Clinical labor pricing updates are needed to address workforce shortages, financial strain

The ongoing effects of the Covid-19 pandemic on primary care physicians are jarring. Fewer than 30% of primary care physicians are reporting that their practices are on solid financial footing. Coupled with worsening staffing shortages and burnout, the challenges facing physicians have never been more evident.

The pandemic has compounded the financial strain caused by unbalanced and outdated Medicare payments. A big reason is that clinical labor pricing has not been updated in nearly 20 years. Clinical labor pricing data are used to calculate Medicare payment rates. This ensures Medicare payments account for the costs of employing nurses, medical assistants, and other clinical staff.

Since clinical labor pricing was last updated in 2002, the mean annual wage for registered nurses rose by $30,152 (60%), but current Medicare rates do not reflect this significant increase. As a result, practices must absorb more than 60% of the cost of employing nurses, ultimately adding to practices’ financial strain.

Stressors of the public health emergency have led more nurses and medical assistants to retire or change careers. This short supply, along with high demand for these workers, is making it exceedingly difficult for physicians to recruit and retain clinical staff, who are integral to well-functioning practices. This problem is made worse by health systems and private staffing companies whose finances don’t depend on clinical labor pricing. Those employers can hire clinical staff at higher salaries, pulling from the pool of workers physician practices rely on.

In a long-overdue move, the Centers for Medicare and Medicaid Services plans to help address these challenges. In the 2022 Medicare Physician Fee Schedule final rule, CMS is moving to update its clinical labor pricing data. This update will support physician practices, particularly primary care practices, that rely heavily on nurses, medical assistants, and other clinical staff to provide patient care. The rates for registered nurses will rise from an hourly rate of $30.60 to $51, a 67% increase, while the rate for medical assistants will increase from $15.60 to $23.40, a 50% increase. This update must begin in 2022 without any additional delay.

Surveys of primary care practices confirm that they are experiencing alarming staffing challenges, in part because low Medicare rates undermine practices’ ability to offer competitive salaries to nurses and medical assistants. A recent survey found 27% of primary care practices have clinician positions they cannot fill due to burnout and low clinical labor rates. Nurses and medical assistants make physician practices run smoothly. Without these essential salary updates, and the staffing shortages they contribute to, patients may experience longer wait times to see doctors and have delays in receiving test results. Underpaying physician practices can also lead to practices closing, which creates barriers for patients to access care in a timely manner within their communities.

In my family practice in Deltaville, Va., I rely on nurses, medical assistants, and others to provide the best possible care to our patients. Employing these essential team members can be a challenge for practices like mine because health systems and health care staffing companies offer higher salaries. CMS’s planned update to clinical labor pricing will enable independent practices like mine to offer fair, competitive salaries without jeopardizing our financial viability.

I’m concerned that pandemic-worsened challenges will negatively affect the U.S. health system for years to come. Staffing and insufficient funding have accelerated hospital acquisitions of physician practices and physicians’ departure from independent practice. Such consolidation has been shown to increase prices for health care services and raise insurance premiums. It also harms low-income communities by widening health disparities and reducing access to essential services in rural areas. Clinical labor pricing updates can help reverse these harmful trends by mitigating workforce shortages and stabilizing independent physician practices.

Updating Medicare clinical labor pricing will help rebalance and modernize the practice-expense portion of physician payments. Because of Medicare budget neutrality requirements, this rebalancing will lead to payment reductions for some procedures. To account for this, CMS plans to implement the clinical labor pricing update over the course of four years to ensure physicians can adjust and there are no drastic changes to payment rates. There is some opposition to this balanced approach, yet continuing to rely on decades old data will worsen staffing shortages and patients’ timely access to care.

The Covid-19 pandemic has fundamentally changed the health care landscape — from telehealth services to mental health care to the ways primary care physicians interact with their patients. Primary care practices have been hit hard, and physicians must protect their clinician teams. Modernizing clinical labor pricing will go a long way toward ensuring physician practices can hire and retain essential staff and continue caring for their patients.

Sterling N. Ransone Jr., is a family physician in Deltaville, Va., and president of the American Academy of Family Physicians.