The Medicare Patient Access and Practice Stabilization Act would, if passed, boost physician pay by 4.7%, replacing Medicare’s planned 2.8% pay cut.
A bipartisan bill introduced in the House aims to provide much-needed relief for physicians by proposing a pay increase to replace scheduled Medicare reimbursement cuts set to take effect in 2025.
The Medicare Patient Access and Practice Stabilization Act would give a 4.7% payment update in 2025 and eliminate the 2.8% Medicare physician payment cut that is set for January 1.
The bill, sponsored by Reps. Greg Murphy, R-N.C., and Jimmy Panetta, D-Calif.,
is designed to address the growing financial pressures on providers, especially physicians, who have faced years of stagnating reimbursements despite rising operational costs.
The Industry POV
At the core of this bill is a provision that would raise physician reimbursement rates under Medicare. In addition, it would delay or entirely block the automatic Medicare payment cuts triggered by the "Sustainable Growth Rate" (SGR) formula, which was originally implemented to control Medicare spending, but has since been criticized for threatening to undercut providers' financial stability. The cuts are scheduled for 2025 unless Congress intervenes.
The American Medical Association has been urging Congress to take action, emphasizing that Medicare reimbursement for physician services, when adjusted for inflation, has steadily declined 29% since 2001.
Jason Marino, director of congressional affairs at the American Medical Association, said in a statement: “We are ruffling some feathers in Washington. Some of them want to just give us a little fix, maybe reduce the cut a little bit, but still give us some cut and want us to go away. And this is not the time to shrink away. This is a time to be fully engaged with the Hill, with Congress and really push this issue.”
MGMA' Senior Vice President of Government Affairs Anders Gilberg also commented:
"We urge Congress to quickly return from recess to pass this critical legislation, stopping the full 2.8% proposed cut to the Medicare physician conversion factor and providing a modest inflation update for 2025. These annual cuts represent an ever-present creeping decline that threatens the viability of our nation's medical groups. The fact that physicians must rely on Congress each year for a last-minute payment fix underscores just how broken the Medicare reimbursement system is. Moving forward, Congress must enact permanent, commonsense reforms that enable medical groups to keep their doors open and protect patients' access to care."
In July, CMS proposed a 2.8% reduction in the conversion factor for the 2025 Medicare Physician Fee Schedule final rule.
On top of this, CMS projects a 3.6% increase in provider expenses for 2025, and physicians would be faced with a 6.4% cut, unless Congress intervenes.
The CFO POV
Considering the bill’s uncertain path through Congress, CFOs will need to prepare for multiple scenarios. If the bill is passed, CFOs should assess how the increased reimbursements will impact their financial projections, especially in terms of cash flow and budget forecasting.
Increased physician compensation could improve recruitment efforts and reduce turnover costs, but it may also lead to higher operational expenses, which need to be balanced against other revenue streams.
If the bill fails to pass and Medicare cuts are enacted in 2025, CFOs will need to have contingency plans in place. They could consider renegotiating contracts with Medicare Advantage plans, exploring alternative revenue streams, or looking into cost-saving initiatives like technology adoption or more efficient resource allocation.
Additionally, CFOs should keep an eye on the political landscape, as changes in policy could prompt rapid shifts in reimbursement rates or regulatory guidelines.
For many health systems, the increase feels like just a drop in the bucket.
We’re here once again. the Centers for Medicare & Medicaid Services has finalized a 2.9% pay increase for hospital outpatient services in 2025. This increase is based on the projected hospital market basket increase of 3.4%, and factors in less 0.5 percentage points for multifactor productivity.
The updates are aimed to result in an additional $2.2 billion in OPPS payments for hospitals in 2025 compared to 2024.
While this is a slight increase from the 2.6% proposed in July, much of the industry is crying out that it is simply not enough.
On the ball as always, the American Hospital Association is arguing that the slight pay bump is far below what hospitals need to have a chance at addressing today's operational challenges.
AHA Senior Vice President Ashley Thompson released a media statement saying:
“Medicare's sustained and substantial underpayment of hospitals has stretched for almost two decades, and today's final outpatient rule only worsens this chronic problem. The agency's final increase of less than 3% for outpatient hospital services will make the provision of care, investments in the healthcare workforce, and addressing new challenges, such as cybersecurity threats, more difficult. These inadequate payments will have a negative impact on patient access to care, especially in rural and underserved communities nationwide.”
While some health systems are gradually improving finances, many feel the increase is just not enough. And these sentiments seem appropriate given that nearly 40% of health systems are operating in the red, according to a Kaufman Hall report. Several factors are playing into the downward trend, including market positioning, payer mix, depth of outpatient services, wage inflation and pricey contract labor.
