Medicare & Medicaid

Medicare physician payment schedule

UPDATED . 3 MIN READ

2025 Medicare physician payment schedule

The AMA has prepared a summary of the 2025 Medicare Physician Payment Schedule proposed rule (PDF), along with an analysis of CMS’ impact assumptions (PDF) for proposed G-codes, the advanced primary care management services, and the proposed 90-day global surgical transfer of care policy.

The CY 2025 Medicare conversion factor (CF) is proposed to decrease for the fifth straight year by approximately 2.80 percent from $33.2875 to $32.3562. This cut is largely the result of the expiration of a 2.93 percent temporary update to the CF at the end of 2024 and a zero percent baseline update for 2025 under the Medicare Access and CHIP Reauthorization Act (MACRA). Unfortunately, these cuts coincide with ongoing growth in the cost to practice medicine as CMS projects the increase in the Medicare Economic Index (MEI) for 2025 will be 3.6 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:

Calculating the payment schedule

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Illustration of physician helping elderly patient

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).

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