CMS proposes CY 2026 Medicare Physician Fee Schedule

Medicare physician reimbursement in 2026 will be more closely tied to value-based care, site-neutral payments and more resourceful delivery of services, according to CMS.

The federal agency proposed the Medicare Physician Fee Schedule for the 2026 calendar year (CY) Monday evening, with a conversion factor update of 3.62%, or $1.17, for physicians not participating in an Advanced Alternative Payment Model (APM) as defined by the Quality Payment Program.

By statute, CMS has to create two separate conversion factors for physicians in a qualifying APM, or qualifying participants (QPs), and those who are not. QPs must meet certain thresholds for participation in an Advanced APM, which generally means the payment model has two-sided financial risk.

In CY 2026, CMS proposed a conversion factor of 3.83% for QPs, representing an increase of $1.24 to a conversion factor of $32.35.

The proposed conversion factors in the CY 2026 Medicare Physician Fee Schedule statutory updates of 0.75% and 0.25% for QPs and non-QPs, respectively, a 0.55% change due to work relative value units (RVUs) and a one-time 2.50% increase as stipulated in the "One Big, Beautiful Bill Act" signed into law by President Donald Trump earlier this month.

Next year could mark a shift in Medicare physician reimbursement, which has faced ongoing cuts. Last year, CMS finalized a 2.83% reduction to physician payments, marking the fifth straight year of cuts.

Physicians criticized the cuts as the Medicare Economic Index, which measures the costs of running a medical practice, increased by about 3.5%. The cuts impacted access to care, staffing shortages and clinician burnout, they said.

CMS said in the proposed CY 2026 Medicare Physician Fee Schedule that it would use the sum of the Medicare Economic Index productivity adjustment percentage over the past five years to determine a more accurate efficiency adjustment to reimbursements. This would replace the survey used to calculate work RVUs, which CMS said has historically had low response rates.

The proposed fee schedule also took aim at one of the Trump Administration's top healthcare priorities: reducing healthcare fraud, waste and abuse. CMS said in the rule that it would pay for skin substitutes as incident-to supplies versus biologicals to reduce spending on these products by almost 90%.

Medicare spending on skin substitutes has seen massive growth recently, increasing from $256 million in 2029 to over $10 billion in 2024, CMS reported using Medicare Part B claims data. The agency attributed the spike to "abusive pricing practices."

The CY 2026 Medicare Physician Fee Schedule also seeks to bolster chronic disease management in an effort to advance the Trump Administration's prevention and wellness priority.

Next year, CMS wants to create optional add-on codes for Advanced Primary Care Management services to support complementary behavioral health integration of psychiatric Collaborative Care Model services. The codes, if finalized, are meant to address behavioral health conditions, which are some of the most common chronic conditions nationwide, CMS said.

The federal agency also asked for feedback on ways to improve prevention, wellness and chronic disease management, particularly through nutrition counseling and physical activity.

In addition, CMS proposed removing 10 quality measures and adding five new outcome measures focusing on chronic disease, including prescreening for diabetes.

Through the CY 2026 Medicare Physician Fee Schedule, CMS is also looking to move toward more site-neutral payment policies.

The agency said in the proposal that it is seeking to reduce payment differentials by site of care using hospital data to calculate more accurate reimbursement rates for certain services. If finalized, CMS would decrease the portion of the facility practice expense RVUs allocated based on work RVUs to half the amount allocated to non-facility practice expense RVUs starting in CY 2026.

The update would account for increased efficiencies in procedures and tests, as well as the shift in the healthcare landscape in which hospitals and health systems employ more physicians, CMS stated. Private practices only employed about 42.2% of physicians by 2024, an 18-percentage-point decrease from 2012, the American Medical Association reports.

"For the last four years, powerful interests have targeted independent medical practices," HHS Secretary Robert F. Kennedy, Jr, said in the announcement. "Thanks to Dr. Oz's decisive leadership, this rule modernizes CMS payment systems, eliminates perverse incentives, and harnesses better data to improve care for patients with chronic disease while protecting the future of hometown doctors."

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.