Skip to main content
The Keckley Report

The Physician Pay Rule in Context: Profession “Heal Thyself”

By November 7, 2022March 1st, 2023No Comments

Last Tuesday, the Center for Medicare and Medicaid Services (CMS) published its 2023 payment schedule for physicians along with changes in the Medicare shared savings program, outpatient, behavioral and home health services.

For physicians, the conversion factor used to calculate reimbursement will decline by 4.48% (-$1.55 to $33.06) in 2023. CMS explained that the conversion factor change accounts for expiration of the 3% increase in physician fee schedule payments for 2022 as required by the Protecting Medicare and American Farmers From Sequester Cuts Act as well as the budget neutrality adjustment for changes in relative value units.

Predictably, this announcement was met with opposition from key groups including the American Medical Association, American Medical Group Association, Medical Group Management Association and others calling the reduction shortsighted. And even if this cut is prevented, they reminded regulators and policymakers that providers will also still be subject to a separate 4% statutory Medicare payment cut next year. Will these happen? Not likely.

Congress has prevented cuts like these in the past and is expected to do so again, but circumstances this time for physicians are different:  

·        The majority (70%) of physicians are employed by hospitals or private equity-backed investors, so these cuts amount to lost revenues and margins for their organizations. As a result, physicians will put pressure on their employers for a “fix”. In tandem, employed physicians in these organizations will be more attentive to executive compensation in the C suites.

·        The economy is hurting. Inflation is at a 40-year high and the healthcare workforce is reacting. Nurses and allied health professionals are forcing union votes. Hourly workers are pressing for higher wages and benefits. The economic pressures on American households facing higher costs for food and fuel include the majority in the healthcare workforce who work beside physicians daily. They’re aware of how much physicians make relative to the teams they depend on.

My take:

Physicians have legitimate grievances: annual adjustments by CMS like this one coupled with insurer reimbursement cuts are frustrating. Revenue increases are more than offset by higher operating costs for staff and supplies and getting ahead seems out of reach for most.

But public debate about physician compensation is risky for physicians . High compensation and occupational respect are mainstays of the profession. The public’s trust in its physicians, nurses and pharmacists remained strong throughout the pandemic but positions taken by its specialty groups and boards against expanded scope of practice opportunities for nurses and pharmacists, price transparency, accountability for diagnostic inaccuracy and protectionism against alternative modalities, behavioral and dental health run counter to populist preferences for high value care. Growing exposure about physician compensation will inevitably lead to closer scrutiny. Consider:

·        “Income is up from the previous year for most physicians, but some of that growth is compensating for income decline in 2020. Overall, physicians made an average of $339K, with specialists making 41.5% more (at $368K) than primary care physicians (at $260K). However, PCPs are making 7% more than they were the previous year, which is nearly the same compensation increase specialists experienced over the same period.” (MGMA)

·        Average pay was up 3.8% in 2021 compared with the 6.2% 12-month inflation rate determined by the Consumer Price Index. (Doximity)

·        Physician income is volatile and varies widely by specialty, state and practice setting: The year-to-year compensation rate by specialty changed anywhere from -13.8% for cardiologists to 20.7% for plastic surgeons (Modern Healthcare’s 28th annual Physician Compensation Survey).

·        The median physician income for primary care and surgical specialists is widening (Sullivan Cotter).

·        The median income for all physicians is 458% higher that of the average wage in the U.S. working population—15% higher than corporate exec’s, 43% higher than lawyers, 376% higher than teachers and nurses and 840% higher than the 4.8 million home care and personal health aides.(Bureau of Labor Statistics). And these differences are even higher for specialists and surgeons.

Healthcare is at a crossroad. Physicians are caught in the crossfire of policies to lower health costs and capital necessary to transform the system from specialty care and volume-based incentives to value and wellbeing.

It’s understandable that physicians resent intrusion in their profession and think they’re underpaid and over-regulated. But less defensible is the profession’s protectionist policies limiting the contributions of other professionals and discounting the potential for self-care.

