As Medicare reimbursement continues to fall while costs rise, orthopedic practices are confronting the most challenging margin environment in more than a decade, one that is influencing consolidation, altering surgeon participation in Medicare and reshaping the future of musculoskeletal care.
Industry leaders say 2026 will bring both opportunity and structural strain for five key reasons:
1. Medicare’s 2025 fee schedule cut is directly contributing to a 3% drop in orthopedic surgeon pay: Orthopedic surgeons remained among the highest-earning physicians in 2025 at an average annual salary of $543,000, but compensation fell 3% year over year as Medicare reduced its conversion factor by 2.83%.
Leaders warn the cuts are unsustainable amid rising labor and supply costs, which climbed 82% per full-time equivalent from 2013 to 2022 in physician-owned multispecialty practices.
“We’re just having to fight more every day for the same dollar,” Andrew Lovewell, CEO of Columbia (Mo.) Orthopaedic Group told Becker’s.
2. Orthopedic surgeons are bracing for new and proposed payer policies that could further reduce reimbursement and strain practice economics: Across commercial and government payers, surgeons face new conversion factor cuts, prior authorization hurdles and rising overhead costs — pressures that threaten practice stability and delay patient care.
Leaders warn these policies are accelerating consolidation and worsening access.
“Prior authorization consumes endless time and phone calls with no guarantee of payment. It does nothing for the patient or the doctor,” Klaud Miller, MD, medical director of Windy City Orthopedics and Sports Medicine in Chicago, told Becker’s.
3. Medicare reimbursement cuts are tightening 2025 practice margins — and may prompt more surgeons to reconsider Medicare participation: CMS’ 2.83% reduction to the 2025 physician fee schedule conversion factor adds to rising overhead, prior authorization hurdles and prepayment reviews. These pressures, surgeons warn, are delaying care, straining sustainability and accelerating consolidation.
While most surgeons remain in Medicare, leaders say continued cuts could make participation harder to maintain as inflation and operating costs outpace reimbursement growth.
“Medicare plans to pay us less while costs go up,” American Medical Association president Bruce Scott, MD, told Becker’s, calling the trend unsustainable for rural and independent groups.
4. Medicare fee schedule cuts are accelerating consolidation as orthopedic groups seek scale to endure rising costs: With healthcare costs climbing faster than reimbursement, orthopedic leaders say consolidation has become one viable path for independent groups.
OrthoMidwest — formed in 2023 through the aggregation of Chicago-based Midwest Orthopaedics at Rush, Rockford-based OrthoIllinois and, later, Peoria, Ill.-based OSF Health — is expanding its footprint to withstand economic pressure, including Medicare and Medicaid cuts, and annual CMS reimbursement changes that are not tracking with the growing cost of practicing medicine.
“Pricing and insurance reimbursement usually either stays the same or goes the opposite direction relative to the cost of business. … With Medicare cuts, Medicaid cuts and CMS changes on an annual basis, we’re still seeing headwinds related to reimbursement,” Brian Cole, MD, managing partner at Midwest Orthopaedics at Rush, told Becker’s.
5. Medicare’s current payment levels are already inadequate for many joint procedures — raising concerns that more surgeons may stop accepting Medicare: Orthopedic leaders warn that Medicare reimbursement no longer covers the true cost of high-volume procedures such as outpatient total knee replacements, even in best-case, low-complication scenarios.
Some surgeons have already stopped accepting Medicare, and others fear patient access will decline if cuts continue.
“What they’re paying us now is not even adequate. … There already are surgeons who are just not accepting Medicare … there’ll be a standoff here in the next decade before we start seeing some really long lines for joint replacement,” Steve Lucey, MD, co-founder of Valere Bundled Solutions, told Becker’s.
