On November 1, 2024, CMS released the Medicare Physician Fee Schedule (PFS) final rule. Among other changes, the rule updates the conversion factor for physicians, makes changes to Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs), extends certain telehealth flexibilities, makes changes to improve payment accuracy in the PFS, and updates provisions related to the Medicare Shared Savings Program (MSSP) and Quality Payment Program (QPP). Below is a high-level summary of 10 takeaways from provisions included in the final rule.
1. Conversion Factor
As anticipated, the final rule reduces the PFS conversion factor from $33.29 in calendar year (CY) 2024 to $32.35 in CY 2025 (-2.8%). This reflects the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) required update of 0.0%, the expiration of the 2.93% increase in the conversion factor Congress passed for 2024 only, and a budget neutrality adjustment.
As in prior years, many in Congress are interested in mitigating the cut. More than 200 members of the House have urged Speaker Mike Johnson and Minority Leader Hakeem Jeffries to address the 2.8% cut.1 Legislation has been introduced that would tie annual payment updates in the Medicare PFS to the Medicare Economic Index (MEI) (H.R. 2474, H.R. 10073) and revise the budget neutrality requirements (H.R. 6371).
What ultimately passes to reduce the reduction in the conversion factor—if anything—likely depends on the available offsets to reduce the net cost of increasing physician payments. The final CY 2025 MEI is 3.5%. Healthcare organizations should not assume Congress will provide an update to the conversion factor that fully accounts for growth in practice expenses. Instead, given that the physician enterprise is an underperforming asset for many organizations, they should continue exploring performance improvement opportunities.
2. Rural Health Clinics (RHCs)
Effective for cost reporting periods beginning on or after January 1, 2025, the final rule removes the RHC productivity standards.
The final rule also makes changes to the RHC Conditions for Certification (CfCs). The new CfCs:
- Expand Opportunities for Workforce Deployment: Instead of being “primarily engaged” in furnishing primary care services, the new CfCs only require that RHCs provide primary care services.
- Remove Lab Services: Removes the requirement that RHCs must directly perform hemoglobin and hematocrit (H&H) and examination of stool specimens for occult blood from the list of laboratory services.
Moving away from the requirement of greater than 50% primary care services allows RHCs to expand access to specialist services, make better use of clinic space, and pursue provider-based conversions. Additional details on the opportunities created by this change are discussed here.
3. Federally Qualified Health Centers (FQHCs)
For CY 2025, CMS rebases and revises the FQHC market basket update (MBU) to reflect a 2022 base year and makes changes to the cost weights and price proxies. This results in a final FQHC MBU of 3.4% (4% MBU, less 0.6% Affordable Care Act mandated productivity adjustment).
4. Telehealth
For CY 2025, CMS redefines “interactive telecommunications system” to include two-way, real-time, audio-only communication technology for any Medicare telehealth service furnished to a beneficiary in their home if the distant site physician or practitioner is technically capable of using an interactive telecommunications system, but the patient is not capable of—or does not consent to—the use of video technology.
In addition, the final rule extends certain flexibilities related to telehealth for CY 2025. These include:
- Practice Address: Allows providers to report their practice address instead of their home address when services are delivered virtually from home.
- RHCs & FQHCs: Can continue billing for services furnished using telecommunication technology by reporting Healthcare Common Procedure Coding System (HCPCS) code G2025 (including services furnished using audio-only communications) through December 31, 2025.
- Virtual Supervision: Provides for direct virtual supervision via real-time audio and visual interactive telecommunications technology.2
- Frequency Limits: Suspends the frequency limitations for subsequent inpatient and nursing facility visits and critical care consultations.
- Resident Supervision: Allows teaching physicians to provide virtual supervision for services furnished by residents in all teaching settings, but only when the service is furnished virtually.
CMS does not believe it has the flexibility to extend the waivers of originating site and geographic restrictions beyond December 31, 2024. While Congress likely will extend these flexibilities in the year-end budget bill, providers should catalog where they are using them to deliver care and develop processes to comply with their expiration should Congress fail to act.
