As part of its annual year-end updates, CMS recently finalized changes to the 2026 Medicare Physician Fee Schedule (MPFS) that could have significant impacts on core provider enterprise pillars, such as compensation planning and patient care revenue.
The 2026 MPFS changes resemble the landmark 2021 MPFS changes—though with an inverse dynamic applied. The changes in 2021 elevated the value of evaluation and management codes while lowering the conversion factor to maintain budget neutrality. In contrast, the 2026 updates increase the reimbursement conversion factor but reduce the work RVU (WRVU) values for many procedural services, effectively achieving a similar result.
Both efforts appear to advance CMS’s commitment to value-based care and cost containment by increasing reimbursement for services commonly delivered by cognitive specialties, such as primary care, and offsetting those increases through reductions in procedural specialty payments.
As payer alignment remains a cornerstone of provider enterprise strategy, healthcare provider organizations must proactively evaluate and adjust their compensation models to coincide with CMS’s shifts in reimbursement methodologies.
Key Changes
There are two key changes in the 2026 MPFS:
- The conversion factors are set to increase from $32.35 to $33.40 for nonqualifying alternative payment model participants and $33.57 for qualifying participants.
- An “efficiency adjustment” will reduce the RVUs of approximately 7,700 CPT codes. This adjustment will affect procedures, diagnostic tests, and radiology services but will not impact time-based codes, telehealth services, pregnancy care, behavioral health services, physical medicine and rehabilitation services, or care management services.
While these updates help to ensure CMS maintains its legally mandated budget neutrality, they also result in provider-level changes to both professional collections and WRVUs that organizations must be prepared to address in their compensation plans.
For example, if an organization does not adjust or refine its production-based compensation models to mitigate the projected impacts, some providers could see a reduction in overall WRVUs—and consequently, compensation—despite providing the same level of service.
Projected Impacts
WRVUs
Regarding WRVU changes under the 2026 MPFS, with the exception of primary care, most specialties are expected to experience a slight decline in WRVUs. This is primarily due to the 2.5% reduction in WRVUs resulting from the efficiency adjustment.
To determine the specialty-level effects of the new CMS ruling, ECG utilized CPT-level data from our 2025 Physician and APP Survey to calculate the variance in WRVUs under the 2024 MPFS (as reflected in the published 2025 benchmarks) and the new 2026 MPFS, as shown in table 1.
Table 1: Projected WRVU Variances
Practice Expense RVUs and Medicare Revenue
In addition to the WRVU changes, the 2026 MPFS may significantly impact Medicare revenue for single-specialty groups or those with strong hospital- or procedure-based programs. CMS has revised the practice expense RVU methodology to account for the fact that facility-based physicians incur little to no direct practice expenses; therefore, paying facility rates at the same level as nonfacility settings may not accurately reflect the current practice of most providers.
Even accounting for the higher conversion factors under the 2026 MPFS, specialties such as facility-based interventional radiology and hospital medicine are expected to see reductions in Medicare revenue of more than 5%. It is essential to note that the changes in revenue associated with the MPFS will be limited to the Medicare program alone, as Medicaid and commercial payers generally operate on different fee schedules. Figures 1 and 2 illustrate CMS’s estimation of the revenue impacts on both non-facility-based and facility-based services.
Figure 1: Revenue Impact for Non-Facility-Based Services
Figure 2: Revenue Impact for Facility-Based Services
The specialties with significant negative revenue impacts are often included in professional services arrangements, which can result in hospitals needing to pay higher subsidies or stipends to ensure that the independent group remains financially sustainable. Organizations should consider their arrangement types and begin analyzing and strategizing based on the relevant implications of these changes.
Recommended Actions
The changes in the 2026 MPFS may have a material effect on production-based compensation plans and Medicare revenue for your organization. To begin planning for this, hospital and health system leaders can take the following actions:
- Evaluate the current compensation methodologies at the service line or specialty level for employed or affiliated physicians to determine the potential impact of the 2026 changes.
- Assess the potential impact on professional services agreements that include subsidies or stipends.
- Model the variance in Medicare revenue stemming from the MPFS changes, including the financial impact to the physician enterprise.
ECG regularly helps organizations navigate fee schedule transitions and develop strategies to address the implications of MPFS changes. If you are in need of support, please let us know.
Edited by Emily Johnson