The CMS pay rule is in the books and physicians will adapt as they grouse. But long-term, the profession’s role, influence and day-to-day business practices need fresh attention beyond issues of how it is compensated.


PS: Tomorrow is election day…finally! Regretfully, healthcare system transformation is not expected to be a major factor in the vote. By contrast, it’s the industry at the center of the government’s solvency and debt ceiling debate soon to follow. Stay tuned.



2022 physician salary report: Doctors’ compensation rebounding post pandemic Comp Health June 21, 2022

May 2021 National Occupational Employment and Wage Estimates

The doctors paid the most (and the least), charted Advisory Board April 19, 2022

Physician compensation benchmarks to navigate the transition from volume to value MGMA May 25, 2022 / transitiontovalue

OCTOBER 2022 Physician Flash Report Based on Data From More Than 200,000 Employed Physicians and Advanced Practice Providers In More Than 100 Specialties Kaufman Hall November 3, 2022

Shannon Firth Doc Groups Unhappy With 4.5% Cut in the 2023 Medicare Fee Schedule Final Rule MedPage Today November 2, 2022

Fact sheet: CY 2023 Physician Fee Schedule Final Rule


Regulatory Guidance

CMS bumps up hospital outpatient payments: Last Tuesday, the Centers for Medicare and Medicaid Services announced plans to increase hospital outpatient provider reimbursement by $6.5 billion next year in its 2023 Outpatient Prospective Payment System final rule.

The regulation also offered more detail on the agency’s rural emergency hospital program, which will offer a 5% Medicare reimbursement boost for covered outpatient services and an average facility fee payment of nearly $3.3 million next year if rural hospitals eliminate their inpatient beds, among other conditions of participation in the program. Medicare beneficiaries will not be charged a copayment on the additional 5% payment.

The rule also updated 340B payments, after the Supreme Court sided with the American Hospital Association in its challenge of the proposed pay cuts. Medicare next year will restore the default rate—the average sales price plus 6%, rather than the average sales price minus 22.5% that took effect Jan. 1, 2018. CMS is still figuring out how to apply the Supreme Court’s decision to prior calendar years, the agency said in the rule.

Also in the rule, CMS established permanent Medicare payments for hospital outpatient department clinicians who provide behavioral health services remotely to patients in their homes.

The agency will remove 11 services from the inpatient-only list, a list of around 1,700 services Medicare would only pay for on an inpatient basis due to the complexity of the procedure, the underlying physical condition of the patient or the need for at least 24 hours of postoperative recovery time. CMS began a three-year phaseout in 2021 by removing 298 services from the list, but reversed course late last year after heavy lobbying from hospital and physician associations over safety concerns.


CDC: One out of every eight deaths in Americans ages 20 to 64 resulted from drinking too much alcohol: Nationally, 12.9% of total deaths per year among adults in this age group were attributed to excessive alcohol consumption from 2015 to 2019, and that number rose to 20.3% of total deaths per year when restricted to people ages 20 to 49. Other findings:

·        Alcohol-attributed deaths ranged from 9.3% in Mississippi to 21.7% in New Mexico and were more common among men than women (15% vs 9.4%).

·        Compared with 2019, death rates involving alcohol as an underlying or contributing cause of death increased during the first year of the COVID-19 pandemic in 2020, including among adults aged 20 to 64 years.

Estimated Deaths Attributable to Excessive Alcohol Use Among US Adults Aged 20 to 64 Years, 2015 to 2019 JAMA Network Open November 1, 2022

CDC updates opioid guidance: Background: Opioid prescribing increased fourfold from 1999 to 2010 in parallel with an approximately fourfold increase in overdose deaths involving prescription opioids, according to CDC data. Subsequent crackdowns on prescription opioids led to prescriptions outside hospitals falling 44% in the eight years to 2020, according to preliminary federal data. In some cases, patients cut off from prescriptions turned to the illicit market where potent bootleg fentanyl has taken over much of the heroin and pill trade. Opioid overdose deaths nearly tripled in that time span and moved even higher in 2021.