5. Global Payment Accuracy
For all 90-day global surgical packages, in instances in which a provider expects to furnish only the surgical procedure portion of the global package, CMS finalizes a policy that expands the applicability of the transfer of care modifier (54). CMS also finalizes the use of HCPCS code G0559 to bill for post-operative care services furnished by a practitioner other than the one who performed the surgical procedure.
6. Radiopharmaceuticals Provided in Physician Offices
CMS clarifies that Medicare Administrative Contractors (MACs) shall base payment limits for radiopharmaceuticals furnished in settings other than hospital outpatient departments on any methodology (including invoice-based pricing) used to determine payment limits for radiopharmaceuticals in place on or prior to November 2003.
7. Clinical Laboratory Fee Schedule
CMS revises the data reporting period and phase-in of payment reductions for clinical laboratory tests under the Clinical Laboratory Fee Schedule per statutory requirements. The Continuing Appropriations and Extensions Act of 2025 (CAEA) delayed the data reporting period until January 1, 2026 through March 31, 2026. However, it did not change the date of the collection period. The legislation also limits the payment reduction to 0% in 2025 and 15% for the years 2026 through 2028.
8. Overpayment Reporting Time Frame
Under certain circumstances, the final rule suspends the 60-day deadline for reporting and returning Medicare Parts A and B overpayments. In qualifying instances, the 60-day period is suspended until the provider’s investigation is concluded and overpayments are calculated or (if earlier) 180 days after the initial date the overpayment was discovered.
Compliance teams will need to carefully review the changes in the Affordable Care Act Overpayment Reporting Requirements and revise their policies and procedures to make sure they adhere to the new timelines if suspected overpayments are discovered.
9. Medicare Shared Savings Program (MSSP)
Among other changes, the final rule aligns MSSP quality reporting with the “Universal Foundation” measure set, streamlines reporting types, implements a health equity adjustment to the benchmark, and creates a policy for removing fraudulent billing from MSSP expenditures. Below is a summary of each of these items.
- Align Measure Set: CMS establishes the Alternative Payment Model Performance Pathway (APP) Plus to align with the Universal Foundation measure set that was adopted last year. The finalized measure set includes the current six measures. Five new measures from the Adult Universal Foundation will be added between CY 2025 and CY 2028.
- Streamline Reporting: Starting in performance year 2027, CMS is limiting the collection types to report the APP Plus quality measure set to electronic clinical quality measure (eCQM) and Medicare CQM. Merit-based Incentive Payment System (MIPS) CQM will be available in performance years 2025 and 2026. To support the transition, CMS is extending the eCQM reporting incentive to 2025 and subsequent performance years.
- Health Equity Benchmark Adjustment: For agreement periods beginning on January 1, 2025, CMS will provide a health equity adjustment to the benchmark of qualifying ACOs. The adjustment is based on the proportion of assigned beneficiaries enrolled in the Medicare Part D low-income subsidy or who are dually eligible. Qualifying ACOs will receive the highest of three possible benchmark adjustments: prior year savings, positive regional adjustment, or health equity.
- Removing Fraudulent Expenditures: As proposed, CMS will remove payment amounts from expenditures, revenue calculations, and historical benchmarks used to reconcile ACO performance in instances in which “significant, anomalous, and highly suspect” billing activity is identified.
10. Quality Payment Program (QPP)
CMS maintains the current performance threshold at 75 points for the CY 2025 performance period/2027 MIPS payment year. It also maintains 75% completeness criteria through the 2028 performance year/2030 payment year. The agency estimates the median positive adjustment will be 1.31% while the negative adjustment will be -1.48% in performance year 2025/payment year 2027.
CMS finalized six new MIPS Value Pathways (MVPs) for the CY 2025 performance period. These include ophthalmology, dermatology, gastroenterology, pulmonology, urology, and surgical care. Modifications to the previously finalized MVPs are limited and include the consolidation of two neurology-focused MVPs into a single neurological MVP.
If you have questions about the CY 2025 Medicare PFS final rule and how it may impact your organization, please reach out to a professional at Forvis Mazars.