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July 17, 2026 – Earlier this week, the Centers for Medicare & Medicaid Services (CMS) issued the calendar year (CY) 2027 Medicare Physician Fee Schedule (PFS) proposed rule. Stakeholders have highly anticipated this reg, as it is the last of the 2027 proposed rules to be released. The 1,592-page reg includes a plethora of proposed policies and requests for information (RFIs) aimed at achieving some of the administration’s top priorities, including:
Before bucketing some key proposals in the themes above, let’s discuss the overall payment update under the PFS. The conversion factor (CF) is the standardized dollar amount used to convert relative value units (RVUs) into payment rates. The CF plays a central role in determining how physicians are reimbursed under Medicare, and it’s come under increased pressure in recent years.
Clinicians experienced cuts to the CFs from 2021 through 2025 but got a temporary reprieve in 2026 with a small increase. However, for CY 2027, we are singing a familiar tune, and the proposed CFs would decline slightly compared to current levels. The proposed CY 2027 CFs are $33.1693 for physicians who meet certain participation thresholds in advanced alternative payment models (APMs) and $32.8409 for other clinicians. These amounts represent decreases of 1.19% and 1.68%, respectively, from the final CY 2026 CFs of $33.5675 and $33.4009.
The proposed CY 2027 CFs are based on three factors:
The CFs are mainly formulaic, and besides the budget neutrality component (which is impacted by changes that CMS proposes to RVUs in the rule), CMS has little control over them. Interestingly, Congress is considering a bill, the Patients First Act, that in part would reform MACRA by increasing the annual updates to clinicians. The bill was just introduced by Reps. Kim Schrier, MD (D-WA); John Joyce, MD (R-PA); and Greg Murphy, MD (R-NC), the respective chairs of the Democratic and GOP Doctors Caucuses, on July 15, 2026. Since the main factor driving the proposed decrease in the CFs is the expiration of the temporary increase provided in OBBBA, stakeholders may look to Congress to provide another short- or long-term fix prior to the start of CY 2027.
CMS proposes significant changes to the practice expense (PE) methodology that could have a big impact on payment for certain specialists. The PFS has a complicated 18-step process for determining PE. CMS proposes eliminating the Indirect Practice Cost Index (IPCI) from the calculation, which would remove steps 12 to 17 from the methodology. CMS’s rationale is that the current approach over-weights aggregate, outdated specialty-level survey data relative to code-level inputs and allocators, which limits CMS’s ability to improve valuation accuracy at the code level. This change would be phased in over two years, with half of the IPCI effect removed in year one and full removal in year two.
CMS also proposes a new indirect PE allocator formula that would add clinical labor RVUs to the work-RVU-based formula for nearly all codes, excluding only those with 010- and 090-day global periods. In step eight of the current PE methodology, indirect PE is allocated using the greater of work RVUs or clinical labor RVUs, except for “global” services billed with separate professional/technical components (mostly diagnostic/imaging), which get the sum of both. CMS points to a RAND report that found that the current policy inadvertently advantages “triplet services” (those with PC/TC/global billing) over “non-triplet services,” since summing two figures produces a larger indirect allocator than taking the maximum of the two. To correct this unintended advantage, CMS proposes extending the same dual-factor allocator (work RVU plus clinical labor RVU) to nearly the entire fee schedule, so that “triplet” and “non-triplet” services would be calculated using the same methodology going forward.
Together with other proposals (most notably the proposed modifier -25 payment cut described below), these PE changes, if finalized, are expected to have a significant negative impact on payments to certain specialties. To offset the volatility that removing the IPCI and changing the allocator formula could introduce, CMS proposes a new PE stabilization adjustment capping any code’s year-over-year PE RVU change at ±5%. This cap would not apply to new, revised, or newly revalued codes, as CMS reasons that the current statutory 19% phase-in cap on significant RVU reductions already limits swings for those categories.
