Medicare Payment

The Physician Fee Schedule Must be Updated to Meet Today’s Needs

On September 6, 2022, The US Oncology Network submitted formal comments to the Centers for Medicare & Medicaid Services (CMS) in response to the CY 2023 Physician Fee Schedule (PFS) proposed rule. If implemented as proposed, the rule would lead to a 4.4% decrease in the conversion factor at a time of unprecedented challenges.

In its comment letter, the Network pointed out that the 4.4% cuts are extremely harmful to community cancer care providers as the United States faces the highest inflation rate in over 40 years (9.1 % as of June 2022). The Network cited a recent Avalere analysis that found that the conversion factor has increased a mere 12.5% since being introduced in 1992, while overall inflation has soared by 101.9% during the same period. The failure for the PFS to keep up with inflation, and its failure to account for the costs of many specialized oncology resources, make it difficult for community oncology practices to remain financially sustainable. 

The Network pointed out that the proposed PFS, if finalized, would exacerbate the payment disparities across sites of service since the rates governed by the Hospital Outpatient Prospective Payment System have actually been increasing. As a result, Medicare currently spends roughly 50% more for the exact same radiation oncology services provided in the hospital outpatient setting than those provided in an independent oncologist’s office. The Network states that the growing disparity across sites is unsustainable, encourages vertical integration, hurts patients’ access to care, and actually increases cost to the Medicare system and patients in the long run.  

The Network, in coordination with over 100 other physician advocacy groups, urged Congress to stop these looming payment cuts and was pleased that the year-end spending bill addressed many of these concerns. H.R. 2617 was signed into law on December 29, 2022 and includes provisions that provide a 2.5% bump to the PFS conversion factor for 2023, a 1.25% bump to the PFS conversion factor for 2024, a 1-year extension of the Advanced APM bonus (reduced from 5% to 3.5%), a 1-year delay in clinical lab reporting and payment cuts, and prevents a new 4% Medicare sequester from taking effected, related to the statutory Pay-As-You-Go (PAYGO) Act requirement.

However, this legislation only provides a temporary fix. The Network looks forward to working with Congress, CMS, and other physician stakeholders to find a long-term solution that stabilizes Medicare payment and accounts for rising inflation.

To learn more about The Network’s recommendations on how to stabilize the Medicare payment system and increase provider participation in value-based payment models: CLICK HERE.

To read an op-ed from Dr. Marcus Neubauer, The Network’s Chief Medical Officer, warning that Medicare payment cuts will lead to further consolidation in community oncology, CLICK HERE.

To read the stakeholder letter urging Congress to stop the Medicare cuts, CLICK HERE.

To read the Network’s comment letter to CMS on the proposed rule, CLICK HERE.

To read the CMS summary of the CY2023 PFS final rule, CLICK HERE.

To read the Avalere study on how statutory management of healthcare inflation impacts providers, CLICK HERE.


In 2011, Congress enacted the Budget Control Act of 2011 which applied a mandatory 2% sequester cut to Part B drugs. Additionally, when the ASP+6% formula was first introduced, Congress required that the prompt pay discounts that pharmaceutical manufacturers extend to distributors for timely payment be included in the calculation of ASP, further lowering the reimbursement centers receive.

As a result of the sequester cut and the prompt pay inclusion, the true amount that community cancer centers receive for administering Part B drugs is equivalent to approximately ASP+2.3% – and that’s if the centers are able to obtain drugs at ASP in the first place. Many small and rural community cancer centers are unable to leverage the buying power of larger centers and end up paying higher than ASP to acquire certain drugs.

Unfortunately, Congress keeps extending the sequester as a way to prevent other scheduled cuts to the Medicare program. While there was a temporary suspension to sequester payment cuts in response to the COVID-19 pandemic, the full 2% sequester returned on July 1, 2022 and is scheduled to run through June of 2032.

There are several ways that the Administration and Congress can act to avoid the most devastating sequestration impacts. CMS has the authority to exempt cancer drugs from the sequester cut or to apply the 2% sequester cut only to the 6% services payment. Additionally, Congress can pass legislation to exclude prompt pay discounts from the calculation of ASP.