Spine practices have weathered years of reimbursement pressure by finding somewhere else to make up the difference.
They have increased volume, improved efficiency, shifted cases outpatient and added ancillary revenue. But recent Becker’s reporting suggests each of those strategies has a ceiling as reimbursement continues to fall and the cost of delivering care rises.
Medicare physician payment declined 33% in inflation-adjusted terms from 2001 to 2025, according to data from the American Medical Association. CMS’ proposed 2027 Medicare Physician Fee Schedule would lower the conversion factor another 1.68% for most clinicians, while CMS estimates orthopedic surgery payments could decline an additional 7% from proposed relative value unit and coding changes.
The significance of another cut, then, is not just its size. It is where it lands, on practices that have already spent years finding ways to compensate for what previous cuts took away.
Cuts compound while costs reset higher
A reimbursement reduction does not lower the cost of the staff, space and supplies needed to deliver care.Brandon Hirsch, MD, an orthopedic spine surgeon at DISC Sports and Spine Center in Newport Beach, Calif., told Becker’s that staff wages, rent, malpractice premiums and supply costs are rising as physician payments decline, creating what he described as an increasingly unsustainable environment for independent practices.
Douglas Beall, MD, illustrated the gap through Medicare’s conversion factor. The factor was about $31 in 1992. Adjusted for inflation, he estimated it would be $71.61, compared with $33.56 when he spoke with Becker’s. “Reimbursement has largely stayed the same,” Dr. Beall said, while practice operating costs have increased substantially.
The result is cumulative. Practices are not starting from the same financial baseline each time reimbursement falls. Higher operating costs become the new baseline, while another payment reduction is layered on top.
Volume has a ceiling
Greater productivity is one way practices have responded to lower reimbursement, but some surgeons say that strategy eventually reaches a limit. Peter Derman, MD, an endoscopic and minimally invasive spine surgeon in Dallas, told Becker’s that rising practice costs and declining payments for smaller procedures eventually made maintaining his focus on endoscopic techniques unsustainable within the traditional insurance model. He said his alternatives included performing more large surgeries, seeing extremely high patient volume or changing the payment model. Dr. Derman ultimately transitioned his practice to direct pay.
The underlying math extends beyond one practice: When reimbursement per service falls, practices must compensate through greater volume, lower expenses or revenue elsewhere in the care episode.
Collecting the same dollar requires more work
Reimbursement pressure is also increasingly about what it costs a practice to secure payment in the first place. Christopher Yeung, MD, of Phoenix-based Desert Institute for Spine Care, told Becker’s nearly every surgical case at his practice requires prior authorization and about 30% are initially denied. Depending on the payer, another 10% to 15% of charges are denied after surgery, requiring appeals and reprocessing. His practice has invested in specialized authorization and revenue-cycle staff to manage that workload.
Alex Vaccaro, MD, PhD, president of Philadelphia-based Rothman Orthopaedics, called prior authorization the “single largest uncompensated administrative burden” on a musculoskeletal practice. He pointed to the cost of dedicated staff, delayed care, disrupted surgical schedules and longer accounts receivable when approved cases are later denied.
The financial effect can be easy to miss: A practice may ultimately collect the reimbursement, but only after spending more staff and physician time to obtain it.
Outpatient migration changes where the money sits
As more spine care moves outpatient, practices are looking beyond the surgeon’s professional fee for revenue. Recent Becker’s reporting found ASC ownership remains one of the clearest ways spine groups can participate in revenue beyond professional fees. Practices are also expanding imaging, physical therapy, pain management, durable medical equipment and other services around the patient’s episode of care.
John Peloza, MD, founder and owner of Peloza Spine in Chesterfield, Mo., described declining physician reimbursement as “death by a thousand cuts.”
“You’ve got to have other sources of revenue streams,” he told Becker’s, pointing particularly to facility ancillaries.
ASC ownership can allow physicians to participate in facility economics as procedures migrate outpatient, but building ancillary revenue streams also requires capital and infrastructure. The strategy therefore does not offer the same opportunity to every practice.
Efficiency gains eventually run out
Spine practices are also turning to operational efficiency and technology to offset financial pressure. Todd Albert, MD, surgeon-in-chief emeritus at New York City-based Hospital for Special Surgery, told Becker’s that organizations are becoming more disciplined about operational efficiency, expanding ambulatory and value-based models and using technology, including AI, to reduce administrative burden and improve productivity as costs rise.
But efficiency gains do not change the underlying reimbursement trajectory. Staffing, technology, supplies, malpractice coverage and regulatory requirements continue becoming more expensive, several spine leaders told Becker’s.
That means practices can streamline workflows and increase productivity, but those savings must continually offset costs that keep resetting higher.
The consequences are becoming harder to hide
For some surgeons, the financial pressure has already driven larger changes in practice structure. Quentin Durward, MD, a neurosurgeon at The Center for Neurosciences, Orthopaedics & Spine in Dakota Dunes, S.D., told Becker’s private practice neurosurgery became financially untenable for him despite generating more than $800,000 annually in receipts. As overhead consumed a growing share of those receipts, he ultimately became an employee of his group practice.
Thomas Scully, MD, a neurosurgeon at Northwest NeuroSpecialists in Tucson, Ariz., said his more than 20-year private practice closed four years ago and its physicians became hospital employed. He said the loss of a hospital call-pay stipend had a significant effect on the practice’s finances and became the “final nail” in its private practice model.
Peter Whang, MD, professor of orthopedics and rehabilitation at Yale University School of Medicine in New Haven, Conn., told Becker’s that practice margins are already “razor-thin” and warned the proposed Medicare reductions could threaten the viability of practices treating Medicare patients.
Those examples have different endpoints, but they point to the same problem: less financial room to absorb another cut.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
