Medicare Finalizes Physician Fee Schedule for 2026

 by Cheryl Clark

The Centers for Medicare & Medicaid Services (CMS) on Friday finalized its annual physician fee schedule for 2026, giving doctors treating Medicare patients a 3.77% pay bump if participating in alternative payment models (APMs) and a 3.26% increase for those not participating in APMs.

The bulk of those percentages comes from a 2.5% 1-year increase Congress passed in its One Big Beautiful Bill Act in July, as well as a 0.49% adjustment CMS said was necessary to account for proposed changes in work relative value units (RVUs) for certain services. Without those additions, the conversion factor increases would be 0.75% for physicians participating in APMs and 0.25% for those not participating in them.

But the agency also imposed a 2.5% cut for clinical services that are not time-based to reflect its opposition to the American Medical Association's (AMA) long-standing method for evaluating RVU schedules that set forth clinical service costs for CPT code billing. Many of the AMA's codes are "very likely overinflated," CMS said. The AMA said this so-called "efficiency adjustment" would reduce payment for 7,000 physician services, amounting to some 95% of all those provided by physicians.

CMS explained its concerns over the AMA's CPT coding system in a fact sheet. It said the AMA's "process relies primarily on subjective information from surveys that have low response rates, with respondents who may have inherent conflicts of interest (since their responses are used in setting their payment rates)."

The agency argued that "procedures, radiology services, and diagnostic tests, should become more efficient as they become more common, professionals gain more experience, technology is improved, and other operational improvements (including but not limited to enhancements in procedural workflows) are implemented" -- and thus should cost less. The adjustment will "accrue gains in efficiency over time" and save money starting in January.

The adjustments "address concerns about distorted payment values that have existed for years," CMS said, adding that MedPAC and the GAO have "called out long-standing overvaluation of certain procedures and undervaluation of time-intensive services like primary care."

"CMS is working to strengthen and transform Medicare for the current and future generations while cracking down on waste and abuse that drives up costs," CMS Administrator Mehmet Oz, MD, said in a press release. "The actions we are taking will improve seniors' access to high-quality, preventive care that will help them to live longer, healthier lives."

The final rule adopted much of what was proposed in July. In what is sure to be controversial, it finalized reduced payment for services that clinicians provide in hospital facilities but increased payment for services in non-facility settings.

For example, a table in the rule shows the estimated impact of the 2026 pay changes across three elements of physician pay -- work, practice expense, and liability insurance -- for 56 specialty practitioners delivering services within a facility such as a hospital or ambulatory surgical center versus in a physician's office.

For 50 of those specialties, the services provided within the facility would be paid less in 2026, whereas services provided in a non-facility practice would get a pay increase. Some examples of facility versus non-facility rate changes, respectively, include:

• Allergy and immunology: -11% vs +8%
• Endocrinology and gastroenterology: -10% vs +6%
• Hematology and oncology: -11% vs +6%
• Neurology: -9% vs +6%
• Ophthalmology: -13% vs +3%
• Otolaryngology: -12% vs +3%
• Podiatry: -9% vs +3%

In a statement, the AMA said the rates "fail to reflect true resource costs incurred by physician practices in the facility setting, [and thus] they risk reducing competition and encouraging consolidation, results that CMS itself has explicitly sought to avoid." Some 37% of oncologists and obstetricians and gynecologists would face cuts, it said.

"We're concerned that, at a time of increasing consolidation in healthcare, this rule will make it harder for independent practices to remain viable parts of our health system," said AMA President Bobby Mukkamala, MD. While calling the 2.5% increase "vital," the AMA said it's not nearly enough.

"This one-time correction does not keep up with increasing costs, and private practices across the country are expressing concern this rule would further put them at a disadvantage merely for treating patients at a hospital or ambulatory surgery center," Mukkamala said.

The American Academy of Family Physicians, however, said it was encouraged by the new structure, which will pay family practitioners 6% more for their non-facility services. The Primary Care Collaborative also was supportive, saying the new rule addresses "methods that have long diverted funding away from the whole-person, relationship-based primary care Americans need" and shifts "resources from facility to independent, community-based practices."

The Medical Group Management Association opposed what it called "flawed policy" in the new pay rates, saying medical groups "had to deal with a 2.83% cut to the Medicare conversion factor all of 2025, and the 2026 conversion factors are barely an increase over 2024 payment levels.

The efficiency adjustment will not apply to certain evaluation and management, care management, behavioral health, telehealth, and maternity services codes.

Other provisions of the final rule include:

• More lenient enrollment criteria for the Diabetes Prevention Program
• Reduced spending on "abusive pricing practices" related to "skin substitutes" in wound care
• A risk assessment tool to focus on beneficiaries' physical activity and nutrition to reduce chronic disease
• Five new outcome measures focused on prevention
• Removal of 10 quality measures said to not improve patient health outcomes

The final rule also eliminated limitations on telehealth services, now allowing services requiring supervision to be provided through real-time audio or visual interactive telecommunications and removing frequency limitations. The Alliance for Connected Care said some aspects of the new policy will make it difficult for practitioners to offer telehealth from home after hours.

https://www.medpagetoday.com/publichealthpolicy/medicare/118296