CMS' rule comes three months after the agency finalized a 2.9% pay increase for inpatient hospital payments in 2025.
Where Does This Leave CFOs?
For some CFOs, this adjustment could offer an optimistic outlook for budget forecasting. It could allow for more predictable reimbursement for services provided in outpatient settings, which is important to continue the shift toward more value-based, ambulatory care models. The rule could enable some CFOs to better manage cash flow, especially for outpatient-focused providers and those looking to expand their outpatient services.
While this increase is a step in the right direction, it still doesn’t solve systemic issues and greater operational challenges. The healthcare industry needs to look at deeper structural changes to combat rising costs.
As more procedures shift from inpatient to outpatient settings, the financial models for hospitals need to evolve rapidly.. CFOs must navigate these changes carefully, ensuring that outpatient departments remain financially viable in the face of stagnant reimbursement rates and rising costs.
Additionally, CFOs may need to carefully strategize to create sustainable financial balance and ride out operational challenges. One trend seen by some health systems is cutting contract labor where possible to improve earnings.
Medicare reimbursement rates and site-neutral payments also play into these complicated issues. Stay tuned for a deeper dive on these two additional contributing factors.
CFOs can play a big role in AI adoption and innovation.
AI has swiftly moved into healthcare and providers all over the country heap the benefits for their systems. But approaching AI adoption in the wrong way, like moving too fast, can have largely negative impacts.
Health systems can leverage their internal relationship with their AI tools to boost income and uncover new opportunities for growth, and CFOs can play a big role in helping their organizations utilize AI for financial growth.
Generative AI in particular can help health systems tighten the screws on a number of challenges such as patient engagement and supply chain improvements.
Here are four steps CFO can take to create a balanced AI adoption.
Kirsten Largent’s extensive finance experience positions her well to take on the role of chief financial officer.
As the healthcare landscape grows more complex each year, appointing visionary leaders can make all the difference.
Enter Kirsten Largent, the incoming Chief Financial Officer of OSF HealthCare, a nonprofit organization based in Illinois.
Largent will succeed Michael Allen as OSF’s CFO and has been with OSF for almost 31 years, holding a variety of positions, previously the senior vice president of financial operations.
She has worked to modernize the financial planning process and develop a long-range plan focused on financial risk assessment and debt capacity analysis. She also worked to redesign the capital allocation process to align capital decisions to long-range strategic and financial plans. Additionally, she established a governance council to function as the monitoring body of the capital process.
On OSF’s website the organization offers numerous health and wellness resources including blogs, nutrition facts, symptom checkers, interactive tools, and a health library.
“That preventive or wellness focus, I think really does dramatically improve patient outcomes,” Largent says.
She says the organization has really leaned into a value-based care model that’s focused on quality, which has helped reduce the cost of delivering care, something she plans to continue as she steps into her executive role.
An Innovative Mindset
Largent says innovation “is in our DNA” at OSF HealthCare, and that begins with understanding where technology can be used to improve financial operations.
“It’s helped us become more efficient, and also use that technology to personalize care in that holistic way,” she says.
Digital innovation has also helped OSF provide critical care access to rurally based patients.
“We have a lot of patients that live in a rural setting or patients that also have financial struggles,” she says. “So, providing that access to both those populations is an area focus for us in innovation.”
Largent says the organization currently uses some automation, mainly in revenue cycle, which has been a helpful in streamlining some operations, and the organization is also exploring how AI and other technology investments can improve operations.
“In my role as CFO I think I can support [my team] through deployment of resources for innovation, ensuring that we're allocating a proper amount of capital so that we're investing in those new technologies,” she says.
While using technology for improvement is one thing, Largent also plans to focus on long-term growth and financial sustainability.
“The foundation of our financial planning is a long-term financial plan. We set those long-term targets, and our focus has been to strengthen our balance sheet and then at the same time create capacity so we can invest in all our different strategic initiatives,” she says.
“We use it as a guide to make our investments in a way that's financially sustainable.”
Largent also knows that there’s no straightforward path to measuring a ROI for innovation. “Financial rewards for innovation come later, as it takes time to understand and embed innovation in our operations.”
Whether it’s a new building, or a new care setting, says Largent, the innovation wheels are always spinning at OSF.
“We always, as an executive team, ensure that we think about innovation as part of a new project.”
Boosting women's health outcomes also shows promising financial outcomes.
