Six Ways to Offset the 2.83% Medicare Physician Pay Cut

Maintaining financial stability and improving operating margins has always been a challenge in healthcare. Now, rising healthcare costs and a 2.83% physician pay cut for calendar year (CY) 2025 make this task even more daunting. Fortunately, there are ways healthcare providers can address financial challenges. However, doing so takes a proactive approach centered on collaboration, enterprise-wide buy-in, and C-suite support. 

Tackling Medicare physician pay cuts, promoting a hospital revenue growth strategy. Consider the following six strategies to enable hospital revenue growth during times of increased healthcare costs and payment cuts:

1. Explore new revenue opportunities.  While the CY 2025 Medicare physician fee schedule final rule includes Medicare physician pay cuts, it also embraces many new medical codes, including those for caregiver training, advanced primary care management, cardiovascular risk assessment and management, and more. All of these newly billable services can contribute to the overall hospital revenue growth strategy.

In addition, on January 1, 2025, the Centers for Medicare & Medicaid Services (CMS) began to pay for evaluation and management (E/M) visit complexity add-on code G2211 when the same provider performs it on the same day as an annual wellness visit, vaccine administration, or certain Medicare Part B preventive services. In 2025, E/M complexity add-on code G2211 pays a national average payment of $15.53 with a work relative value unit of 0.33. Be sure to review Transmittal 13015 for more information about the payment change and a list of applicable Part B preventive services with which G2211 can be billed.

2. Rethink patient collection strategies. When patient balances continue to linger, perhaps it’s time for healthcare organizations to restrategize. For example, it might be time to offer flexible payment plans, promote price transparency, double down on up-front collections, or leverage the patient call center in new and innovative ways to engage patients.

3. Follow-up on old accounts receivable (A/R). According to the American Hospital Association, 50% of hospitals and health systems have more than $100 million in A/R for claims that are older than six months. This old A/R not only impacts hospitals’ cash flow; it also weakens their ability to weather the avalanche of cost increases they continue to face. Devoting resources to A/R follow-up with the goal of reducing old A/R will be critical in the year ahead and beyond as Medicare physician pay cuts continue.

4. Reduce labor costs, when possible. Labor, on average, accounts for about 60% of a hospital’s budget, which is why it’s important to reduce these costs, when possible, as part of an overall hospital revenue growth strategy. In the revenue cycle, there are countless opportunities to do this through outsource partnerships—particularly those that leverage offshore talent. 

Outsourcing one or more aspects of revenue cycle management helps organizations save on one of the biggest employee costs: Healthcare. The average annual premiums for employer-sponsored health insurance in 2024 were $8,951 for single coverage and $25,572 for family coverage, and costs continue to increase. Even despite measures like moving staff to remote work environments, organizations continue to incur costs related to at-home office equipment, professional development training, and other increasingly important benefits like retirement matching and paid parental leave. Working with the right offshore outsource partner can greatly reduce these costs while simultaneously providing high quality output.

5. Optimize operational efficiencies.  Streamlining administrative processes to reduce waste will also be important as organizations looks for ways to offset the Medicare physician pay cut. In the revenue cycle, this may mean standardizing workflows and leveraging automation and other efficiency-boosting technologies. It may also mean revisiting revenue cycle quality and productivity metrics to ensure best practices and compliance. The same is true for patient call center performance metrics. 

6. Transition to value-based payment models. While annual Medicare physician pay cuts are predictable in fee-for-service payment models, value-based payment models are just the opposite. With the latter, providers have the potential to generate more revenue by providing high-quality patient care. Risk adjustment coding plays a significant role in these efforts, and it will be increasingly important to hire medical coders with risk adjustment coding experience—and/or partner with outsource vendors that do the same.

Looking ahead
These proactive strategies help providers navigate the financial challenges associated with the Medicare physician pay cut to promote the hospital revenue growth strategy. However, as healthcare costs continue to rise, the time to act is now. Learn how Global Healthcare Resource can help.