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Rural physicians are leaving Medicare faster than anyone is tracking

Nationally, roughly 1% of U.S. physicians have opted out of Medicare entirely, according to 2025 data from KFF. 

While 1% appears to be a marginal number upon first glance, a closer look at where those exits are happening, and what is accelerating the trend, tells a more consequential story for independent physician practices and the ASCs that depend on them.

A 2025 JAMA analysis of Medicare claims data from 2013 to 2023 found that while overall physician participation in Medicare grew by 6.3% over that decade, physicians in nonmetropolitan counties were more likely to exit the program than their metropolitan counterparts. 

Physicians practicing in Health Professional Shortage Areas — communities already struggling to maintain adequate care capacity — were also disproportionately leaving. 

Notably, female physicians exited at a rate of 3.16%, compared with 2.39% for male physicians, a disparity the study’s author, Christopher Whaley, PhD, of Brown University in Providence, R.I., linked in part to the fact that female physicians are overrepresented in primary care, where Medicare reimbursement pressure has been most acute.

The financial logic driving those exits has been building for decades. According to the American Medical Association, Medicare reimbursement for physician services has declined 33% from 2001 to 2026 when adjusted for inflation, with some fee schedule provisions unchanged since 1992.

“Unfortunately, physicians are losing money in multiple scenarios in medicine,” Taif Mukhdomi, MD, interventional pain physician at Columbus, Ohio-based Pain Zero, told Becker’s in 2025. “The most prominent loss of physician revenue is Medicare’s consistent decreasing of physician reimbursement in office settings while supporting hospital-setting healthcare services. This trend affects all insurances, as Medicare is the benchmark of most if not all healthcare insurance reimbursement.”

The compounding effect of that benchmark problem is what makes individual opt-out decisions a systemic indicator rather than an isolated one. When Medicare cuts, commercial payers often follow — making the economic calculus for staying in the program worse with each rate cycle.

The opt-out rate and practice closure rate are distinct metrics, but they trace the same root cause. Becker’s reported 23 physician practice closures in 2025, with continued closures into 2026 — including the shuttering of four primary care clinics by Johnson City, Tenn.-based State of Franklin Healthcare Associates in January.

Whether a physician opts out of Medicare or closes a practice entirely, the downstream effect on patient access is similar, and the entity stepping into that gap increasingly is not another independent physician.

Payer-operated practices now account for 4.2% of the national Medicare primary care market by service volume, up from just 0.8% in 2016, according to a July 2025 study in Health Affairs Scholar. In counties with above-average Medicare Advantage enrollment, that share rises to 5.5%. Independent physicians exiting Medicare are increasingly being replaced by vertically integrated entities.

For ASCs, that consolidation dynamic carries real operational stakes. ASC volume is largely physician-driven: independent surgical specialists who control their own referral patterns are the partner base that sustains most physician-owned centers. As those physicians face escalating pressure — rate cuts, administrative burden, rising practice costs — the population of potential ASC partners is narrowing, and the alternatives available to them increasingly point away from the independent practice model entirely.

The 2026 Hospital Outpatient Prospective Payment System final rule moved Medicare further toward equalizing rates across sites of care, added 560 codes to the ASC covered procedures list and phased out 285 primarily musculoskeletal procedures from the inpatient-only list. CMS estimated the changes would reduce OPPS spending by roughly $290 million in 2026. For independent physician groups, site neutrality levels the playing field between their practice and larger, vertically integrated systems and hospitals, while also removing the reimbursement penalty for directing surgical cases to ASCs rather than HOPDs.

“If reimbursement suddenly shifted to site-neutral payments, private practices would immediately redirect as many appropriate cases as possible from hospitals to their own ASCs, since the financial disadvantage of performing cases outside the hospital would disappear overnight,” Brian Curtin, MD, an orthopedic surgeon at OrthoCarolina Hip and Knee Center in Charlotte, N.C., told Becker’s.

In terms of legislative reform, a bipartisan group of lawmakers in March introduced the Provider Reimbursement Stability Act, led by Rep. Greg Murphy, MD, a Republican from North carolina. The bill would raise the budget neutrality threshold from $20 million to $54.3 million, index it to inflation every five years, limit year-to-year conversion factor variance to 2.5% and require updates to practice expense calculations at least every five years. If enacted, the bill would represent the most structural fix to physician fee schedule mechanics since MACRA.

From Becker’s