Why Orthopedic Groups Are Walking Away from Medicare
Independent orthopedic practices across the U.S. are reducing Medicare exposure — and in some cases dropping it entirely — as reimbursement rates fail to keep pace with rising costs. Medicare physician pay has declined nearly 29% in inflation-adjusted terms since 2001, while operational expenses continue to climb. Paul Bruning, president-elect of the American Alliance of Orthopaedic Executives, notes that practices are consolidating with larger organizations, joining hospital systems, or partnering with private equity just to stay financially viable. MIPS compliance adds roughly 53 hours of administrative work and $12,800 in annual costs per physician. As independent groups reduce Medicare access, patients increasingly shift to hospital outpatient departments — a higher-cost setting that compounds the systemic problem.
For multi-site orthopedic and musculoskeletal operators, this is a strategic inflection point: the payer mix math is forcing a decision between independence and institutional alignment. PE-backed groups and health systems hold a structural advantage; independent practices face mounting pressure to consolidate or renegotiate their payer strategy now.
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How much has Medicare physician reimbursement declined since 2001?
Medicare physician pay has fallen nearly 29% in inflation-adjusted terms since 2001. During that same period, staffing, supply, and technology costs have continued rising, creating a margin squeeze that independent orthopedic practices cannot offset through volume alone.
Why are independent orthopedic practices consolidating instead of continuing to see Medicare patients?
The administrative burden compounds the financial pressure. Physicians spend an average of 53 hours annually on MIPS-related reporting and about $12,800 per year on compliance costs — overhead that becomes unsustainable as reimbursement rates decline annually. Many practices ultimately consolidate with larger organizations or health systems to absorb these fixed costs.
What happens to Medicare patients when orthopedic practices stop accepting Medicare?
Patients are redirected to hospital outpatient departments, which are reimbursed at significantly higher rates than physician-owned practices for identical services. This creates a systemic paradox: as independent groups reduce Medicare exposure to survive financially, the overall cost to Medicare increases through the hospital outpatient channel.