Proposed Rule Highlights and Potential Implications
- Issued on July 14, 2026, the Physician Fee Schedule (PFS) proposed rule includes policy and reimbursement changes for Medicare payments under the PFS and other Medicare Part B issues. The rule also includes proposed changes to the Medicare Shared Savings Program (MSSP).
- For CY 2027, CMS continues its policy of applying differential payment rates to qualifying alternative payment model (APM) participants and non-qualifying providers, which was first implemented in CY 2026.
- As a result, CMS is proposing a conversion factor for qualifying APM participants of $33.17, which represents a 1.19% decrease from CY 2026, and a conversion factor of $32.84 for nonqualifying providers, which represents a 1.68% decrease compared to CY 2026.
- Other updates include proposed changes to the use of modifier 25, proposed changes to the practice expense (PE) calculation, and updates to the E&M visit complexity add-on coding. CMS is also proposing a variety of changes to the Medicare Shared Savings Program (MSSP) to encourage broader participation and beneficiary enrollment.
- Finally, the proposed rule includes additional details and proposed changes on the mandatory Ambulatory Specialty Model (ASM) that is set to begin on January 1, 2027.
- Comments on the proposed rule are due September 14, 2026.
Additional Details
Conversion Factor Updates
- For CY 2027, CMS is proposing 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 proposed conversion factor for qualifying APM participants is $33.17. This represents a decrease of $0.40, or 1.19%, from the current $33.57.
- The proposed conversion factor for nonqualifying providers is $32.84, a decrease of $0.56, or 1.68%, from the current $33.40.
- The conversion factor updates reflect positive adjustments required by statue, including a 0.53% adjustment tied to proposed 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 $20.42 and the CY 2027 anesthesia nonqualifying APM conversion factor to be $20.21, reflecting the same overall PFS adjustments with the addition of anesthesia-specific 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 surgery, and hand surgery, and to a smaller extent, ophthalmology, podiatry, audiology, neurosurgery, plastic surgery, and portable x-ray suppliers. These changes are largely attributed to proposals around practice expense 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
- PE Calculation: In the CY 2027 proposed rule, CMS explains their reevaluation of how PE is established for services in the PFS. Specifically, CMS explains that the longstanding methodology utilized to calculate PE RVUs inadvertently advantages services that can be reported using technical, professional, and global components (typically diagnostic and imaging services) over those that cannot. These services are 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.
As such, CMS is proposing 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.
CMS is also proposing 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. Specifically, 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 proposing to reduce payment when a physician bills a separately identifiable office or outpatient evaluation and management visit on the same day as a 0-, 10- or 90-day global procedure. Under the proposal, the most expensive service (either surgical or E/M visit) would be paid at 100%, while the other would be paid at 50%.
- Of note, while this proposal is limited to office or outpatient (O/O) E&M visits, CMS is seeking comments on whether it should also apply to other E&M visits, such as inpatient E&M visits.
- E&M Visit Complexity Add-On: CMS is proposing to convert theG2211 evaluation and management complexity add-on code into a modifier, rather than a separate billing code.
- CMS is proposing that the modifier would be billed under the same circumstances that the G2211 code is currently billed, with a valuation equal to 16% of the base E&M code. CMS established this payment percentage based on a weighted average of the percent increase that G2211 comprised relative to the base code, weighted by utilization, and adjusted to achieve budget neutrality.
- CMS is proposing to establish a separate modifier to replace G2211 reporting for practitioners participating in accountable care organizations (ACOs), such as Shared Savings Program or LEAD Model ACOs. CMS is proposing to value the ACO-specific modifier at 32% of the base E&M code. CMS notes that valuing the modifier for ACO participants at twice the rate will better account for the complexity of ACO visits and the associated increased time and intensity.
- In terms of rationale, CMS noted that since they began payment 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 notes that this transition should reduce operational and administrative burden.
- Remote Monitoring: For CY 2027, CMS is proposing several changes to policies surroundingremote physiologic monitoring (RPM) and remote therapy monitoring (RTM), including:
- Proposal to require that RTM services can only be furnished to established patients.