Last Thursday, The CDC said in the first update to its opioid guidelines since 2016 that doctors shouldn’t abruptly stop prescriptions for patients on high opioid doses in particular and should ensure they are receiving appropriate care. Physicians aren’t obligated to follow the CDC’s guidelines.


CDC: Telemedicine Use Among U.S. Adults: In the last 12 months:

·        37.0% of adults used telemedicine in the past 12 months. (42% of women vs. 32% of men)

·        29.4% among adults aged 18–29 used telemedicine vs. 43.3% among adults aged 65 and over.

CDC, October 2022

FDA Study: Accelerated approval for new drugs increasing: In this cross-sectional study of 581 FDA-approved pairs of novel drugs and indications, use of expedited development and review programs increased from 42.3% of pairs in 2008 to 74.5% in 2021. Of approved drug-indication pairs using at least 1 expedited program, 62.0% were orphan drugs, 69.8% were biologics, and 60.2% were small-molecule drugs. “The study showed that use of the FDA’s expedited programs to bring novel drugs to market in the US increased from 2008 to 2021. The findings suggest that this trend is likely to continue”

Monge et al Use of US Food and Drug Administration Expedited Drug Development and Review Programs by Orphan and Nonorphan Novel Drugs Approved From 2008 to 2021 JAMA Netw Open. 2022;5(11):e2239336. doi:10.1001/jamanetworkopen.2022.39336

CMS updates ACO’s to jumpstart participation: Last week, the Centers for Medicare and Medicaid Services (CMS) finalized changes to the Medicare Shared Savings Program (MSSP) that covers 11 million people with Medicare and 500,000 healthcare providers.

The major changes: new payments for new ACOs to use to support their participation in the program, incorporating health equity adjustment to ACO scores, revising the benchmarking methodology and giving ACOs more time before being hit with downside risk.

In response, NAACO replied: “Today’s finalized changes to Medicare’s largest ACO program bring a win to patients and will absolutely help providers deliver accountable care to more beneficiaries…However, we remain concerned with CMS’s use of a prospectively projected administrative growth factor for ACO benchmarks or their financial spending targets. “


NAACOS Praises Positive Changes for ACOs in Final CMS Rule


Labor Department October Jobs Report: The US added 261,000 payrolls in October vs. median estimate of 205,000 but below September (315,000). The unemployment rate rose to 3.7% from 3.5% suggesting the labor market remains robust despite recession fears.

·        Average hourly earnings, a proxy for wage growth, rose by 0.4% in October–faster than the prior month (+ 0.3%).

·        The share of people working or looking for work (labor force participation rate), was 62.2% vs. 62.3% in September

Payroll employment increases by 261,000 in October; unemployment rate rises to 3.7% Bureau of Labor Statistics November 4, 2022

Federal Reserve raises rate:  Wednesday, the central bank added with a fourth-straight 0.75% lending rate rise to a range of 3.75% to 4%, its highest level in 15 years. It’s the 6th increase this year

Federal Reserve

Health Status

Study: disability prevalence high in prison population: Disabled people are disproportionately incarcerated and segregated from society through a variety of institutions. Using data from the 2016 Survey of Prison Inmates, researchers estimated disability prevalence in state and federal prisons. Findings:

·        66% of incarcerated people self-reported a disability, with Black, Hispanic, and multiracial disabled men especially overrepresented in prisons.

·        Compared with nondisabled incarcerated people, disabled incarcerated people were more likely to have previously resided in other institutions, such as juvenile detention facilities and psychiatric hospitals.

The Links Between Disability, Incarceration, And Social Exclusion Health Affairs October 2022

Policy, Advocacy

Coalition voices opposition to Pasteur Act: A coalition of academics and advocacy groups is urging Congress not to pass the Pasteur Act which would encourage antibiotic drug development by creating a subscription-style business model in which the U.S. government offers upfront payments to drugmakers in exchange for unlimited access to their antibiotics to reward drug companies for developing new treatments The rationale is to enable pharmaceutical companies to recover their costs and make an appropriate profit without having to sell large volumes of antibiotics.

