Final Rule Highlights and Potential Implications
- Issued on November 4, 2026, the Physician Fee Schedule (PFS) final rule includes policy and reimbursement changes for Medicare payments under the PFS and other Medicare Part B issues. The rule also includes changes to the Medicare Shared Savings Program (MSSP).
- For CY 2027, CMS continues to apply separate conversion factors to qualifying alternative payment model (APM) participants and nonqualifying providers, which was first implemented in CY 2026. CMS is finalizing a conversion factor for qualifying APM participants of $32.95, which represents a 1.83% decrease from CY 2026, and a conversion factor of $32.63 for nonqualifying providers, which represents a 2.31% decrease compared to CY 2026. These changes are largely driven by the expiration of the temporary 2.5% statutory increase.
- Other finalized changes include:
- A revised modifier 25 payment-reduction policy. Specifically, when a separately identifiable office/outpatient evaluation and management (E&M) visit is furnished on the same day as a 0-day global procedure, the higher-valued service will be paid at 100% and the other service at 80%. The proposal would have paid the lower-valued service at 50% and included 0-, 10-, and 90-day global procedures.
- Significant changes to the practice-expense methodology that will redistribute payments across specialties. This is expected to benefit behavioral health and certain therapy and radiology specialties while reducing payments for certain procedural and surgical specialties.
- Replacement of the stand-alone E&M visit complexity add-on code (HCPCS G2211) with two modifiers: B1 and B2.
Additional Details
Conversion Factor Updates
- For CY 2027, CMS is finalizing two separate conversion factors, as required by statute beginning in 2026—one for physicians who qualify as participants in an advanced alternative payment model (AAPM), and one for those who do not.
- The finalized conversion factor for qualifying APM participants is $32.95, a reduction from the previously proposed conversion factor or $33.17, and a decrease of $0.62, or 1.83%, from the current conversion factor of $33.57.
- The finalized conversion factor for nonqualifying providers is $32.63, a decrease from the previously proposed $32.84, and a decrease of $0.77, or 2.31%, from the current $33.40.
- The conversion factor updates reflect positive adjustments required by statue, including a -0.12% adjustment to account for changes in work relative value units (RVUs), and a 0.75% and 0.25% adjustment for qualifying and nonqualifying APM participants, respectively. However, these positive adjustments are offset by the expiration of the temporary 2.50% conversion factor increase that was mandated by statute and applied from January 1 through December 31, 2026, and will therefore not be in effect for CY 2027.
- For anesthesia services, CMS estimates the CY 2027 APM conversion factor to be $20.31 and the CY 2027 anesthesia nonqualifying APM conversion factor to be $20.11, reflecting the same overall PFS adjustments with the addition of the anesthesia-specific practice expense (PE) adjustment.
- By specialty, CMS estimates significant positive impact on clinical psychologists and clinical social workers, with smaller increases to physical and occupational therapists, interventional radiology, and vascular surgery. Specialties that would see a significant decrease include dermatology, otolaryngology, orthopedic and hand surgery, and to a smaller extent, ophthalmology, podiatry, audiology, neurosurgery, and plastic surgery. These changes are largely attributed to proposals around PE methodology, the use of modifier 25, and the proposal to remove the Indirect Practice Cost Index (IPCI) from the calculation of the PE RVUs, all of which are discussed later in this summary.
Coverage and Reimbursement Updates
- Practice Expense Calculation: CMS is finalizing its proposal to allocate indirect PE using both the work RVU and the clinical labor RVU for all services, with the exception of codes with 0-, 10-, and 90-day global periods rather than just applying that methodology to those services that can be reported using technical, professional, and global components. This change is designed to correct the previous methodology used to calculate PE RVUs, which CMS believes inadvertently advantaged services that can be reported using technical, professional, and global components (typically diagnostic and imaging services) over those that cannot. These services were advantaged because their indirect PE RVUs are allocated based on the sum, whereas services that can only be reported as a global service depend on the maximum rather than the sum.
CMS is also finalizing other technical changes to the PE RVU calculation, including removing the IPCI from the calculation of the PE RVUs over a two-year transition period. In the first year, only half of the measured variation in the IPCI will be applied. In the second year, the IPCI will no longer be applied.
- Payments Using Modifier 25: CMS is finalizing a payment reduction when a physician bills a separately identifiable office/outpatient E&M visit on the same day as a 0-day global procedure. This represents a modification from the initial proposal, which included 10- and 90-day global procedures.
Under the finalized policy, the most expensive service (either surgical or E&M visit) will be paid at 100%, while the other will be paid at 80%. This also represents a modification from the proposal, which had the second service paid at 50%.
- E&M Visit Complexity Add-On: CMS is finalizing its proposal to convert HCPCS code G2211 into two modifiers, rather than a separate billing code.
