Independent orthopedic groups say they have spent more than a decade proving they can lower Medicare’s costs. Now they say CMS’ proposed 2027 cuts are penalizing them for it.
Leaders from the OrthoForum, a network of independent orthopedic practices, told Becker’s that the cumulative effect of the proposed cuts, including a reduction of up to 20% for hip and knee replacements, could push more independent groups into hospital employment and ultimately raise costs for Medicare.
“How much sense does it make to keep cutting physician payment in the lowest-cost provider that’s actually saving Medicare money?” Joel James, vice president of advocacy and policy for the OrthoForum, told Becker’s.
The savings argument
Mr. James pointed to Medicare’s original Bundled Payments for Care Improvement program, which was in place from 2013 to 2018. More than 50 OrthoForum-affiliated groups participated through Signature Medical Group, an OrthoForum member that served as their convener and where Mr. James previously worked. Over five years, he said, those groups saved Medicare millions on the reconciliation payments they earned for hitting target prices.
A study published in 2021 and led by researchers from Washington University in St. Louis and Boston-based Harvard Medical School supports the broader pattern. The study, which analyzed 91 orthopedic groups in the program, found participating practices reduced 90-day Medicare payments per joint replacement episode from $18,257 to $15,320, a larger drop than among comparable nonparticipating practices.
Independent groups also helped demonstrate that joint replacements could move safely to ASCs, Mr. James said, a shift Medicare has since expanded to hundreds of procedures.
Why the cuts hit independents harder
The core problem, said Jeffrey Racca, MD, an orthopedic surgeon and CEO of New Mexico Orthopaedic Associates in Albuquerque, is hospitals can absorb physician fee cuts through facility fees. Independent practices cannot.
“We do not have the facility fees to offset the losses that we’re getting on Medicare,” he said. “We’re the low-cost providers of healthcare in the country, and we can’t offset our losses with other things.”
Dr. Racca said his practice stands to lose about 3% of its overall revenue from the proposed modifier 25 change alone, plus roughly 9% on Medicare cases, on top of cuts from prior years.
Mr. James said the damage becomes clear when the cuts are viewed together.
“Policymakers tend to look at each of these pieces very discretely, but they don’t ever really put them all together and see what the impact is,” he said. “It’s pretty darn ugly.”
Dr. Racca also noted that the physician fee schedule funds more than surgeons’ pay. It covers the physical therapists, physician assistants and staff that practices employ, which means cuts land on payroll first.
Dr. Racca said budget neutrality is a major factor. Because Medicare spending on joint replacements has grown as the procedures have become more successful and common, they have become an easy target when CMS needs to offset costs elsewhere.
“If you have to cut care, you cut the big spends,” he said.
The access risk
Dr. Racca said New Mexico Orthopaedic Associates is the last large independent orthopedic practice in the state. He added that other groups in the largely rural state have sold to hospital systems or lost surgeons entirely, leaving some communities without orthopedic coverage.
“Now people are being sent hundreds of miles for care,” he said. “The people who are impacted are the people who can least afford to have that impact.”
He added that independent surgeons often take on community obligations like hospital call and local sports team coverage, and that their investment in their practices ties them to the communities they serve.
Recruiting is also getting harder, Dr. Racca said. Hospitals can offer signing bonuses and student loan repayment that independent practices cannot match; that benefit is a significant draw for new surgeons with large debts.
How independents are adapting
To stay viable, independent practices are expanding ancillary services, moving more cases to ASCs and adopting AI tools to reduce administrative overhead, Dr. Racca said. Some are also starting research programs and training residents and medical students to strengthen recruiting.
His biggest piece of advice, however, was advocacy.
“One of the biggest problems independent physicians have is we don’t advocate for ourselves,” he said. He encouraged practices to educate patients about the value of independent care and ask them to contact legislators.
The OrthoForum is pushing CMS to reverse the cuts before the final rule, which is expected this fall.
Becker’s has reached out to CMS for comment and will update this story if more information becomes available.
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