Physician pay cuts loom as CMS unveils major Medicare reforms

Proposed Physician Fee Schedule payment policies

The rule provides two conversion factors: one for physicians participating in a qualifying alternative payment model under the Quality Payment Program and one for those reporting under the program's Merit-Based Incentive Payment System.

If finalized as is, the rule would enact a qualifying APM conversion factor of 0.75% and a non-APM conversion factor of 0.25%.

However, the CMS clarified that the conversion factors would ultimately decrease under the rule. Federal law requires a 2.50% reduction in Medicare payments under the PFS, which was avoided last year under Public Law 119-21, also known as the One Big Beautiful Bill Act.

Therefore, the proposed CY 2027 qualifying APM conversion factor would be $33.10, a decrease of about $0.40, and the non-qualifying APM conversion factor would be $32.80, a decrease of about $0.56.

The proposed CY 2027 conversion factors reflect a major change that would affect the work relative value units for some services.

CMS is on a broader effort to reform the practice expense methodology. The agency will begin this process by reducing the reliance on specialty-specific practice expense per-hour data as told by physician surveys conducted by the American Medical Association.

The agency said that the surveys have historically had low response rates and discrepancies between actual data, when available, which have been particularly problematic for specialty providers.

The proposed rule would initiate a multi-year shift from the surveys, beginning with phasing out the methodology that ensures the overall number of practice expense RVUs by specialty is consistent with data from 2007 or earlier. Eventually, CMS hopes to replace it with a practice expense stabilizer that anchors values to a specific point in time.

The rule would also adjust the allocation of indirect practice expense for physician visits to patients in skilled nursing facilities, aligning with the current site-of-service payment differential policy finalized last year.

The proposed rule would also decrease payment by 50% when a separately identifiable office or outpatient evaluation and management visit is done by the same physician or practice on the same day as a global procedure. The least expensive service -- surgical or E/M -- would be subject to the reduced rate.

As part of President Donald J. Trump's Make America Healthy Again initiative, the CMS is also seeking to create an HCPCS code for shared medical appointments, which the agency said help to reduce and manage chronic illness while addressing social isolation and loneliness.

The rule would also create two additional HCPCS codes for advanced care planning services, which would distinguish the work done by billing from the time spent by clinical staff. The existing ACP CPT codes 99497 and 99498 would only be used to report time personally spent by billing staff, CMS explained.

Transforming value-based care for physicians

Physician quality reporting and value-based care programs are also slated for major reform in the coming years.

By 2029, the CMS wants to sunset the traditional MIPS reporting system in favor of MIPS Value Pathways, specialty-specific sets of measures and activities for MIPS reporting. The MVPs have been voluntary since their introduction in 2023, but the CMS wants clinicians to transition fully to the sets, which it considers more clinically meaningful.

The agency also proposed three new MVPs focused on diabetes, hypertension and hospital-based care.

If finalized, the CMS said the updated MVP options would provide a relevant reporting option for about 98% of specialties.

Physicians have long complained that MIPS has not captured actual patient outcomes or the true quality of care, while also being a heavy administrative burden and disproportionately penalizing smaller or safety-net practices.

The proposed rule also included a major overhaul of the MSSP, with updated benchmarking and financial methodologies.

Under the rule, the CMS intends to balance incentives for accountable care organizations in the higher levels of the BASIC and ENHANCED tracks. As such, the agency proposed a 60% shared savings rate (up from 50%) for Level E of the BASIC track and a 35% maximum weight (up from 50%) for the positive regional adjustment for ACOs in the ENHANCED track.

The CMS said that reducing this gap in savings percentages should increase participation and the long-term success of ACOs, especially since ACOs in Level E have generated higher Medicare savings than those in the ENHANCED track.

The proposed rule would also increase the prior savings adjustment's scaling factor from 50% to 75% to provide relief from the rebasing "ratchet effect," in which the savings an ACO generates later reduce its rebased benchmark. This ratchet effect has made it harder for cost-cutting ACOs to generate savings later.

To encourage new ACO participation, the CMS also proposed a benchmark growth adjustment for practices with limited experience with risk or value-based care. The adjustment would be applied to the highest existing benchmark adjustments eligible to the ACO, not exceeding the proposed risk adjusted 5% cap.

The rule would also implement a guardrail limiting the Accountable Care Prospective Trend to no more than 1 percentage point below (or 1.5 percentage points above) national growth rates, with retroactive application of the lower guardrail for PY 2025 reconciliation.

"Expanding accountable care is a critical part of making the Medicare program work well for patients," John Brooks, CMS Deputy Administrator and Director of the Center for Medicare, said in the press release. "Our goal is simple: deliver better outcomes for patients by appropriately incentivizing providers, improving quality measurement, and reducing administrative burden."

Jacqueline LaPointe is an Executive Editor at Xtelligent Healthcare Media, covering revenue cycle management, healthcare payers, health policy and health IT since 2016.