For several months before he left private practice, Zachary Lum, DO, worked without a paycheck. So did the other physicians in his South Florida orthopedic group, which had turned to credit cards to cover its bills and stopped paying its physicians so it could keep paying its staff.
Nearly three years later, Dr. Lum — a hip and knee arthroplasty surgeon now employed by a university health system in California — said his experience should give CMS pause as it prepares to finalize 2027 physician pay, including a proposed cut of about 20% to the primary codes for total hip and knee replacement.
Keeping 40 cents on the dollar
Dr. Lum joined Weston-based Sports Medicine Associates of South Florida in 2021, after three years in an employed role in California. The group had practiced in Broward County for more than 30 years, with five physicians, advanced practice providers and three clinics serving communities including Weston and Pembroke Pines.
Within about a year, costs began outpacing revenue. EHR costs climbed. A top-earning physician was briefly out sick. And as inflation pushed wages up, the group raised payroll by nearly 25% to stay competitive — and still lost staff to hospitals that could pay more.
In his final year with the group, monthly overhead ranged from 60% to 95%. Those were not bets on new technology, he said, but the basics: payroll, rent, electricity, an X-ray machine.
“I got to keep between 40 cents to five pennies on the dollar, depending on what month it was,” he said.
As cash dried up, the practice borrowed on credit cards to cover expenses, and the physicians went without pay for several months so employees could still be paid.
“Not being able to earn any money while you’re working hard is a recipe for burnout,” Dr. Lum said.
He said despite his best efforts, he had to leave the practice, as did more than half of the group’s physicians; several, including Dr. Lum, took employed jobs. The practice restructured, closing offices and letting staff go. Dr. Lum returned to California to join orthopedic department at UC Davis.
The cut on the table
CMS released its proposed 2027 Medicare Physician Fee Schedule on July 14. It would reduce relative value units for total hip replacement (CPT 27130) and total knee replacement (CPT 27447) by about 20%, according to the American Association of Hip and Knee Surgeons. That follows an 8% cut to Medicare payment for joint replacement surgeons that took effect in 2026, according to the OrthoForum.
The proposal would also lower the conversion factor 1.68%, to $32.8409, for clinicians outside qualifying alternative payment models, as a temporary 2.5% increase for 2026 expires. Orthopedic surgery is projected to lose about 7% more from RVU and coding changes. Hospital reimbursement, meanwhile, would rise 2.3%.
The AAHKS has urged CMS to withdraw the arthroplasty reductions. The agency is expected to finalize the rule in November.
Dr. Lum said the proposal lands on decades of payment declines, while the cost of running a practice moves in one direction.
“Those costs never go down, right? They only go up,” he said. “It’s not tenable anymore.”
Who pays when practices close
Dr. Lum said the policy could produce the opposite of its intended effect.
“They’re trying to save money, but I don’t think it’s going to save money,” he said. “It’s going to do the exact opposite.”
Dr. Lum said if private practices continue to close, health systems lose their competition.
“When you lose that as a competing factor, that’s when the prices will really start to rise for overall healthcare costs,” he said. “It’s essentially a monopoly.”
Patients would have fewer choices, Dr. Lum said, and under-resourced patients would feel it first. He has started hearing about the worry firsthand: Over the past two to three years, patients have raised access concerns with him unprompted, something he said had not happened before in about eight years of practice.
The pipeline is thinning, too. A fellow Dr. Lum mentored was interested in joining a private group in San Diego, but the group could not offer a competitive salary. Some certified registered nurse anesthetists at Dr. Lum’s hospital, he said, would earn more than that starting offer his fellow received.
What he wants CMS to do
Dr. Lum’s first request of CMS would be an inflationary update. Underpaying surgeons, he argued, pushes them to raise volume to keep their practices running, which drives costs up. He also called Medicare’s budget neutrality approach, in place for roughly 30 years, out of step with today’s expenses.
“It’s outdated,” he said. “Practice costs back then are not what practice costs are now.”
Second, he wants CMS to consult subspecialty societies such as the AAHKS directly on where value lies, rather than relying mainly on established channels like the American Medical Association and its RVS Update Committee.
Third, he would like to see the cuts paused until their effects are understood.
“These are going to be irreversible things,” he said.
Asked what could draw him back to independent practice, Dr. Lum pointed to autonomy — ideally, physicians running “the whole vertical system.”
In the months after he left South Florida, he said, other physicians approached him with similar stories of groups that went bankrupt. He said that his experience is just one of many.
“It happens more frequently than we’d like to think,” he said. “It shouldn’t happen.”
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