Ambitious efforts by some of the nation’s largest retailers to open health clinics nationwide have met with disappointing results, which underscore the precarious financial reality of care delivery today. And it sparks an obvious question for policymakers to consider: If retail giants can’t make today’s care delivery model work financially, how on earth can physicians in private practice?
The answer is we can’t, not with the annual Medicare payment cuts we’re asked to endure as they push us ever closer to the brink of financial collapse. This is why the AMA has made reforming our broken Medicare reimbursement system our top advocacy priority, and why we’re keeping the pressure on Congress until meaningful policy changes are made.
The retreat from in-store health care delivery by Walmart earlier this year is a dramatic example of an increasingly unstable health care reimbursement model. Walmart’s 51 in-store health care centers, along with its telehealth services unit, shut down at the end of June, although a division of Humana has announced plans to open primary care centers for seniors at 23 Walmart locations in the months ahead. Earlier this year, Walgreens posted a $6 billion loss on its VillageMD primary care clinic chain and outlined plans to shut down 160 of its locations, citing “recent changes in Medicare reimbursement” as a factor. CVS Health has closed MinuteClinic locations in Southern California and elsewhere.
As a physician in a small private practice in Louisville, Kentucky, I know firsthand how challenging (and also how rewarding) this profession is. Severe staffing shortages, unyielding financial pressures, demanding documentation, non-negotiable payor contracts and unreasonable audits—all these factors and more create the kind of business environment that force even mammoth enterprises like Walmart to step away from health care delivery as unsustainable.
AMA resources and advocacy
Supporting physicians’ practices is a core mission for the AMA, which works at every level of government policymaking to ensure patients receive the best evidence-based health care possible. Finally achieving the reform that the Medicare physician payment system so desperately needs is essential if we are to avoid jeopardizing access to critical health services. The current situation, which has persisted for years, nearly defies belief. Adjusted for inflation, Medicare physician payment plunged by 29% (PDF) from 2001 to 2024, just as nearly every other Medicare provider saw their reimbursement rate increase each year.
The lack of annual payment increases for physicians tied to the inflation rate stands in sharp contrast to the substantial boosts routinely awarded each year to hospitals, skilled nursing facilities and others who serve Medicare patients. The experience for physicians is just the opposite, as we must fight to lessen or delay round after round of payment cuts, year after year.
This summer, the Centers for Medicare & Medicaid Services (CMS) proposed a 2025 physician payment cut of 2.8%—while at the same time projecting a 3.6% rise in practice-cost inflation. If this holds, it will mark the fifth straight year physicians have had to absorb these egregious cuts. This is simply unconscionable, especially considering the essential role physicians play in the health and economic vitality of this country.
The ever-growing gap between what Medicare pays physicians and the costs physicians incur in delivering quality patient care must be addressed, and addressed now. Here are a few policies that underpin advocacy by the AMA and our partners in organized medicine:
- Congress must act to establish a permanent, annual Medicare physician payment update tied to the inflation rate so physicians can keep up with the rising cost of practicing medicine. The AMA continues to support H.R. 2474, the Strengthening Medicare for Patients and Providers Act, a bipartisan bill that would provide a permanent, annual update equal to the increase in the Medicare Economic Index, which measures practice cost inflation. This is not some radical proposal but rather simply pays physicians using the same logic used to update pay for hospitals.
- Federal budget neutrality policies must be overhauled to raise the threshold that triggers adjustments, and to prevent erroneous utilization estimates that cause inappropriate payment cuts. H.R. 6371, the Provider Reimbursement Stability Act, helps ensure the accuracy the Medicare physician fee schedule while requiring CMS to update key elements of direct practice costs at least once every five years.
- We need to replace unworkable and inefficient elements of the current Merit-based Incentive Payment System with a data-driven performance payment model, so that small, rural and underserved physician practices are not disproportionately penalized as they are now. Doing so would align program requirements with other CMS hospital value-based programs and simplify reporting by allowing cross-category credit.
- Congress should also act expeditiously to strengthen support for physician practices that wish to switch over to an alternative payment model (APM). We support S. 3503/H.R. 5013, the Value in Health Care Act, which will boost physician participation in APMs by extending incentive payments and freezing the current revenue threshold physicians must meet for bonus eligibility for an additional two years.
Despite setbacks, we’re confident that momentum is shifting toward significant Medicare reform. Thanks to our Fix Medicare Now campaign, multiple hearings on the Hill, significant media visibility, and persistent lobbying efforts, there is now broad acceptance from lawmakers that the current Medicare payment models don’t work. And there is growing support in Congress for Medicare reforms aligned with AMA’s recommendations that seek to put physicians on equal footing with all other health care providers.
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We need all our physician colleagues to lend your voice to our Fix Medicare Now grassroots campaign, which calls for a number of specific reform measures to create a rational Medicare payment system that safeguards patient access to high-quality care.
Reform protects patients
Physicians face the same types of financial pressures that make in-store health clinics an unsustainable proposition for organizations that have climbed to the top of the retail world highest position. For many years now, physicians have continued to place patients first while dealing with the precariously unstable path that the Medicare physician payment system has laid before them. The downward spiral of Medicare reimbursement has impact far beyond Medicare patients, as private payers and Medicaid plans routinely tie their contracts to the Medicare rate.
It is long past time for Congress to enact reforms that yield a Medicare payment structure that is financially stable and more predictable for both patients and physicians, a system that protects value-based care while safeguarding access to care where it is needed most. Failing to do so jeopardizes delivery of affordable and high-quality care to not only seniors, but to patients of all ages in every part of our nation.
