Doing more with less: The state of physician reimbursement
New physician performance data shows increases in net patient revenue and provider productivity while reimbursement stays flat, meaning groups are doing more with fewer resources.
There is no contest between provider productivity and physician reimbursement, according to the latest financial data from Kaufman Hall. In fact, reimbursement simply isn't keeping pace with the recent spike in productivity.
Kaufman Hall's quarterly "Physician Flash Report" analyzes data from more than 200,000 employed physicians and advanced practice providers across over 100 specialties. The report for the second quarter of 2025 showed some promising improvements for these physician groups -- net patient revenue per provider increased by 4% to $404,116 compared to the same time last year, while provider productivity measured by work relative value units (wRVU) per full-time equivalent (FTE) also saw a 4% increase during this time.
Being productive is typically a good sign, especially in financial circles. However, the report's other findings paint a chilling picture.
Corresponding increases in revenue and expenses by the second half of 2025 indicate that physicians are working more, and coding changes to evaluation and management services in 2021, specifically, cannot solely be responsible. Rather, physician reimbursement has remained flat or declined, according to Matthew Bates, managing director and physician enterprise service lead at Kaufman Hall.
"If you look at net patient revenue per provider wRVU, in 2023, it was about $82. Today, it's at about $76. That's what physicians and advanced practice providers are getting paid for a unit of work, seeing patients," he explained.
"Now, if you're working 11% harder or more and inflation has come along and you're getting paid the same or less for what you do, that's pretty frustrating. Another way to say this is: burnout is real," he continued.
What is weighing down physician reimbursement?
What is weighing down physician reimbursement rates? Bates put it frankly: the federal government.
CMS finalized a 2.83% cut to the rates under the Medicare Physician Fee Schedule in 2025, reducing the conversion factor to $32.35 from $33.29 the previous year. This also marked the fifth consecutive year of rate cuts for physician services, a move highly criticized by healthcare industry groups like the American Medical Association (AMA).
However, physician reimbursement cuts have a problem for much longer, according to the AMA. According to the group's calculations, Medicare payments to physicians have decreased by 33% since 2001, when adjusted for inflation. What's more, CMS recently projected a 3.5% increase in the Medicare Economic Index (MEI), which measures the costs of running a medical practice.
"The federal government itself is bluntly just not keeping pace with doctors, and that impacts more than Medicare and Medicaid. Commercial insurers tend to base their rates off of the federal government's," Bates said.
The federal government doesn't plan to reduce Medicare Physician Fee Schedule rates next year. Instead, CMS proposed a very modest overall increase in Medicare physician reimbursement, with physicians in advanced alternative payment models (APMs) under MACRA slated to see slightly higher payments under a new conversion factor system.
The conversion factors -- $33.59 for advanced APM participants and $33.42 for nonparticipants -- also incorporate a temporary, one-year 2.5% update finalized by the reconciliation package enacted in July, otherwise known as the One Big Beautiful Bill Act.
Still, the AMA is calling for "systemic Medicare physician payment reform to ensure the sustainability of physician practices," including a permanent baseline update to conversion factors in accordance with the continued growth in the MEI. CMS projected in its final rule a 2.7% MEI increase in 2026.
Upcoming changes to payer mix spell trouble
Upcoming changes to the Medicare Physician Fee Schedule could be good news for physician reimbursement over the next couple of years, especially if commercial payers follow suit. However, Bates warned that payer mix changes under the Trump Administration could offset any gains.
[N]ot only are our rates failing to keep up, but the number of people with no insurance is projected to grow exponentially over the next couple of years.
Matthew Bates, managing director & physician enterprise service lead, Kaufman Hall
"The reality is we are going to see fewer people on the Affordable Care Act exchange and we're going to see more of them shifting to Medicaid or all the way to uninsured," he said. "So, not only are our rates failing to keep up, but the number of people with no insurance is projected to grow exponentially over the next couple of years."
This change in payer mix stems from the Trump Administration's efforts to reform public payer programs, in particular, Medicaid and the Affordable Care Act's Health Insurance Marketplaces, or exchanges.
Recently, Congress passed significant reforms in the reconciliation package, including mandatory Medicaid work requirements, more frequent Medicaid redeterminations, elimination of continuous enrollment protections and tighter verifications of subsidies provided to certain individuals on the exchanges.
The Congressional Budget Office projected about 10 million more people to become uninsured over the next decade under the reforms, with Medicaid slated to see the greatest loss in enrollment.
"It's a double whammy," Bates stated. "We're not going to give you a raise and, in fact, one out of the 10 people you see today will no longer have insurance tomorrow."
A recipe for a workforce disaster
Physician groups are also doing more with fewer staff, revealed the latest "Physician Flash Report." The report showed that support staff per 10,000 provider wRVUs decreased by 3% to 2.99 by the second half of 2025 compared to the second half of 2024. That ratio also fell by 13% compared to 2023.
"The support staff we're talking about here are, largely, not easy to replace with technology," Bates explained. "This is the front desk receptionist who greets you in the clinic, collects your copay and makes sure your paperwork is up to date. This is the medical assistant who comes and gets you from the waiting space, takes you back to the room and takes your vitals. When we have fewer of these people, those tasks start to fall on our doctors, or patients start to back up. That's certainly not helpful for docs who are trying to be busier."
The reduction in medical support staff is likely a symptom of physician reimbursement reductions.
Healthcare, at large, is having trouble keeping up with labor. It is challenging to recruit for medical support staff when these positions pay as much as the local big box retailer, Bates explained.
To put it in perspective, data shows that the average age per hour at Target is $15 to $17 for an entry-level position, with that rate increasing to $20 to $24 for more experienced roles. Walmart offers similar compensation, with a frontline associate earning close to $18 per hour. Meanwhile, the Bureau of Labor Statistics puts average wages for healthcare support workers at about $22 per hour.
"In the physician space, we're not paying more, so we can't afford to compete for lower-level talent because we can't afford to pay those rates," Bates said. "Physician groups can't keep up. They don't have the reimbursement or revenue levels they need to be able to compete effectively for service-level talent."
Consequently, physician groups will have to continue to do more with less, whether that means staff or reimbursement.
"Nobody wants to do more with less," Bates said. "Physician groups are in a very challenging environment right now."
Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.
