The Centers for Medicare & Medicaid Services (CMS) in December finalized the 2021 physician fee schedule (PFS), which went into effect Jan. 1. It includes telehealth expansion, targeted rural health assistance, and more streamlined coding and documentation regulations.1

The rule includes what CMS called “a historic increase” in the payment rates for office/outpatient face-to-face evaluation and management (E/M) visits. The agency added 11 procedures to the ambulatory surgical center covered procedures list (CPL). Further, within the next three years, CMS says it will eliminate the inpatient-only list (IPO) of 1,700 procedures that Medicare currently only will pay for when performed in a hospital inpatient setting.2

The American Hospital Association called the final rule “a blow to America’s hospitals” and worries that “the continuation of deep cuts in payments for 340B drugs exacerbates the strain placed on hospitals serving vulnerable communities.”3

Ambulatory Surgery Center Association CEO Bill Prentice struck a different tone. “CMS should be commended for recognizing that ASCs [ambulatory surgery centers] are increasingly able to safely provide a greater range of services as medical practice evolves,” he said in a statement after the rule’s release.4 “We sincerely appreciate the policies relating to allowable procedures that rely on the critical role of physicians and their clinical judgment in making site-of-service determinations.”

The Budget Neutrality Catch

Because of a federal stipulation regarding budget neutrality, to finance certain increases CMS had to make cuts elsewhere — in this case, payment reductions to other medical services covered by Medicare. Upon its release, surgeons, anesthesiologists, and others blasted the fee cuts at a time when the whole industry is struggling financially.

Some physicians accused CMS of turning a blind eye toward their sacrifices and the COVID-19 pandemic financial pain they experienced in 2020. “We’re having our payments cut by 10% on the Medicare side, and this takes us back to rates that haven’t existed since 1991” says Beverly Philip, MD, FACA, FASA, president of the American Society of Anesthesiologists. “We’re at the forefront of the pandemic. We have medical expertise and care for COVID patients in critical care units and surgery.”

For example, anesthesiologists helped convert anesthesia machinery into ventilators for use in hospitals. This, at a time when facilities were filled past capacity and running out of supplies.

“As anesthesiologists, we are enthusiastic about contributing to the nation’s response to the pandemic,” Philip says. “At this time, when we are gladly doing more than ever before, we’re getting funding cuts, and it will make our practice unsustainable.”

Many anesthesiology practices and ASCs were closed in March and April 2020 because of the pandemic. When centers reopened, they followed COVID-19 prevention practices that reduced their patient volume and added more cost to their practices.

These cuts could affect the anesthesiology practice for a long time, perhaps discouraging new doctors from going into the field, according to Philip. “For decades, we’ve had a problem with Medicare payment,” she says. “Our specialty, in the original system, gets paid less for Medicare rates.”

Medicare’s other big change, to send more procedures to ASCs, is a double-edged sword. Such providers welcome the potential to help more patients. On the other hand, the shift in Medicare payments for surgery in ASCs increases surgery centers’ reliance on Medicare payments and cuts, according to Philip.

“What we’re seeing year by year is that procedures that used to be hospital patients are now being driven to the ambulatory surgery center,” she says. “ASCs are also subject to increasing exposure to Medicare payment cuts, more than they ever had before.” If Medicare cuts to anesthesia services and certain surgical procedures continue, the long-term result could be limited access to these procedures.

“If a business is not viable, then people don’t go into it, and that is what I worry about,” Philip says. “It’s not that we won’t care for these patients; it won’t be financially viable.”

Ophthalmology Especially Concerned

The Medicare changes could harm struggling ophthalmologists, since the proposed 6% cut in Medicare reimbursement for 2021 follows years of significant cuts in reimbursement, says Dan Briceland, MD, senior secretary for advocacy with the American Academy of Ophthalmology in San Francisco.

Ophthalmologists typically see many Medicare patients for cataract procedures and other eye surgeries. Any cuts in their Medicare reimbursement could affect these practices significantly. “Ophthalmology has a high overhead — 50% to 60% — because of its equipment. When you run a high-overhead office, you don’t have margins that can take double-digit decreases, year to year,” Briceland explains.

Plus, ophthalmology lost more patient volume during the pandemic than any other medical specialty.5 “With the COVID pandemic and closing all of our practices down for two months, it was just devastating,” Briceland adds.

Some ophthalmologists, especially those near retirement, might decide it is no longer worth continuing with their small surgical practices if the additional Medicare cut goes through.

“Other doctors are saying, ‘You gave me double-digit cuts in cataract surgery last year, so I won’t do as many surgeries,’ and some will give up surgery,” Briceland says. “This could happen in rural areas especially.”

Another outcome might be small practices merging with larger ones, which already is a trend in surgery centers and healthcare generally.

“Some practices might offer a little more cosmetic surgery if they have training and interest in that. Some might sell products like vitamins for macular degeneration,” Briceland says. “Some practices might do more upscale concierge cataract surgery, but that doesn’t move the needle. That’s not why we went into practice.”

Congress Could Help

CMS’ move is the culmination of a situation that has been brewing since last summer when the agency first released the rule proposal for public comment. Back then, healthcare groups asked CMS to postpone the budget neutrality provision or waive it altogether, at least this one time.

Now, preventing the controversial cuts from becoming reality would take congressional intervention. A bipartisan group of House lawmakers have been working on just such a proposal — “Holding Providers Harmless From Medicare Cuts During COVID-19 Act of 2020.” The resolution would freeze the Medicare reimbursement rates at 2020 levels for two years.6

In November, a coalition of 74 healthcare organizations sent a letter to Congress in support of this proposal.7 In December, 50 senators urged action.8

“We have been pushing majority and minority members of the Senate to include some fix for us in the last budget bill they’re doing for the year,” Philip says. “There is broad agreement that this is not reasonable, and it’s an unintended consequence of an outdated budget [provision].”

If Congress fails to act, there is a contingency plan. “We will continue in January and February, if needed, to help our congressional supporters create a fix that will address the needs, especially of physician anesthesiologists who are going into another surge of the COVID-19 pandemic,” Philip says. “If there’s not time to sort out this ... the cuts will be terrible, and we will not stop with a broad medical coalition to get it fixed.”


  1. Trump administration finalizes permanent expansion of Medicare telehealth services and improved payment for time doctors spend with patients. Dec. 1, 2020.
  2. Trump administration finalizes policies to give Medicare beneficiaries more choices around surgery. Dec. 2, 2020.
  3. American Hospital Association. AHA statement on CY 2021 OPPS final rule. Dec. 2, 2020.
  4. Ambulatory Surgery Center Association. 2021 final Medicare payment rule released. Dec. 2, 2020.
  5. American Academy of Opthamology. Planned Medicare cuts deal heavy blow to nation’s ophthalmologists. Aug. 5, 2020.
  6. Holding Providers Harmless From Medicare Cuts During COVID-19 Act of 2020.
  7. Letter of support for H.R. 8702. Nov. 11, 2020.
  8. Senate letter on physician payment cuts. Dec. 4, 2020.