- CMS is finalizing modifier B1, to be billed under the same circumstances that the G2211 code is currently billed, and will increase the payment of the associated E&M code by 16%.
- CMS is also finalizing its proposal to establish a separate modifier to replace G2211 practitioners participating in accountable care organizations (ACOs), such as MSSP or LEAD Model ACOs. This modifier, B2, will increase payment of the associated E&M code by 32%.
- CMS noted that since payment began for HCPCS G2211 in CY 2024, they have come to believe that the resources required for longitudinal care are not a separate service, but rather an inherent part of the visit, and therefore a modifier on the base E&M code would be more appropriate. CMS also believes that this transition should reduce operational and administrative burden.
- Remote Monitoring: For CY 2027, CMS is finalizing several of the proposed changes surrounding remote physiologic monitoring (RPM) and remote therapy monitoring (RTM). The finalized changes include the following:
- RTM services can only be furnished to established patients.
- Practitioners reporting RPM or RTM services must furnish a separately reportable initiating visit in association with the onset of RPM or RTM services.
CMS also previously proposed to only allow payment for RPM or RTM services when furnished by clinical staff employed by the billing practitioner. In other words, RPM and RTM codes could not be billed by contracted third-party companies. After consideration of public comment, CMS is delaying the implementation of this requirement until January 1, 2029, to allow time for practices to adapt to the planned change.
- Clinical Laboratory Fee Schedule (CLFS): For CY 2027, CMS is finalizing requirements put forth in the Consolidated Appropriations Act of 2026, including changes in data collection and reporting requirements. In addition, the phase-in of payment reductions from the implementation of private payer rate data will begin in CY 2027 and will be limited to 15% per year through CY 2029
Medicare Shared Savings Program
- Financial Methodology: CMS is finalizing several changes to the MSSP, mainly aimed at increasing incentives for higher risk tracks, mitigating selection issues, and rebasing benchmarks. Finalized changes include:
- Increasing the shared savings rate (“sharing rate”) for Level E of the basic track from 50% to 60% to narrow the difference when compared to the enhanced track, which has a 75% sharing rate.
- Reducing the maximum weight used in calculating the positive regional adjustment for lower-spending ACOs participating under the enhanced track from 50% to 35%.
- Increasing the prior savings adjustment’s scaling factor from 50% to 75% to incentivize ACOs to generate more savings in their initial agreement period while encouraging long-term program participation.
- Risk-adjusting the 5% cap on upward adjustments to an ACO’s historical benchmark, which will allow for higher adjustments for ACOs serving a higher-risk population.
- Historical Benchmark Adjustment: CMS finalized a new growth adjustment to reward ACOs for adding new ACO professionals who are inexperienced with value-based care and/or serving beneficiaries new to value-based care.
- Beneficiary Assignment Methodology: CMS finalized several changes to the beneficiary assignment methodology, including updating the definition of primary care services and modifying assignment eligibility criteria.
Other Updates
- Coding for Shared Medical Appointments (SMAs): CMS is finalizing its proposal to establish separate coding and payment for SMAs (HCPCS codes G0686 and G0687). Within this policy, CMS is finalizing the following requirements:
- SMAs will be limited to beneficiaries who have an established relationship with the billing physician, or other provider/health professional of the same specialty who has belonged to the same group practice within the previous 12 months.
- Beneficiaries are required to consent to SMA participation.
- SMAs must include 2 to 10 beneficiaries, to be billed once for each participating beneficiary.
- SMA sessions can be held either in person or via telehealth (G0686 and G0687 were added to the Medicare Telehealth Services List for CY 2027).
- Smoking and Tobacco Use Cessation: CMS is finalizing its proposal to include smoking and tobacco use cessation services and screening, brief intervention, and referral to treatment (SBIRT) services to the timed behavioral health codes. CMS will apply the full 19.1% adjustment for these services in CY 2027 to align with the fourth and final year of the phase-in for timed behavioral health codes.
- ASM: Ahead of the model start on January 1, 2027, CMS finalized additional details on the model and select modifications, including:
- Additional participation exceptions for certain heart failure participants.
- Additional scoring and reporting flexibility, including a rural scoring adjustment for participants in rural areas, and an option for data submission for improvement activities at either the individual or group level.
- Limiting Medicare Coverage for Certain Individuals: CMS is finalizing rules to implement statutory changes related to Medicare eligibility. Specifically, eligibility will be limited to individuals in the following four groups:
- A citizen or national of the United States
- An alien who is lawfully admitted for permanent residence under the Immigration and Nationality Act
- An alien who has been granted the status of Cuban and Haitian entrant
- An individual who lawfully resides in the United States in accordance with a Compact of Free Association