- Proposal that practitioners reporting RPM or RTM services must furnish a separately reportable initiating visit in association with the onset of RPM or RTM services.
- Proposal to only allow payment for RPM or RTM services when furnished by clinical staff that are employed by the billing practitioner. In other words, if finalized, this would mean that RPM and RTM codes could not be billed if the service is not performed by clinical staff of the billing practitioner and therefore would not allow contracting out to third-party companies.
- Clinical Laboratory Fee Schedule (CLFS)
- For CY 2027, CMS is proposing to implement requirements put forth in the Consolidated Appropriations Act of 2026. These include changes in data collection and reporting requirements in addition to the phase-in of payment reductions for clinical diagnostic laboratory tests (CDLTs).
- The payment reductions from the implementation of private payer rate data are set to begin in CY 2027 and are subject to a phase-in reduction of up to 15% per year through CY 2029.
Medicare Shared Savings Program
- Financial Methodology: CMS is proposing several changes to the MSSP, mainly aimed at balancing incentives between higher risk tracks, mitigating selection issues, and rebasing benchmarks. These include proposals to:
- Increase the shared savings rate (“sharing rate”) for Level E of the basic track from 50% to 60% to more properly balance this participation option relative to the enhanced track, which has a 75% sharing rate.
- Reduce the maximum weight used in calculating the positive regional adjustment for ACOs participating under the enhanced track from 50% to 35% to rebalance the influence of regional cost variation on ACO benchmark calculations.
- Increase the prior savings adjustment’s scaling factor from 50% to 75% in an effort to incentivize ACOs to generate more savings in their initial agreement period while also encouraging long-term participation in the program.
- Risk-adjust the 5% cap on upward adjustments to the historical benchmark, which would result in potentially higher adjustments for ACOs whose assigned beneficiary populations are higher risk and would potentially incur higher costs.
- Historical Benchmark Adjustment: CMS is proposing to introduce a growth adjustment for the historical benchmark that will reward ACOs for recruiting ACO professionals who are inexperienced with value-based care and/or serving beneficiaries new to value-based care.
- Beneficiary Assignment Methodology: CMS is proposing several changes to the beneficiary assignment methodology with the goal of increasing the number of Medicare beneficiaries enrolled in accountable care relationships. These proposals include updating the definition of primary care services and modifying assignment eligibility criteria.
Other Updates
- Coding for Shared Medical Appointments (SMAs): In CY 2026, CMS solicited feedback on how to better support prevention and management of chronic conditions. In response to input regarding multidisciplinary support and the use of shared medical appointments, CMS is proposing to establish separate coding and payment for SMAs (HCPCS code GSMAS). Within this policy, CMS is proposing the following requirements:
- SMAs will be limited to beneficiaries who have received services from the billing physician, or other provider/health professional of the same specialty who belongs to the same group practice within the previous 12 months.
- Beneficiaries are required to consent to SMA participation.
- SMAs will be established as 60-minute sessions with a maximum of 10 beneficiaries per session.
- SMA sessions can be held either in person or via telehealth (CMS is proposing to add the SMA service to the Medicare telehealth list accordingly).
- SMAs will have a work RVU of 1.73 and a total work time of 45 minutes (based on a preservice evaluation time of 7 minutes, an intraservice time of 30 minutes, and a post-service time of 8 minutes).
- Smoking and Tobacco Use Cessation: In the CY 2024 PFS final rule, CMS finalized an increase in the valuation for timed behavioral health services by applying an upward adjustment 19.1% to the work RVUs for time-based psychotherapy codes to be implemented over a four-year transition period. In the CY 2027 proposed rule, CMS is proposing to apply the same adjustment to smoking and tobacco use cessation and screening, brief intervention, and referral to treatment (SBIRT) services. Specifically, CMS is proposing to 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 is offering additional details on the model and proposing select modifications, including:
- A proposal to create exceptions for certain ASM heart failure participants from specific model requirements.
- Proposals to incorporate 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.
