Impact of Medicare Participation on Orthopedic Practices
Amid rising financial concerns, many independent orthopedic and musculoskeletal practices are reevaluating their Medicare participation. Key industry professionals cite declining physician fee schedule payments and growing administrative burdens as catalysts for these shifts, pushing practices toward mergers or hospital employment, and limiting Medicare patient intake.
In a recent communication with the House Energy and Commerce Subcommittee on Health, the American Alliance of Orthopaedic Executives (AAOE) emphasized the financial strain. With a membership of over 1,300 spanning 660 practices, the AAOE detailed the challenges posed by Medicare payment reductions in a letter dated May 19.
Key Financial Trends Impacting Practices
Since 2001, Medicare physician payments have experienced a 33% decrease after inflation adjustments, as noted by both the AAOE and the American Medical Association (AMA). Additionally, physicians are uniquely excluded from automatic annual inflationary updates, unlike other Medicare provider categories.
Furthermore, compliance with the Merit-based Incentive Payment System demands considerable time and resources, averaging 53 hours annually and approximately $12,800 per physician. Limited relevant quality measures for specialists exacerbate these issues, prompting calls for Congress to align annual reimbursements with the Medicare Economic Index.
Another significant factor is the payment disparity between hospital outpatient departments and physician offices. The facility-fee structure allows hospital departments to receive about 60% higher Medicare payments for equivalent services, raising overall program costs and driving patient shifts to hospital settings.
The Centers for Medicare & Medicaid Services (CMS) recently confirmed a 3.26% increase in the nonqualifying APM conversion factor for 2026, set at $33.40, and a 2.5% efficiency adjustment based on Medicare Economic Index productivity. The AMA has voiced concerns about potential negative impacts on patients and private practices.
In 2025, 23 physician practices reportedly closed, with more closures and consolidations projected for 2026. Among them, Dr. Corey Welchlin closed his long-standing independent practice in Minnesota due to the Affordable Care Act and increased local consolidation, highlighting a trend toward hospital system affiliations, private equity, or management service organizations.
These pressing topics will be addressed at Becker's 23rd Annual Spine, Orthopedic, and Pain Management-Driven ASC + The Future of Spine Conference from June 11-13 in Chicago. The event will include sessions focused on the latest in minimally invasive techniques and outpatient care strategies.