Your Preview Guide to 2025 Medicare Reimbursements

Medicare reimbursement involves a complex series of rules, qualifications, and calculations, which change annually.

It’s critical for specialty practices to stay on top of each year’s changes so you can be prepared for how they might affect your bottom line.

This guide will address:

1. How Medicare Reimbursement Works

2. The Medicare Physician Fee Schedule

3. Proposed 2025 Changes to Medicare Reimbursement

4. How to Maximize Your Revenue from Medicare

5. The Future of Medicare Reimbursement

How Medicare Reimbursement Works

Medicare covers specific healthcare services for certain people, including those 65 and older and those with particular disabilities or diagnoses.

When healthcare providers in private practice serve Medicare beneficiaries, they submit a claim for the services provided. Medicare reviews these claims and determines a reimbursement rate.

The amount a provider is reimbursed can be affected by medical specialty, economic trends, legislative budgets, geographic location, performance on quality measures, and that year’s physician fee schedule.

Understanding the Medicare Physician Fee Schedule

What Is the Physician Fee Schedule?

The Medicare Physician Fee Schedule is a reimbursement table updated every year by the Centers for Medicare & Medicaid Services (CMS).

Medicare uses the schedule to determine how much to pay for private practice healthcare services, certain incidental services, and certain diagnostic tests and procedures.

It was first introduced in 1992 with a goal of ensuring fair compensation by standardizing payments across medical specialties and geographic locations.

Each year, CMS updates the Physician Fee Schedule based on input from healthcare providers, medical societies, and other stakeholders.

Proposed changes reflect advancements in medicine, market trends, cost data, recommendations from the American Medical Association, and legislative changes made by Congress.

Each summer, CMS announces changes being considered for the next year’s schedule. Stakeholders can submit feedback on the proposal during a public comment period.

Once the comment period has closed, CMS reviews the feedback and finalizes the new fee schedule. The updated schedule is released in November and takes effect Jan. 1.

To determine how much Medicare will reimburse, the physician fee schedule evaluates the value of services, the location of providers, and the fixed costs of operating a medical practice.

The formula for calculating Medicare reimbursement is (Work RVU x Work GPCI + Practice Expense RVU x Practice Expense GPCI + Malpractice RVU x Malpractice GPCI) x Conversion Factor.

You can find Medicare payment information for more than 10,000 specific services using the CMS Physician Fee Schedule Lookup Tool.

Components of the Medicare Physician Fee Schedule

Relative Value Units (RVUs)

Each service or procedure covered by Medicare is assigned an RVU, or Relative Value Unit. These units are meant to represent the resources it takes to provide that service.

RVUs are further broken down into subsets:

• Work RVUs account for the time, skill, and effort of the clinicians providing care.
• Practice Expense RVUs account for the overhead costs of running a practice, including rent, equipment, and payroll.
• Malpractice RVUs reflect the cost of malpractice insurance.

Resource-Based Relative Value Scale (RBRVS)

The Resource-Based Relative Value Scale, or RBRVS, is the scale used to determine RVUs.

The RBRVS follows a methodology that assigns weighted values to each service Medicare covers.

Conversion Factor

To convert RVUs into dollar amounts for reimbursement, Medicare uses a conversion factor.

This multiplier changes every year based on the Medicare Economic Index. The index measures changes in the cost of operating a medical clinic and considers the financial impact of legislative changes.

The proposed 2025 conversion factor is $32.36. This is about 93 cents less than the 2024 conversion factor.

Geographic Practice Cost Indices (GPCIs)

The physician fee schedule recognizes that the cost of operating a medical clinic is not the same all across the United States.

For example, rent and payroll are more expensive in New York City than in rural Montana. Reimbursing a doctor at a New York clinic at the same rate as a doctor in Havre would result in either the New York doctor being underpaid or the Montana doctor being overpaid.

To accommodate varying regional costs, Medicare adjusts RVUs based on geography. Geographic Practice Cost Indices, or GPCIs, allow for more equitable reimbursement rates across the country.

Medicare Reimbursement Changes Proposed for 2025

According to CMS, proposed changes to the physician fee schedule for 2025 are intended to advance health equity and support whole-person care. Some key changes include a reduction in Medicare reimbursement rates, new restrictions on telehealth services, and adjustments to MIPS and six new MIPS Value Pathways. The proposal also includes advance payments for ACOs, feedback solicitation on an ambulatory specialty care model, and a payment rate increase for ambulatory surgical centers in addition to annual updates to CPT and HCPCS codes. 

You can review the complete physician fee schedule proposal here, or take a tour of some highlights below.

Medicare Reimbursement Rates

Under the 2025 proposal, most providers will see a drop of 2.93% in their Medicare reimbursement rate, to $32.36.

Telehealth

Over the past four years, telehealth has been an industry changer. It allows physicians to see more patients in the same amount of time, shortens the time it takes for patients to get an appointment, and provides patients convenience and flexibility.

During the COVID-19 pandemic, Congress gave broad authorization to Medicare payments for telemedicine appointments. That authorization expires Dec. 31.

Unless Congress extends the authorization, as of Jan. 1, Medicare patients must be in a rural area and in a medical facility to receive non-behavioral telehealth services.