CFOs sit at the crossroads of clinical outcomes and financial sustainability, and women’s health has a major impact on both. When health systems prioritize women’s health, the effort emerges not only as a moral imperative but also as a strategic financial opportunity.
Women often suffer worse health outcomes than their male counterparts. With many more factors to consider, like longer life spans and more reproductive health care needs, women often require more intensive care.
However, that care is not always a given. Women are generally 20% to 30% more likely to be misdiagnosed than white men, and one study even found that women are 50% more likely to be misdiagnosed when having a heart attack.
This gap in women’s healthcare also totes some economic consequences. A report by McKinsey found that in 2020, for example, only 1% healthcare research and innovation
was invested in female-specific conditions beyond oncology. But according to that same report, every $1 invested in women’s health would return around $3 in economic growth.
With strategic investment and operational initiatives, CFOs have the opportunity to take the reins on women’s health, for financial and clinical success.
The CFO Playbook
Step One: Education
The first step towards tackling women’s health challenges is to acknowledge them. CFOs should start by recognizing where their organization stands by examining women’s care utilization, readmission rates and misdiagnoses.
Surveys among medical staff can also help paint the picture of women’s health in your organization. What challenges are physicians and nurses seeing in direct care? Take note and focus on the most solvable challenges.
Examine the opportunities for better education around women’s health by looking at what programs or tools that staff, as well as patients, can access to better understand the complexities of women’s healthcare. When medical staff better understand women’s healthcare, including diagnoses and symptoms, women patients are more likely to trust their doctor.
Step Two: Examine The Options
Once a health system has identified the challenge it can tackle, examine the options for doing so. Would specific services need more attention or might they work better as outpatient services? Would a third-party partnership make a difference? For example, CommonSpirit, UCSF Health, and Cedars-Sinai have all partnered with Tia to provide in-person and virtual care for women’s physical, mental, and reproductive health.
Would a specific technology help ease the challenge? Collaborating with CMOS and CNOS can help CFOs get the full picture on clinical outcomes, and collaboration with CTOs can help them decide where new tech might help. Be resourceful and examine all options.
Step Three: Invest
CFOs can set their organization up for success by investing in women's health initiatives. Whether that’s in research and data collection, education programs, clinical tools, or specialist staff. CFOs can create a framework to monitor investments and identify gaps and unmet needs.
Lastly, CFOs can focus on building initiatives to create better, more informed health outcomes for women. Creating a space for continued education for staff on women’s healthcare can be a simple initial solution. Better informed staff can create better clinical outcomes.
Another option is zooming in on current care models. Health systems can examine building new care models that work cohesively for women patients. One example is Kaiser Permanente, which developed the Cocoon Care Program in Georgia to reduce maternal morbidity and mortality.
Community Health Systems reported its third quarter income on October 23, coming in at $3.09 billion. The 69-hospital system saw minor growth since last year, but its earnings were notably dampened by some payer activity.
Despite higher patient volumes and growth in its ambulatory surgery center, CHS saw payer denials and downgraded coding affect its Q3 earnings. Additionally, the health system took a financial hit from operational disruptions and damage from Hurricane Helene last month.
"We are seeing some payers aggressively deny payment for medically necessary services that have been provided for our patients,” CHS CEO Tim Hingtgen told investors and analysts on the earnings call. “For several quarters now, the challenges that we and our industry are facing regarding increasing denial activity by payers has been well documented. And over the last few years, in response to this challenge, we have stood up an enhanced utilization review program and centralized physician adviser services to ensure our patients are placed in correct care status and that we receive appropriate payment for their care."
More than half of those denials and downgrades are from Medicare Advantage plans, Chief Financial Officer Kevin Hammons told investors on the call.
"While denial activity is not new, the tactics used by the payers have become more aggressive, and we have experienced an approximate doubling of denials in the quarter compared with the prior year, which is an increase above our expectations," he said. "This resulted in an approximate $10 million headwind for the quarter."
CHS logged a net loss of $391 million, a loss of $2.95 per share in Q3, a 330% decrease from a loss of $91 million, or a loss of 69 cents per share, in the same quarter a year ago, according to the report.
The Payer Problem
We’ve said it before and we’ll say it again: Payer denials are wreaking havoc across the healthcare landscape. With these more aggressive tactics, as well as AI powered solutions to deny care, payers are leaving providers scrambling.
Specifically, many Medicare Advantage plans operated by commercial payers are often taking less-overt avenues to deny care or delay reimbursement. A report by Kodiak Revenue Cycle Analytics hones in on one of these tactics.
