How Medicare Pays Physicians: A Guide for Pulmonary and Critical Care Doctors

Most of us enter fellowship focused on vents, vasopressors, and interstitial lung disease. Few of us spend time thinking about how we actually get paid for the work we do. But understanding Medicare reimbursement shapes how we practice, which services are valued, and, ultimately, whether pulmonary and critical care medicine remain financially sustainable specialties.

Medicare covers more than 67 million Americans, and nearly half of the program's $1 trillion in spending goes to Part B services, which include physician payments. For those of us in pulmonary and critical care medicine, understanding this system matters because it directly impacts our compensation, our ability to provide comprehensive care, and the future viability of our field.

Medicare reimburses physicians through the physician fee schedule, which assigns payment rates for over 10,000 healthcare services—everything from office visits to bronchoscopies to central line placements.

Each service gets a unique billing code, and the payment rate is calculated using three components:

These components are measured in relative value units (RVUs). The total RVUs for a service are adjusted for geographic differences in costs, then multiplied by a conversion factor—a dollar amount that translates RVUs into actual payment.

Here's the formula:

Medicare typically pays 80% of the fee schedule amount, and the patient is responsible for a 20% coinsurance. Physicians who participate in Medicare agree to accept this as payment in full, a concept known as "accepting assignment."

Unlike primary care, which relies heavily on evaluation and management (E/M) codes, our work in pulmonary and critical care spans a wide range of services, including procedures such as bronchoscopy and thoracentesis, critical care time codes, consults, and longitudinal pulmonary clinic visits.

The fee schedule values procedural services more than cognitive services. A 30-minute bronchoscopy with biopsy generates significantly more RVUs than a 30-minute family meeting in the ICU or a complex outpatient pulmonary hypertension visit. This imbalance has real consequences: it incentivizes procedural volume over time spent on care coordination, goals-of-care discussions, and chronic disease management—all of which are central to what we do.

CMS has tried to address this gap by adding billing codes for advanced primary care management, caregiver training, and chronic disease coordination. But the fundamental structure still favors procedures over cognitive work.

Every year, CMS updates the physician fee schedule through a rule-making process. These updates include:

The system must be budget-neutral. If projected spending increases by more than $20 million in a given year, CMS must offset the cost—usually by decreasing the conversion factor. This means that when payment for some services increases, payment for others must decrease.

One of the most influential and controversial entities in this process is the AMA/Specialty Society RVS Update Committee (RUC).

The RUC is a volunteer committee of physicians, formed by the American Medical Association, that advises CMS on how much each service should be worth. The committee includes representatives from medical specialty societies, including pulmonary and critical care.

Each year, the RUC reviews potentially misvalued services and makes recommendations on RVU assignments. CMS accepts these recommendations about 90% of the time.

But the RUC has been criticized for several reasons:

HHS Secretary Robert Kennedy Jr. has recently called for greater transparency and reduced influence of the RUC in setting payment rates. CMS has proposed supplementing RUC data with independent sources when calculating RVUs—a shift that could reshape how our services are valued.

In addition to the fee schedule, Medicare adjusts payments based on quality and participation in alternative payment models through the Quality Payment Program (QPP).

The QPP has two pathways:

Physicians who participate in A-APMs—such as accountable care organizations (ACOs)—can earn bonus payments if they meet certain thresholds. These models require providers to take on financial risk by sharing in savings and losses relative to a benchmark.

A-APM bonuses were 5% from 2019-2024, dropped to 3.5% in 2025, and will be 1.88% in 2026 before being phased out entirely in favor of small conversion factor increases.

Roughly 386,000 clinicians qualified for A-APM bonuses in 2024—a fourfold increase since the program started. But participation remains uneven, and many intensivists and pulmonologists don't practice in settings where A-APMs are feasible.

Clinicians who don't participate in A-APMs are subject to MIPS, which adjusts payments up or down based on performance on quality metrics.

MIPS adjustments are budget-neutral and capped at ±9% in 2025. However, because few clinicians receive negative adjustments, positive adjustments are usually modest—around 2% to 3%.

MIPS has been criticized for its reporting burden and weak incentives. CMS has introduced MIPS Value Pathways (MVPs)—streamlined, specialty-specific reporting bundles-to reduce complexity. There are now MVPs for conditions like heart disease and neurodegenerative care, but adoption is still in early stages.

For pulmonologists and intensivists, CMS offers the Pulmonology Care MVP (MVP ID: M1424), which is designed for clinicians treating COPD, asthma, sleep apnea, and general pulmonology conditions. The MVP is also applicable to sleep medicine specialists, nurse practitioners, and physician assistants.

To participate in the Pulmonology Care MVP, you must report on four quality measures. At least one must be an outcome measure (or a high-priority measure if no outcome measures are available). The available measures include:

Pulmonology-specific measures:

General preventive and care coordination measures:

The MVP also includes cost measures calculated automatically from Medicare claims data, including episode-based costs for COPD exacerbations and asthma/COPD care. You don't submit data for cost measures-CMS calculates them for you.

Finally, participants must complete one improvement activity from a specialty-relevant list, such as promoting use of patient-reported outcome tools, integrating patient coaching between visits, or implementing telehealth services to expand access.

The Pulmonology Care MVP is meant to reduce reporting burden by bundling the most clinically relevant measures for our patient population. But adoption has been slow, and many pulmonologists continue to report under traditional MIPS, which offers more flexibility but requires navigating a much larger set of measures.

One of the most persistent issues in Medicare payment is the compensation gap between primary care and specialty physicians.

Procedural services tend to generate higher RVUs than non-procedural services like patient education, care coordination, and chronic disease management. And because the system is budget neutral, efforts to boost payment for primary care often lead to across-the-board cuts via the conversion factor.

This dynamic affects pulmonary medicine more than critical care. Outpatient pulmonology—managing interstitial lung disease, pulmonary hypertension, or complex asthma—requires significant cognitive work that isn't always reflected in RVU totals. Meanwhile, critical care time codes and procedures generate higher payments per unit of time.

MedPAC has recommended targeted payment increases for primary care and safety-net providers, as well as eliminating MIPS in favor of voluntary alternative payment models. But broader reform remains politically challenging.

Several policy proposals are under discussion to reform the physician payment system:

CMS has also proposed changes to reduce reliance on the RUC by using independent data sources to validate RVU calculations. This could reshape how our services are valued-especially if CMS takes a more active role in reviewing procedural codes.

If you're in fellowship or early in your career, understanding this system is critical for several reasons:

Medicare pays physicians through the physician fee schedule, which assigns payment rates based on RVUs, adjusted for geography and a conversion factor. The system favors procedural services over cognitive work, and budget neutrality requirements make it difficult to increase payment for undervalued services without cutting elsewhere.

The RUC plays a major role in setting relative payments, but its influence is under scrutiny. Payment rates fluctuate year to year, and recent cuts have put financial pressure on many practices. The Quality Payment Program offers bonuses for A-APM participation and performance-based adjustments through MIPS, but both programs have limitations.

For pulmonary and critical care physicians, this system matters because it shapes how our work is valued, how we're compensated, and whether our field remains financially viable.