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Rising Costs, Falling Reimbursements
January 21, 2025 by Megan Boyd

Medicare reimbursement cuts are threatening the stability of physicians and the healthcare system as a whole. For the fifth consecutive year, Centers for Medicare and Medicaid Services (CMS) has reduced physician pay, cutting reimbursement by 2.83% for 2025. Meanwhile, inflation and operational costs continue to rise, leaving many practices struggling financially to stay open. The American Medical Association (AMA) and other industry organizations have raised concerns, advocating for payment updates tied to the Medicare Economic Index (MEI) to better reflect the actual costs of providing care.  

As reimbursement decreases, acquiring new equipment, retaining staff, and accepting new Medicare patients become increasingly difficult. This financial squeeze is especially hard on practices operating in rural and underserved areas. The strain affects not only physicians but also patient access to care. The statistics are staggering: from 2013 to 2022, the supply cost per full-time employee in physician-owned multispecialty practices increased by 82 percent, according to a report by the Medical Group Management Association (MGMA).   

While Congress did not provide any relief in the 2024 year-end continuing resolution, swift action is needed in the coming weeks and months. The current trajectory is unsustainable. Aligning reimbursement rates with inflation and actual care costs is crucial. 

For additional context on recent legislative actions affecting Medicare reimbursement, read our earlier blog post on the American Relief Act of 2025 and its impact on physicians. To dive deeper into the challenges physicians face, explore our comprehensive white paper.  


For more information about this and other issues impacting healthcare, check out our podcast. 

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