Background: Per the CDC’s 2019 data, resistance to antibiotics caused an estimated 2.8 million infections and 35,000 deaths annually. The coalition’s objections center on its price tag ($6 billion) and questions about the likelihood of disproportionate inaccessibility in older and sicker populations

Ed Silverman A ‘blank check’: Bill to boost antibiotic development blasted as a ‘flawed’ giveaway to pharma Nov. 4, 2022

Study: Texas abortion law results in fewer abortions: Researchers analyzed the result of the September 2021 implementation of a Texas law prohibiting abortion after detectable embryonic cardiac activity associated with changes residents’ use of in-state and out-of-state facility-based abortion care. Findings:

“In this interrupted time series analysis of 80 ,107 abortions obtained between September 2020 and February 2022, Texas’ law was significantly associated with a decrease in Texas facility–based abortions (incidence rate ratio [IRR], 0.43), an increase in Texas residents obtaining out-of-state abortions (IRR, 5.38), and a decrease in total in-state and out-of-state abortions (IRR, 0.67) in September 2021 compared with August 2021.”

White et al Association of Texas’ 2021 Ban on Abortion in Early Pregnancy with the Number of Facility-Based Abortions in Texas and Surrounding States JAMA. Published online November 1, 2022. doi:10.1001/jama.2022.20423

Study: Opioid abuse coverage in Medicaid FFS higher than managed Medicaid: Public health academics analyzed coverage and prior authorization (PA) policies for medications for opioid use disorder (MOUD) vary across Medicaid fee-for-service (FFS) programs and managed care organization (MCO) plans and across state. Findings:

“In this cross-sectional study of 266 Medicaid MCO plans and 39 FFS programs, FFS programs offered more generous MOUD coverage, but a higher percentage of FFS programs-imposed PA than MCO plans. Although most Medicaid MCO and FFS beneficiaries were enrolled in a plan that covered MOUD, approximately 50% were subject to PA.”

Abraham et al Coverage and Prior Authorization Policies for Medications for Opioid Use Disorder in Medicaid Managed Care JAMA November 4, 2022 doi:10.1001/jamahealthforum.2022.4001


AHA: Hospitals increasingly frustrated with payers: Per AHA’s survey of 304 representatives of 772 hospitals in 47 states:

·        78% said their relationships with commercial insurers are getting worse vs.1% who said relationships had improved.

·        84% said the cost of complying with insurer policies is increasing, and 95% reported increases in staff time spent seeking prior authorization approval.

·        7 of 10 hospitals reported an unpaid insurance claim from 2016 or earlier

Survey: Commercial Health Insurance Practices that Delay Care, Increase Costs Infographic AHA

CMS penalizes 2,273 hospitals for high readmissions: CMS evaluated two and a half years of readmission cases for Medicare patients through the Hospital Readmissions Reduction Program and penalized 2,273 hospitals (43% of total hospitals) that had a greater-than-expected rate of return, according to a Nov. 1 report from Kaiser Health News. The average payment reduction was 0.43%, the lowest rate reduction since 2014. Reductions will be applied to each Medicare payment to the affected hospitals from Oct. 1 through next September 2023 costing hospitals $320 million.  75% of Medicare-assessed hospitals were penalized. 

Background: The Hospital Readmissions Reduction Program began in 2012 in the Affordable Care Act. It measures the frequency with which Medicare patients at most hospitals return within 30 days and lowers future payments to hospitals that had a greater-than-expected rate of return by up to 3% of each Medicare payment for a year.


CHQPR: rural hospitals at risk: Across the U.S., a total of 631 rural hospitals — or about 30 percent of all rural hospitals — are at risk of closing in the immediate or near future due to persistent financial losses on patient services, inadequate revenues to cover expenses, and low financial reserves, according to a report from the Center for Healthcare Quality and Payment Reform.


Hackensack General Catalyst Deal: Hackensack Meridian Health is the latest hospital system to partner with venture capital firm General Catalyst. Hackensack is General Catalyst’s fifth health system partner joining Jefferson, HCA and Intermountain among others.