Many health systems have created financial balance by reducing their contract labor costs. For CHS, the system’s contract labor spend decreased $4 million, bringing it to $41 million in the third quarter.
While tactics for dealing with payer challenges can be limited for providers, CFOs need to examine all available options. Some suggest conducting weekly payer meetings to ensure both parties have accurate up-to-date data and minimize the margin for error.
Providers can also use software to automate the prior authorization process, which can improve claim approval rates. One payer is jumping on this option to help ease the struggles of the prior authorization process. CFOs can also conduct regular internal audits to identify and correct coding and billing errors.
Investing in the right precautions is a key strategy.
Cyberattacks cost health systems millions every year, and they’re becoming more frequent. Now it’s more crucial than ever that all staff are educated and up-to-date on best cybersecurity practices in their organization. CFOs can get the ball rolling by examining strategic investments to protect their organization, as well as the ROI on these investments.
Check out these four tips for prioritizing cybersecurity as a CFO.
A partnership between Blue Shield of California and Salesforce aims to dilute some prior authorization struggles for providers.
Blue Shield of California is teaming up with Salesforce to ease the burden of prior authorization for providers.
The nonprofit health plan will aim to use its prior authorization platform solution on Salesforce Health Cloud to work within physician systems. The platform will gather relevant clinical data from EHRs and disparate systems, allowing members and physicians to get prior authorization in near real-time.
After a physician prompt, the platform will search a patient's EHR for relevant clinical information and compile an electronic document. Physicians will then be able to submit requests from their systems at that moment and members will receive answers during their medical appointments. Modifications or denials will always be made by a medical director or licensed clinician.
Testing for the platform will begin in early 2025, with limited rollout later in the year, and near real-time prior authorization will be available starting January 2026.
"As a practicing physician, I'm proud that we're taking on this challenge to build a solution that allows providers to focus on delivering care — why they became physicians in the first place — rather than adding to the administrative burden," said Ravi Kavasery, M.D., chief medical officer, Blue Shield of California, in a press release.
The Prior Authorization Battle
Prior authorization is one of the biggest challenges for providers, often leading to a long, tedious administrative process and worse health outcomes for patients. According to an annual survey by the American Medical Association, 78% of physicians say issues with prior authorization can lead to patients foregoing care.
Part of this challenge also stems from outdated and inefficient industry processes While new technology like AI and automation have played a role in streamlining industry processes, AI has also been used on the payer side to deny care.
Another question coming out of this partnership is: whether other payers will follow in the footsteps of Blue Shield of California or find other ways to ease the prior authorization process.
The CFO Toolkit
The partnership between Blue Shield of California and Salesforce, while innovative, is just a drop in the bucket compared to the prior authorization struggles of providers all across the country.
CFOs should still prepare for continuous claims struggles with payers, and ensure they are very carefully negotiating their system’s payer contracts and choosing the right payers for coverage. For some CFOs, implementing weekly payer meetings and conducting strict documentation has helped push back on some payer tactics for inappropriately denying care.
New data exposes aggressive tactics by payers for Medicare Advantage denials.
Hospital CFOs are in the crosshairs of aggressive Medicare Advantage (MA) payers, who are increasingly denying claims and bending the rules.
This tug-of-war between hospitals and payers isn’t just about paperwork—it’s a high-stakes battle impacting patient care, hospital revenue, and the financial sustainability of health systems. As denial rates for inpatient stays rise, CFOs must ramp up their strategies to combat rule-breaking payers and protect their bottom lines.
Now, new data from Kodiak Revenue Cycle Analytics reveals a disturbing trend: some MA payers are refusing to comply with CMS’s Two-Midnight Rule, leaving hospitals struggling to secure proper reimbursement. Kodiak examined claims data from more than 1,900 hospitals and 250,000 physicians across the country, collectively representing about $1.4 trillion in annual gross revenue.
The report examines payers who are not following the Two-Midnight Rule set by CMS to determine how to cover and pay health systems for care provided to Medicare beneficiaries.
The report reveals a wide variation in patient observation rates amongst health plans and wide variations in patient observations rates within a health plan type over time.
The Data
From this data, the report found four primary trends amongst Medicare, MA, and commercial health plans.
The observation rate for Medicare Advantage (MA) plans is significantly higher than traditional Medicare. MA plans seem to follow the Two-Midnight rule some of the time, but there is still a large gap and MA members are not getting the same inpatient coverage as traditional Medicare counterparts.
