Medicare Payment

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

On September 11, 2023, The US Oncology Network submitted formal comments to the Centers for Medicare & Medicaid Services (CMS) in response to the CY 2024 Physician Fee Schedule (PFS) proposed rule. If implemented as proposed, the rule would lead to a 3.34% decrease in the conversion factor. This reflects the statutorily-required update to the conversion factor for CY 2024 of 0%, the one-time 2.5% increase for 2023 and the onset of the 1.25% increase for 2025 provided by the Consolidated Appropriations Act of 2023, as well as the statutory budget neutrality adjustment.

In its comment letter, The Network pointed out that this is the fourth consecutive year CMS has called for a reduction in the conversion factor and reimbursement under the physician fee schedule. While Congress has thankfully passed legislation to mitigate some (but not all) of these proposed cuts, inflation and practice expenses have continued to rise. The cost of staffing and interest rates also continue to grow. According to the American Medical Association, when adjusting for the full impact of inflation on practice costs, Medicare physician payment has declined by 26% from 2001 to 2023. 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 continued to increase. For CY 2024, CMS is proposing to increase OPPS payments by 2.8%. According to The Network’s internal analysis of the CY 2024 proposed rules, this translates to Medicare paying 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. Medical oncology has an even greater disparity, with OPPS rates for drug administration approximately 150% higher when provided in the hospital outpatient setting. This growing disparity across sites is unsustainable and incentivizes hospitals to acquire community cancer practices, forcing patients to receive care in a more expensive setting. This increases cost to the Medicare system and patients in the long run.  

Clearly, more needs to be done to protect the viability of independent physician practices. 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 read the Network’s comment letter to CMS on the proposed rule, CLICK HERE.

To read the final rule, CLICK HERE.

To read the stakeholder letter thanking the sponsors of H.R. 2474, which would provide a permanent inflation-based update to the PFS conversion factor, CLICK HERE.

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.


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.