2025 Medicare physician payment schedule
The AMA has prepared acomprehensive summary of the 2025 Medicare Physician Payment Schedule finalrule (PDF). The CY 2025 Medicare conversion factor (CF) will decrease for the fifth straight year by approximately 2.83 percent from $33.2875 to $32.3465. This cut results from the expiration of a 2.93 percent temporary update to the conversion factor at the end of 2024 and a 0 percent baseline update for 2025 under the Medicare Access and CHIP Reauthorization Act. Unfortunately, the 2025 cut coincides with ongoing growth in the cost to practice medicine as CMS has determined that the increase in the Medicare Economic Index (MEI) for 2025 is 3.5 percent.
The Social Security Act (the Act) requires the Centers for Medicare & Medicaid Services (CMS) to establish payments under the Medicare Physician Payment Schedule based on national uniform relative value units (RVUs) that account for the relative resources used in furnishing a service. The Act requires that RVUs be established for 3 categories of resources:
- Physician work
- Practice expense (PE)
- Malpractice (MP) expense
CMS is also required to establish by regulation each year’s payment amounts for all physician services paid under the Medicare Physician Payment Schedule, incorporating geographic adjustments to reflect the variations in the costs of furnishing services in different geographic areas.
The Medicare Physician Payment Schedule’s impact on a physician’s Medicare payments is primarily a function of 3 key factors:
- The resource-based relative value scale (RBRVS)
- The geographic practice cost indexes (GPCI)
- The monetary conversion factor
Calculating the payment schedule
The Omnibus Budget Reconciliation Act of 1989 (OBRA 89) geographic adjustment provision requires all 3 components of the relative value for a service—physician work relative value units (RVUs), practice expense RVUs and professional liability insurance (PLI) RVUs—to be adjusted by the corresponding GPCI for the locality. In effect, this provision increases the number of components in the payment schedule from 3 to the following 6:
- Physician work RVUs
- Physician work GPCI
- Practice expense RVUs
- Practice expense GPCI
- PLI RVUs
- PLI GPCI
The formula for calculating payment schedule amounts entails adjusting RVUs, which correspond to services, by the GPCIs, which correspond to payment localities.
Calculating total RVU
Work RVU* x Work GPCI** + Practice Expense (PE) RVU x PE GPCI + Malpractice (PLI) RVU x PLI GPCI = Total RVU
Additional background
View the History of Medicare conversion factors (PDF).
View the History of Budget Neutrality (PDF).
Follow the fight for Medicare reform
Stay up to date on how the AMA is fighting to reform the Medicare payment system for physicians—delivered to your inbox.