The data also shows that the observation rate for MA plans is falling, but so is the traditional Medicare observation rate. For MA plans, this decline reflects CMS’ requirement for them to follow the Two-Midnight Rule starting in January 2024. The biggest decline was in December 2023 when MA plans observation rates were at 19.0% to 15.0% in January 2024. This shows that commercial payers are beginning to adhere to the traditional Medicare guidelines for their MA members, resulting in fewer denials for inpatient stays.
For traditional Medicare, the rate is also unexpectedly falling, declining to 3.7% in June 2024, the lowest it's been in the past 18 months. Kodiak surmises that this rate could be coming from a more standardized provider approach to use the Two-Midnight rule, more accurate clinical documentation and more accurate provider coding. This low could also be coming from a higher percentage of Medicare patients that require inpatient care versus outpatient care as more care moves to ambulatory or virtual settings.
Lastly, the report found that the observation rate or commercial/managed care health plan is rising after a slight dip. The observation rate for these plans jumped from 15.0% in January 2024 to 18.5% in June 2024, marking a whopping 23.3% increase in just six months.
This jump shows a tense shift in payer claims behavior and is once again putting providers between a rock and aggressive inpatient denial tactics. This data also suggests, according to Kodiak, that payers are focused on commercial lines as a means to manage inpatient denial rates, possibly due to stricter Medicare regulations. Many of the largest commercial payers also make up the majority of the managed Medicare marketplace.
Despite the slight reduction in denials, there is still a much greater chance of MA members and their providers facing more inpatient denials for hospital stays compared to traditional Medicare members.
The CFO Playbook
A recent AHA report zoomed in on rising hospital administration costs, citing longer times and higher expenses in appealing and overturning inaccurate claims denials by MA plans as the primary cause.
Providers will need to reinforce their denial management practices and ensure their documentation and case reviews are optimized. Now is a critical time for providers to double down on this initiative to continue riding the momentum of the trending decrease in observation rate for Medicare members.
Providers have struggling with reimbursement for years now, and sticking to a sustainable strategy can be difficult. Some CFOs suggest conducting weekly payer meetings to ensure both parties have accurate up-to-date data and minimize the margin for error.
As denials rates increase year over year, CFOs and all finance executives will need to keep up with hardball payer tactics, and ensure they focus on reducing observation denials in MA while leveraging stability in observation denials in traditional Medicare.
The benefits of AI in healthcare are no secret. Health systems all over the country make use of AI to automate tasks, take on administrative work, reduce staff burnout, streamline operations, and optimize departments like revenue cycle.
But health systems can also leverage their internal relationship with their AI tools to boost income and uncover new opportunities for growth, and CFOs can play a big role in helping their organizations utilize AI for financial growth.
CFOs should collaborate with CTOs and other tech executives to ensure the AI they are using is solving a specific challenge in their organization. To do this, a deeper understanding of the technology is vital.
Generative AI in particular can help health systems tighten the screws on a number of challenges such as patient engagement and supply chain improvements. GenAI can identify subgroups of patients that are likely to respond to a specific treatment, but it can also analyze inventory levels, among other factors, in supply chains to help minimize risk.
But to successfully utilize GenAI, CFOs will need to focus on a few key actions.
Development costs
Firstly, CFOs will need to develop cost models to manage the unique cost structures of GenAI, which can be expensive to get started. This includes the costs for data acquisition, cleaning, licensing, partnering with AI engineering talent, and computing resources, both cloud-based and internal.
CFOs will need to carefully assess these costs and create a plan of how to amortize them over revenue streams to get to their desired return on investment. CFOs can align use cases with strategic financial goals and identify the most valuable opportunities for AI adoption.
Determining market needs
Health systems must be careful not to use AI simply for the purpose of using AI. CFOs will need to examine the specific needs of their market and ask the right questions. Does it encompass a large Medicare population? Is there a growing number of behavioral health patients? Are there reimbursement gaps?
After CFOs have developed a focus on a few key market populations and their needs, then they can determine where specific types of AI and automation can help and truly make a difference in the bottom line and patient outcomes. CFOs can utilize AI in the continuum of care by making use of programs that automatically follow up with the patient and offer additional resources for them to record symptoms and outcomes remotely.
Utilization balance
Even though AI can be majorly helpful for health systems looking to cut costs, CFOs must ensure that they don’t move too fast with AI adoption. To see a favorable ROI, CFOs must make sure all staff have thorough training with new AI programs and feel comfortable working alongside them.
Moving at a steady pace for AI adoption can also help with patient retention. Health systems must be open and transparent about their use of AI programs, or they risk losing the trust of some patients. An AI investment return may not be as significant if the organization loses patients who are confused or distrustful of AI practices.
