Major Medicare Physician Fee Schedule Shake Up for 2026
On July 15, 2025, the Centers for Medicare & Medicaid Services (CMS) released a major update to how Medicare will pay doctors in 2026. This proposal, outlined in a massive 1,800-page document, marks the biggest change to Medicare’s payment system in years. It introduces new financial incentives and important structural reforms designed to better support healthcare providers and modernize the way care is reimbursed.
The team at Coding & Billing Solutions is monitoring these updates and the impact it will have on its clients. Major elements of the CMS update include:
- Dual Conversion Factors Introduced
For the first time ever, Medicare will use two distinct conversion factors:
- $33.59 for clinicians participating in Advanced Alternative Payment Models (APMs) — a 3.83% increase from the current $32.35
- $33.42 for non‑APM participants — a 3.62% increase
Breakdown of the bump:
- Statutory 2.5% increase required by law
- APM-specific boost: +0.75%
- Non-APM increase: +0.25%
- A small 0.55% tweak to account for evolving work RVUs
- Efficiency Adjustment: Rethinking RVU Valuation
CMS is pulling back from the traditional reliance on AMA’s RUC survey data, citing concerns over low response rates and potential bias in work-time reporting. Instead, the agency proposes:
- A –2.5% efficiency adjustment targeting all non–time-based CPT codes (e.g., diagnostic and procedural services) for CY 2026
- Exceptions include time-sensitive services such as timed E/M visits, behavioral health, and telehealth codes—allowing those areas to avoid cuts.
Expect slight payment shifts: primary care, geriatrics, psychiatry (timed services) may gain, while procedural specialties face small reductions in RVUs.
- Site-of-Service Payment Realignment
CMS is revising how indirect Practice Expense (PE) RVUs are treated across care settings:
- Non-facility (office) services: increased indirect PE RVUs (+~4%)
- Facility (hospital/ASC) services: reduced indirect PE RVUs (–~7%)
This aims to discourage hospital acquisition of physician practices by leveling payment incentives.
- Other Noteworthy Policy Proposals
- Skin substitutes are reclassified as incident-to supplies rather than biologics. This is a move to clamp down on often-fraudulent billing.
- Telehealth: permanent adoption of real-time audio/video direct supervision; extended flexibilities for FQHCs and RHCs through 2026.
- Ambulatory Specialty Model (ASM): launching Jan 2027, focusing on heart failure and low back pain physicians with payment adjustments over five years.
Why It Matters
- Boost for APM participants: Those already in value-based care models will see a stronger payment increase—helping offset stagnant rates of the past five years.
- Valuation overhaul: Moving away from RUC survey data—CMS aims to build a more evidence-based, balanced approach to valuation.
- Incentivizing site choices: Incentivizes more cost-effective, office-based care—counteracting facility consolidation.
- Targeted efficiency: Standardizing efficiency penalizes less time-based services, pushing Medicare towards recalibrated pricing.
- Telehealth & integrated care embedded: Reflects expanding digital health and holistic care models within physician billing.
What’s Next for Stakeholders
- Public comments due September 12, 2025 — clinicians, societies, and advocacy groups are gearing up their responses.
- Final rule anticipated in November/December 2025, for implementation January 1, 2026.
- Practices should start modeling budget impacts now—especially surgical vs time-based specialties—and consider aligning with APMs or ASM pathways to optimize reimbursement.
Bottom Line
The 2026 proposed rule marks a watershed moment in Medicare billing. It’s a blend of modest payment uplifts, methodological reform, and strategic incentives designed to modernize the fee schedule—while nudging providers toward value-based, office-based, and time-focused care.
If you would like to learn more about these important changes, contact Coding & Billing Solutions today. We’d love to talk!
Please call us at 610-428-9034 or fill out our Contact Form.