Independent practices and Medicare: Why a ‘low-paying’ panel may be your most important asset

Many independent physician practices have long depended on commercial payers such as Blue Cross Blue Shield (BCBS) for a large share of their income. But recent data show that aggregate profit margins have been shrinking for all BCBS plans over the past several years. Those numbers should prompt all independent practices to rethink how heavily they rely on commercial payments as their primary financial safety net.

Independent primary care practices are under relentless pressure from staffing costs, IT expenses and payer consolidation. Combine that with a flat Medicare Physician Fee Schedule and many clinics feel like they are one bad year away from selling. In that environment, a growing share of Medicare patients can look like the final straw: lower reimbursement, more complexity and more unpaid work.

That instinct can miss something critical. A payer mix with a strong Medicare presence is not just a burden to be managed. It can be a core strategic asset. Having a significant number of Medicare patients can be essential to your role in value-based care, your negotiating leverage and the long‑term value of your practice.

The challenge for independent physicians is to hold both realities in view and manage them simultaneously. Medicare does pay less per visit than commercial insurance, but Medicare patients are the ones who generate the savings, risk scores and downstream utilization that everyone else in the system is fighting to control.

More importantly, each Medicare life you treat is not simply a billing encounter — it is a unit of strategic value on your balance sheet that may not be obvious until the day you decide to sell. Hospital systems and health plans are not acquiring independent practices for their exam rooms or their electronic health record (EHR) data. They are acquiring attributed Medicare lives. Each one represents a predictable, longitudinal revenue stream. The reimbursement you see on each visit barely scratches the surface of what that panel could actually be worth.

Thin margins for primary care

On the surface, Medicare is a bad business proposition for a small practice. Fee schedule updates have not kept up with inflation. Commercial insurers, by contrast, typically pay physicians more than Medicare for professional services.

From a pure fee-for-service standpoint, an ever-rising proportion of Medicare patients looks unsustainable. The amount you get paid for each visit is lower, the administrative burden is higher and neither CMS nor Congress has delivered the kind of comprehensive primary care payment reform that experts say is needed.

Yet those same patients are the ones who define the strategic value of your practice. In fact, they may be the most important asset your practice has.

The other half of the story

Medicare beneficiaries sit at the center of the largest value-based payment programs in the country. These programs are built almost entirely on traditional Medicare lives attributed to primary care clinicians. In 2024, Medicare Shared Savings Program accountable care organizations (ACOs) earned, on average, $410 in shared savings payments per attributed beneficiary.

For an individual practice, that means that a panel with too few Medicare patients may look comfortable on a cash-flow report but will have limited appeal in value-based contracts, limited attribution and limited bargaining power with most potential buyers. A panel with a thoughtfully sized Medicare population, by contrast, can open the door to performance-based payments and give the clinic a stronger negotiating position if market dynamics eventually force a sale.

Step one: Know your payer mix in hard numbers

The first practical move is to translate your payer mix into exact, current numbers and revisit them regularly. Pull a 12‑month report from your practice management system that shows the following:

• Total dollars collected by payer: Medicare, Medicare Advantage, each major commercial plan, Medicaid, self-pay
• Each payer’s share as a percentage of total revenue and visits
• Key performance metrics such as denial rates, average days in accounts receivable, and collection write-offs by payer, especially given the current trend of higher deductibles

Review these at least quarterly. You need to see, in near real time, when you are becoming too dependent on a single commercial payer’s revenue stream.

Step two: Set guardrails for a ‘healthy’ Medicare share

There is no single national “right” percentage for Medicare. Markets differ, overhead differs and practices have different access to ACOs, Medicare Advantage plans and care management infrastructure. But you can and should set a range — a guardrail — for how much Medicare you can carry, given your circumstances.

Some practices no longer accept existing patients as they age into Medicare. Unless you are consistently turning away higher-paying commercial patients, you should estimate how much of your fixed costs your practice can still cover if Medicare’s share of visits grows faster than its share of revenue by adding more Medicare patients and keeping your current patients who age into Medicare.

Look at one year of data and figure out your average cost per visit and average payment per visit for each payer, especially Medicare. Then ask: If I kept the same total number of visits but made more of them Medicare, would I still cover my overhead? If yes, you can probably afford to keep your patients who are aging into Medicare.

When you are deciding whether to add new Medicare patients, start by calculating how many appointments went unfilled over a defined period, such as the last 90 days or the past year. Divide that number by the workdays in that period to get your average unfilled slots per day. If that average is more than two unfilled appointments per day, you likely have enough open capacity to safely use some of those slots for additional Medicare patients, as long as Medicare’s payment per visit is at least equal to your average cost per visit.

Step three: Make each Medicare patient count more

The next move is to make each Medicare relationship count more — clinically and financially — by fully using the tools Medicare has created to support proactive care.

• Close quality gaps at each visit and during outreach
• Use new advanced primary care management codes — such as Advanced Primary Care Management (G0556–G0558), chronic care management (99487–99491) and related virtual-care codes — that finally pay for the non-face-to-face coordination and follow-up work that primary care has historically done for free.
• Fully utilize G2211 to recognize the complexity and continuous, relationship‑based care you provide for patients with ongoing medical needs, adding it to eligible visits when documentation supports it.
• Meticulously document and code chronic conditions so that your practice is fairly treated on risk adjustment, benchmarks and shared savings.

These steps do not turn Medicare into a high-paying commercial plan, but they do raise the revenue per beneficiary and strengthen your performance profile inside ACOs and other value-based arrangements. Over time, that combination is exactly what makes your Medicare panel more valuable.

Step four: Treat your Medicare panel as an asset in every negotiation

When hospitals, health systems or aggregators show interest in your practice, remember this: Your Medicare patients are a central part of what they are buying. They see the same lower fee-for-service rates you do, but they also see downstream revenue tied to that panel.

For hospital-based buyers, each Medicare patient is a revenue multiplier. In a vertically integrated hospital system, a Medicare patient can drive imaging, procedures, admissions, rehabilitation and home health — often billed at higher hospital or hospital-affiliated rates.

Commercial lives matter for revenue, but they are typically younger, healthier and more mobile between plans and far less reliable as a long-term source of high-intensity utilization than a stable Medicare panel.

When a hospital wants to acquire your practice, it is effectively buying both your downstream referral stream and your position in shared-savings or risk arrangements. Even if your current profitability is under pressure, your Medicare panel can still give you leverage in those negotiations — leverage that a practice with a higher share of commercially insured patients but shrinking profitability may not have.

Reframing Medicare: from low pay to high value

You need to see your Medicare panel for what it really is: not just low-paying visits, but a powerful multiplier of value inside a hospital or other health care system. The earlier you recognize that, the more intentionally you can manage payer mix, align those patients with value-based contracts that pay you for total cost-of-care performance and, if you ever negotiate a sale, insist on terms that reflect the true long-term value of the lives you have been managing.

A practice that knows its numbers, has a balanced payer mix and can demonstrate performance with a substantial Medicare population is negotiating from strength. A practice that simply sees Medicare as “low pay” and lets its panel drift without a plan is far more likely to sell at a much lower multiple and more likely to do so under pressure.

For independent physicians who want to stay independent and have real options, the path forward is not to eliminate Medicare from their payer mix. It is to manage payer balance deliberately and build the infrastructure to make Medicare patients count more. Insist on a fair share of the value their work creates, knowing that doing so also diversifies practice options when the market shifts.

Robert Resnik, M.D., MBA, is a board-certified internal medicine physician practicing in Cary, North Carolina. He earned his medical degree from Eastern Virginia Medical School and completed his residency at East Carolina University. He also holds an MBA from Duke University.