MIPS

Proposed changes to the MIPS scoring methodologies will help more clinicians achieve positive MIPS scores and higher Medicare reimbursement.

In addition, CMS proposes six new MIPS Value Pathways in 2025: ophthalmology, dermatology, gastroenterology, pulmonology, urology, and surgical care.

MIPS is the Merit-Based Incentive Payment System, which rewards practices for meeting quality criteria by reimbursing Medicare claims at a higher rate. MIPS Value Pathways, introduced in 2023, offer clinicians a streamlined way to participate.

Accountable Care Organizations (ACOs)

A proposed change to the Medicare Shared Savings Program would allow eligible ACOs to request an advance on earned shared savings. 

These advance payments are intended to promote investments in staffing, infrastructure, and services to patients on Medicare.

Additional changes to the program would require ACOs to adopt Alternative Payment Model Performance Pathway Plus quality measures, which are more extensive than the APP quality measure set many follow now.

The program would also adopt a new health equity benchmark adjustment and implement a new, more accurate methodology for Shared Savings Program financial calculations.

Ambulatory Specialty Care Coordination

CMS is soliciting feedback on the design of an ambulatory specialty care model. It is unlikely this model would become effective in 2025, but may be included in the 2026 proposal.

The intent of the proposed model is to increase the number of specialists providing value-based care to Medicare patients. The model would also incentivize collaboration between specialists and primary care providers.

Ambulatory Surgical Centers

Qualifying ambulatory surgical centers (ASCs) could see payment rates increase by 2.6% under the proposed fee schedule.

In addition, CMS is considering updated quality reporting requirements for ASCs.

Coding Updates for 2025

In a separate exercise from the physician fee schedule, CMS works with the AMA to make annual updates to CPT (Current Procedural Terminology) and HCPCS (Healthcare Common Procedure Coding System) codes.

The 2024 CPT book added 230 codes, removed 49, and revised 70. Though the 2025 code book has not been released, 34 new codes related to emerging technologies and procedures took effect early, in July.

To avoid coding errors, ensure your practice’s coding staff is certified and undergoes annual training. We also recommend using an intelligent coding and billing tool like Nextech’s integrated billing system, which is always up to date.

How To Maximize Your Revenue from Medicare Reimbursements

Frequent changes and updates can make Medicare reimbursement rates a volatile factor in a practice’s revenue stream. For most practices, diversifying their payer mix so they are not overly reliant on Medicare payments is a good strategy for stabilizing cash flow.

To maximize your Medicare revenue, carefully review each year’s proposed updates and strategize ways your practice could adapt. 

As changes are influenced by market trends and medical society recommendations, the proposal may indicate ways you could adjust your service mix to emphasize in-demand services with high potential for reimbursement.

Don’t neglect detailed documentation of patient visits and medical decisions; it can make a tremendous difference on the bottom line.

For example, one of the most common CPT codes charged to Medicare is 99213, an established patient office visit of low to moderate complexity. Under the current conversion factor, the RVU for 99213 is about $25.75.

However, if the visit uncovers an issue that requires more provider time or expertise to treat, it could warrant a higher-level code — which reimburses at a correspondingly higher rate.

Nextech’s specialty-specific EHR for dermatology, ophthalmology, plastic surgery, med spa, and orthopedic practices has a robust and user-friendly interface that prompts providers to record important details.

Easy-to-use coding and billing tools integrated into the EHR make it simple to submit accurate, detailed claims and maximize reimbursement.

The Future of Medicare Reimbursement

Since Medicare reimbursements update every year, it’s impossible to think too far ahead when creating strategies to adapt.

However, trends shaping Medicare reimbursements reflect broader trends in American medicine. By staying at the forefront of these developments, a practice can position itself to adapt nimbly to each year’s physician fee schedule changes.

Quality Of Care

CMS is placing a greater emphasis on value-based payment models that prioritize the quality of care over the volume of services provided.

This emphasis has taken the form of quality reporting programs like MIPS that tie reimbursement levels to a practice’s performance metrics.

In short: The better you document and prove the quality of the care you provide, the higher the rate at which the government reimburses you for services to Medicare patients.

Other patient-first strategies rising in prominence include care coordination and patient engagement. Practices that collaborate with other providers to coordinate care, and that actively engage patients in their own healthcare, are moving in the right direction.

Technological Adoption

CMS encourages practices to embrace rapidly evolving healthcare technology.

Comprehensive systems with integrated healthcare data analytics help prove quality of care by documenting a practice’s compliance with reporting requirements.

Other modern tools enable greater patient engagement, interoperability, and access to records, all goals CMS has previously said it wants to target.

Those practices already investing in tools like intelligent EHRs, telehealth platforms, and remote patient monitoring are well positioned to adapt to future updates.

Nextech helps specialty medical practices maximize revenues from Medicare, private insurance, and patient payments. At the same time, we help optimize your clinic’s efficiency so you keep more of what you earn.

Our specialty-specific tools for EHR and practice management include advanced data and analytics, tools for billing and coding, patient engagement features, telehealth capabilities, workflow optimization, and more.

To see what Nextech can do for you, schedule a demo.