Medicare Cuts Drive Orthopedic Practice Consolidation and Reimbursement Challenges

The orthopedic sector is facing a challenging financial landscape in 2026, driven primarily by Medicare reimbursement cuts and rising operational expenses. A 2.83% reduction in Medicare's conversion factor in 2025 contributed to a 3% decline in orthopedic surgeon compensation, despite surgeons maintaining high average salaries. Increasing labor and supply costs, which have surged significantly over the past decade, are intensifying financial pressures on physician-owned multispecialty practices. New and proposed payer policies, including further cuts to conversion factors and increased prior authorization requirements, are creating additional hurdles for orthopedic practices. These policies not only threaten practice viability but also delay patient care and are accelerating consolidation within the industry. Prior authorization processes, in particular, are criticized for their time-consuming nature without guaranteeing payment, impacting both providers and patients. The cumulative effect of reimbursement reductions, administrative burdens, and rising overhead is prompting orthopedic surgeons to rethink their participation in Medicare. While most continue to accept Medicare, the unsustainable trend of payment reductions amid inflation is especially concerning for rural and independent groups. These economic strains are contributing to an industry-wide shift toward consolidation as groups seek greater scale to manage financial challenges. Consolidation efforts are exemplified by entities like OrthoMidwest, formed through merging multiple regional practices to strengthen their market presence and resist economic pressures imposed by annual Medicare and Medicaid reimbursement cuts. Leaders emphasize that reimbursement trends are not aligned with the increasing costs of delivering musculoskeletal care, leading to ongoing financial headwinds. Medicare's current payment rates are deemed insufficient to cover the actual costs of common procedures such as outpatient total knee replacements, sparking concerns over patient access. Some surgeons have ceased accepting Medicare patients, and there is anticipation of growing access issues if reimbursement cuts persist. The orthopedic field is therefore at a critical juncture where reimbursement policies, cost dynamics, and consolidation trends will shape the future delivery of musculoskeletal services in the U.S.