practice-Stabilization-Act-of-2025.pdf (Accessed 2/18/25).
