By Eric Tait, M.D.
Medicare reimbursement has lost a third of its purchasing power since 2001. The 2027 fee schedule cuts it further. You cannot negotiate your way out of a system designed to pay you less every cycle. But you can build income that does not answer to a conversion factor.
A physician who finished residency in 2001 and went straight into practice started with a Medicare conversion factor of $38.26. That number determined what every evaluation, every procedure, every unit of work was worth. It was the baseline. The floor.
Twenty-four years later, that floor has dropped to $32.84.
Not because the work got easier. Not because patients got healthier. Not because the overhead disappeared. The cost of running a practice rose 59% over that same period. Malpractice, rent, staff, technology, compliance… all of it went up. And Medicare reimbursement, adjusted for what it actually costs to keep the lights on, went down 33%.
That is not a pay freeze. That is a pay cut that compounds every single year. And it is about to get worse.
The 2027 Fee Schedule
CMS released its proposed 2027 physician fee schedule this summer. For most physicians, the conversion factor drops another 1.68%. For those in advanced alternative payment models, it drops 1.19%. Neither number accounts for inflation. Neither number reflects the actual cost of delivering care. The temporary bump Congress gave physicians for 2026 expires, and the baseline resumes its slide.
But the conversion factor is not even the biggest problem in the proposed rule.
CMS wants to cut payment by 50% when a physician bills a separately identifiable office visit on the same day as a procedure. Fifty percent. If you see a patient, evaluate a new problem, and perform a procedure in the same visit… the evaluation is now worth half of what it was yesterday. The AMA has urged CMS to withdraw the proposal entirely. Whether they will is another question.
The Ambulatory Specialty Model becomes mandatory in 2027. It puts individual specialists into two-sided risk through 2031. Remote monitoring codes face cuts of up to 19% per year. And CMS has opened a request for information questioning how physician rates get set at all, including the role of the CPT coding system itself.
This is not a one-time adjustment. This is a system telling you, in writing, that it intends to pay you less every year for the foreseeable future.
The Efficiency Trap
Here is the part that should concern every physician reading this.
On January 1, 2026, CMS cut the work relative value units for nearly all procedure codes by 2.5%. The stated reason was that technology and improved techniques allow physicians to perform services faster than when the values were originally set.
CMS did not measure whether that actually happened. It took five years of productivity adjustments from the Medicare Economic Index, a generic economy-wide figure that has nothing to do with how long any particular procedure takes, and applied the result across roughly 7,700 codes. Some of those codes had been surveyed within the past year. The data was current. CMS cut them anyway.
The AMA called it arbitrary. CMS finalized it. And they will do it again in 2029, 2032, and 2035.
Think about what that means. Every time a new technology makes you more efficient, CMS treats the efficiency gain as a reason to pay you less. You adopted AI documentation tools. You streamlined your workflows. You invested in systems that let you see patients faster and more effectively. And the reward for all of that is a lower conversion factor.
Josh Umbehr, M.D., cofounder of AtlasMD in Wichita, put it plainly in Medical Economics: the current system is “pitting AI against the doctors, where if we help you chart faster, then we just make you see more patients.”
Somebody captures the gain when a physician gets faster. For 82% of the profession, the ones now employed by hospitals or corporate entities, it is not the physician. It is the employer. And when your compensation is denominated in work RVUs, and the value of each RVU keeps falling, your paycheck follows.
You cannot out-earn this. You cannot see enough patients. You cannot work enough hours. The system is structurally designed to absorb every efficiency gain you produce and redirect it somewhere else. The harder you work, the more evidence CMS collects that the work should be worth less.
What This Means for Your Financial Life
I talk to physicians every week who are running harder than they ever have and making less in real terms than they did five years ago. They feel it even when they cannot name it. The numbers on the paycheck look similar, maybe even a little higher. But the purchasing power behind those numbers is shrinking. The gap between what they earn and what their life costs is narrowing, and they are covering the difference with more shifts, more call, more hours.
That is not a career. That is a treadmill. And the speed keeps increasing.
The physicians I work with who are not on that treadmill have one thing in common. They stopped depending entirely on clinical income years ago. Not because they saw this specific fee schedule coming. Because they understood the trajectory. They looked at twenty years of declining reimbursement and rising costs and made a decision. They were not going to let a conversion factor set by a government agency determine their financial future.
They built a second income line. One that does not answer to CMS. One that does not get cut when Congress lets a temporary patch expire. One that does not shrink every time they adopt a new technology that makes them better at their job.
The Other 67%
Medicare has taken 33% of your purchasing power since 2001. The question is what you do with the other 67%.
If the answer is “keep it in the same system that is cutting your pay,” then the math gets worse every year. Your clinical income is a depreciating asset. Not because you are less valuable. Because the payment structure values you less with every recalculation. That is the trajectory, and it is published on a schedule. 2029. 2032. 2035.
But your clinical income is also the most powerful tool you have right now. It is substantial. It is consistent. And it can be deployed into assets that do not depreciate on a government timeline.
A fixed-income position that pays a contractual return does not care what CMS proposed this summer. A cash-flowing investment managed by an operator does not lose value because Congress failed to pass a payment patch. An asset that produces income on a schedule does so whether the conversion factor is $32.84 or $28.00 or whatever number they land on in 2035.
The physician who allocates a portion of their clinical income into assets like these every year is not running harder on the treadmill. They are building a second track beside it. And every year, a larger share of their financial life runs on that track instead of the one CMS controls.
The Conversation You Need to Have Now
The final rule drops by November 1. Most of the changes take effect January 1. And three years after that, CMS will recalculate the efficiency adjustment and apply it again.
You are not going to lobby your way out of this. The AMA has been fighting these cuts for two decades and the trajectory has not changed. You are not going to negotiate your way out of it either. 253,000 physicians moved into employment between 2018 and 2026. When your employer’s revenue per physician falls, your compensation follows. That is how the contract works.
The one thing you can control is what you build outside of it.
Every dollar of clinical income you deploy into an asset that produces returns independent of the fee schedule is a dollar that CMS cannot touch. Every stream of income you build outside of medicine is a stream that does not shrink when the conversion factor drops. Every year you spend building that parallel financial life is a year that makes the next pay cut matter less.
Thirty-three percent is gone. You are not getting it back. The question is whether you spend the next decade watching the rest of it erode, or whether you start building something that does not need permission from CMS to grow.
The fee schedule is their document. Your financial life is yours. Build accordingly.