Medicare Physician Fee Schedule (PFS)
Model Summary
Medicare Physician Fee Schedule (PFS)
Overview
The Physician Fee Schedule is the payment system governing approximately 1.3 million physicians and clinicians billing Medicare Part B. CMS updates the PFS annually, typically effective January 1 (calendar year basis). The PFS rule sets the conversion factor, relative value units (RVUs), geographic adjustments (GPCIs), telehealth policy, and quality program requirements including MIPS and MSSP. It is the single most impactful annual rule for physician practices, ACOs, and value-based care organizations.
Conversion Factor Trend (CY 2020-2025)
| Year | Conversion Factor | Change | Statutory Update | Notes |
|---|---|---|---|---|
| CY 2020 | $36.09 | -- | -- | Baseline |
| CY 2021 | $32.41 | -$3.68 (-10.2%) | 0.00% | E/M revaluation budget neutrality offset |
| CY 2022 | $33.59 | -$1.30 from effective* | 0.00% | *Effective CY 2021 CF was $34.89 after +3.75% Congressional patch |
| CY 2023 | $33.06 | -$1.55 from effective* | 0.00% | *Effective CY 2022 CF was $34.61 after +3% supplemental |
| CY 2024 | $32.74 | -$1.15 (-3.4%) | -1.25% | From CY 2023 CF of $33.89 |
| CY 2025 | $32.35 | -$0.94 (-2.83%) | 0.00% | Expiration of +2.93% temp increase |
The conversion factor has declined every year from $36.09 (CY 2020) to $32.35 (CY 2025) — a cumulative drop of $3.74 (-10.4%) over five years. Congress has provided temporary patches (3.75% for CY 2021, 3.0% for CY 2022, 2.93% for CY 2024) that inflated the effective CF, but each expired the following year causing renewed drops. The 0% statutory update has been the norm, meaning physician payment fails to keep up with inflation (the MEI was 3.8% in CY 2023 alone).
E/M Code Transformation Timeline
| Year | Key E/M Policy |
|---|---|
| CY 2021 | Major overhaul: New office/outpatient E/M coding framework. G2211 (visit complexity add-on) finalized but Congress suspended payment until 2024. |
| CY 2022 | Split/shared visit policy refined. Teaching physician clarifications. |
| CY 2023 | E/M overhaul extended to inpatient, observation, ED, nursing facility, home visits. MDM or time replaces history/exam for code selection. |
| CY 2024 | G2211 goes live (suspended since 2021). Recognizes complexity of primary/longitudinal care. |
| CY 2025 | G2211 expanded (billable same day as AWV, vaccines). New APCM services (G0556-G0558): 3-level bundled primary care management based on chronic condition count. |
MSSP / ACO Growth Trajectory
| Year | ACOs | Assigned Beneficiaries | Key Policy Change |
|---|---|---|---|
| CY 2021 | ~477 | ~10.7M | COVID accommodations; telehealth attribution |
| CY 2022 | ~456 | ~10.4M | Repayment mechanism reduced 50% |
| CY 2023 | ~460 | ~10.6M | Advance Investment Payments; BASIC glide path extended to 7 years; health equity quality adjustment |
| CY 2024 | ~470 | ~10.8M | Negative regional adjustment eliminated; V28 HCC phase-in; 760K+ new assignable beneficiaries |
| CY 2025 | 480 | 10.8M+ | Prepaid Shared Savings; Health Equity Benchmark Adjustment (HEBA); goal: 100% Traditional Medicare in accountable care by 2030 |
The MSSP has grown from a plateaued ~456 ACOs in CY 2022 to 480 ACOs covering 10.8M+ beneficiaries (nearly 50% of Traditional Medicare) by CY 2025. This growth was driven by:
- Advance Investment Payments (AIP): $250K one-time + quarterly payments for new low-revenue ACOs
- Eliminated negative regional adjustment: Removed the penalty that discouraged ACOs in historically efficient regions
- Health Equity Benchmark Adjustment (HEBA): Upward benchmark adjustment for ACOs with 15%+ LIS/dual-eligible beneficiaries
- Prepaid Shared Savings: New option for ACOs with savings history, with at least 50% directed to beneficiary services
Telehealth Policy Evolution
| Year | Status |
|---|---|
| CY 2021 | Maximum flexibility. Category 3 (temporary) created. Audio-only codes established. RPM clarifications. |
| CY 2022 | PHE services extended through December 2023. Audio-only for mental health (with modifier). |
| CY 2023 | Extended through 151 days post-PHE. PTs, OTs, SLPs, audiologists authorized. |
| CY 2024 | All PHE telehealth services continued through December 2024. Non-facility rate for home telehealth. |
| CY 2025 | Statutory flexibilities largely expired. Audio-only permanently allowed for home beneficiaries. Virtual direct supervision permanent for select services. |
MIPS Quality Standards for MSSP ACOs
| Year | Key Quality Policy |
|---|---|
| CY 2022 | 30th percentile quality standard maintained; CMS Web Interface extended |
| CY 2023 | Sliding scale replaces all-or-nothing; +10 bonus health equity points |
| CY 2024 | Medicare CQM collection type; V28 HCC phase-in (67%/33%) |
| CY 2025 | APP Plus quality measure set (6 measures growing to 11 by PY 2028); SDOH and immunization measures phasing in |
Behavioral Health Coverage Expansion
- CY 2023: General supervision for incident-to behavioral health services
- CY 2024: Marriage and Family Therapists (MFTs) and Mental Health Counselors (MHCs) covered under Part B for first time. Psychotherapy for crisis at 150% of non-facility rate.
- CY 2025: Safety planning intervention codes. Digital mental health treatment devices. Post-discharge telephonic follow-up.
Other Quantifiable Milestones
| Data Point | Year | Value |
|---|---|---|
| Specimen Collection Fee | CY 2023 | Increased from $3 to $8.57 |
| Colorectal Screening Age | CY 2023 | Lowered from 50 to 45 |
| Colorectal Coinsurance | CY 2030+ | Phases to 0% (from 20%) |
| AIP to New ACOs | CY 2025 | $20M+ to 19 new ACOs |
| Traditional Medicare in ACOs | CY 2025 | ~50% (goal: 100% by 2030) |