Alex Kacik Hackensack Meridian Health partners with General Catalyst Modern Healthcare November 1, 2022


Pitchbook: Walgreens-owned VillageMD is in talks to merge with Summit Health in what could be a more than $5 billion tie-up, Bloomberg reported this week. Summit is backed by Warburg Pincus and owns CityMD. “The news puts another retailer’s push into healthcare in the spotlight after Walmart, Amazon and CVS grabbed headlines earlier this year. Walgreens’ efforts stand out because of the retailer’s clear emphasis on whole-population, value-based care—in contrast to rival retail pharmacy chain CVS, whose recent M&A activity has a Medicare Advantage bent. “

Rebecca Springer Summit Health deal could supercharge Walgreens in retail healthcare race Pitchbook November 1, 2022

FL Medical board takes action to limit transgender programs for youth: Two Florida medical boards approved a new rule Friday that bans gender transition procedures for minors. The state’s Board of Medicine and Board of Osteopathic Medicine moved to prohibit surgeries and giving puberty blockers and hormone therapies for children with gender dysphoria. The initiative follows an August request from Florida Surgeon General Joseph Ladopo to prohibit gender reassignment procedures for minors.

New York Post November 7, 2022

AMA analysis: Health insurance markets highly concentrated: Large health insurance companies dominated the commercial and Medicare Advantage markets in 2021, with consolidation shrinking competition and inflating premiums, the American Medical Association reports in its annual study released last week. Other findings:

·        Three-quarters of metropolitan areas lacked a competitive commercial health insurance market, 2% less than the year before. In 91% of regions, a single insurer held at least 30% of the commercial markets,

·        Competition was even weaker in the Medicare Advantage market: 79% of the 380 metropolitan statistical areas surveyed were “highly concentrated.” Vs. 87% in 2018. A single carrier enrolled more than half of the Medicare Advantage members in 34% of markets last year.

American Medical Association’s (AMA) 2022 edition of Competition in Health Insurance: A Comprehensive Study of US Markets November 7, 2022

Elevance Poll: Consumers Embrace Virtual Primary Care: The online poll of more than 5,000 adults, 32% of whom say they’ve accessed virtual primary care, was commissioned by Elevance Health (formerly Anthem, Inc.,) and conducted in March 2022 by The Harris Poll. Key findings:

·        82% of Americans feel their health is excellent or good

·        63% are living with or managing chronic health conditions.

·        62% managing chronic conditions say virtual primary care could help them take charge of their health.

·        For those who haven’t used telehealth, 31% say they prefer in-person visits, while 21% say they’re not sure if it’s covered by their insurance. 

·        41% of people with a primary healthcare doctor want to see more use of digital communication, such as text messages or emails.

What Consumers Want from Virtual Primary Care – Findings Elevance Health October 31, 2022

Health insurers

Commonwealth survey: out of pocket cost limits, additional benefits primary factors in Medicare Advantage choice: The Commonwealth Fund’s 2022 Biennial Health Insurance Survey examined why seniors why chose MA or traditional Medicare, and where they received information. Findings:

·        24% respondents cited additional benefits and out of pocket cost limits as their reason for choosing MA compared to 40% choosing traditional Medicare cited provider choice as their primary reason.

·        Respondents that received help to choose their plans relied primarily on an insurance broker for Medicare (30%) and MA (31%).

Traditional Medicare or Medicare Advantage: How Older Americans Choose and Why Commonwealth October 17,

Cigna-Centene partnership sets stage for mega-competition: In its third quarter earnings call last Thursday, Cigna said it will spend $200 million next year to integrate its Express Scripts services into Centene’s 20 million enrollee benefits. Cigna won the business from CVS Health’s Caremark, Cetene’s current PBM, which sets the stage for escalating competition between national insurers offering broad based services to Medicare and Medicaid managed care plans.

Cigna’s membership increased 5.5% to 17.9 million, driven by growth in the commercial segment and partially offset by a decline in government enrollees, which the company attributed to the divestiture of its Texas Medicaid business last year. 

Cigna’s Centene PBM deal to ding 2023 earnings Modern Healthcare November 3, 2022