For a growing number of independent orthopedic and musculoskeletal practices, Medicare participation is becoming a financial liability rather than a sustainable line of business. Practice leaders cite steady erosion of physician fee schedule payments, mounting administrative requirements and prior authorization burdens as the forces pushing groups toward consolidation, hospital employment or limiting Medicare patients altogether.
In a May 19 letter to the House Energy and Commerce Subcommittee on Health, the American Alliance of Orthopaedic Executives, which represents more than 1,300 members across 660 practices, warned that Medicare physician payment has fallen sharply in real terms while practice operating costs continue to rise.
Here are five numbers behind the orthopedic exit from Medicare:
1. 33%. Medicare physician payment has declined 33% in inflation-adjusted terms since 2001, according to AAOE’s letter to Congress. The American Medical Association cited the same figure in its May 20 statement to the subcommittee, noting that physicians remain the only Medicare provider category without an automatic annual inflationary payment update.
2. 53 hours and $12,800. Physicians spend an average of 53 hours each year on tasks tied to the Merit-based Incentive Payment System, and compliance costs roughly $12,800 per physician annually, according to AAOE. Orthopedic leaders have argued the burden is compounded by the limited number of specialty-relevant quality measures available under the program. AAOE has urged Congress to tie annual Medicare reimbursement updates to the Medicare Economic Index to create more predictable adjustments.
3. 60%. Hospital outpatient departments currently receive about 60% higher Medicare payments than physician offices for similar services because of facility-fee differences, according to coverage of CMS’ 2026 site-neutral payment proposal. The disparity is what makes Medicare’s reimbursement structure ultimately more expensive for the program: as independent groups reduce Medicare exposure, patients shift toward hospital outpatient settings reimbursed at higher rates than physician-owned practices for many of the same services.
4. 3.26%. CMS finalized a 3.26% increase to the nonqualifying APM conversion factor for 2026, bringing it to $33.40. The rule also includes a 2.5% efficiency adjustment tied to Medicare Economic Index productivity calculations. The AMA said portions of the final rule “may have unintended consequences for patients and private physician practices.”
5. 23. Becker’s tracked 23 physician practice closures in 2025, with additional shutdowns and consolidations continuing in early 2026. Among them: Corey Welchlin, MD, closed his 36-year independent orthopedic practice in Fairmont, Minn., earlier this year, citing the cumulative impact of the Affordable Care Act, COVID-19 and rising local consolidation. Practices that have not closed are increasingly opting for hospital employment, private equity backing or physician-led management services organizations such as Latham, N.Y.-based Evolve Orthopedic Partners, which launched in August 2025 with Albany, N.Y.-area OrthoNY as its foundational partner.
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