If changes to PE sound familiar, they should. In the CY 2026 PFS final rule, CMS modified the indirect PE allocation methodology for services furnished in the facility setting, reducing the portion of indirect PE allocated per work RVU to 50% of the amount allocated for non-facility services. CMS implemented the policy to better align its payment policy with contemporary physician practice patterns and address potential duplicative payment for indirect costs. However, the agency indicated it would continue to examine the indirect PE methodology and consider further refinements in future rulemaking. In the CY 2027 PFS proposed rule, CMS proposes a modification to the policy for clinician visits in nursing facility settings. CMS also acknowledges stakeholders who believe that the 2026 policy had a detrimental effect on facility-based physicians who work in independent practices. These stakeholders are concerned that independent practices are unable to cut administrative and overhead costs enough to absorb the CY 2026 facility PE reductions, and that the reductions are accelerating the insolvency of independent physician practices and leading to an increase in hospital consolidation. CMS notes that it has heard “no general consensus among interested parties to this effect,” and that the agency has “received feedback that this policy supports independent practices.” CMS notes, however, that it is open to further refinements to the 2026 policy, particularly in how PE costs vary for physicians who are employed by facilities.
Modifier -25 is used to denote when an evaluation and management (E/M) visit is significant and separately identifiable from a same-day procedure. Because global surgical packages already account for the resource costs of routine visits, a standalone E/M code can only be billed alongside a procedure when this modifier is used.
In previous rulemaking, CMS stated its belief that billing a same-day E/M visit alongside a procedure with a global period likely duplicates payment, since global surgical packages already account for some of that E/M work. As a result, in the CY 2019 proposed rule, CMS proposed to reduce payment by 50% for the least expensive 0-day global procedure or visit that the same physician (or a physician in the same group practice) furnishes on the same day as a separately identifiable E/M visit, currently identified on the claim by an appended modifier -25. CMS ultimately did not finalize this proposal after commenters raised concerns about duplicative adjustments through the Relative Value Scale Update Committee (RUC) review process, unjustified reduction amounts, and the risk that physicians might respond to financial incentives to bring patients back for necessary visits on a different day to avoid triggering the payment reduction.
For CY 2027, CMS revisits this proposal and applies it more broadly by proposing to pay the most expensive service at 100%, and all other surgical procedure(s) or E/M visit(s) at 50%, when a separately identifiable office or outpatient (O/O) E/M visit is furnished by the same physician on the same day as a 0-, 10-, or 90-day global procedure.
The 50% is meant to match the longstanding Medicare multiple procedure payment reduction policy to cut payment by 50% for the second and subsequent surgical procedures furnished on the same day to the same patient, largely based on the efficiencies in PE and pre- and post-surgical physician work. CMS requests feedback on the appropriateness of this adjustment value.
While CMS proposes to apply this policy only to O/O E/M visits, the agency seeks comments on whether the policy should also apply to other E/M visits, such as inpatient E/M visits. CMS says it will rely on existing claims editing, comparative billing, and medical review tools to monitor for inappropriate scheduling of medical services for patients to maximize payment, while seeking comment on whether additional payment safeguards are needed.
Driven in part by recent Office of Inspector General (OIG) reports, CMS proposes several changes to the criteria for remote patient monitoring (RPM) and remote therapeutic monitoring (RTM) services.
First, CMS proposes to require that RTM services be furnished only to established patients – a requirement that has been in place for RPM services since the end of the COVID-19 public health emergency. CMS believes that this policy will help address OIG’s findings that some practices did not have a prior relationship with patients for whom they billed remote monitoring services.
Second, CMS proposes that, beginning in CY 2027, practitioners reporting RPM or RTM services must furnish a separately reportable face-to-face (in-person or telehealth) initiating visit in association with the onset of RPM or RTM services. From the agency’s perspective, an initiating visit is necessary for these services, as it would ensure that the billing practitioner assesses clinical appropriateness of remote monitoring and obtains the required beneficiary consent. This proposed requirement for an initiating visit would be consistent with an existing requirement for chronic care management services.
Third, CMS is concerned about recent OIG report findings that RPM or RTM services may be outsourced to third-party companies that provide services via telephone and online contact only and have limited association with the billing practitioner. To address these ongoing concerns, CMS proposes to only allow payment for RPM or RTM services when furnished by clinical staff employed by the practice, and proposes to prohibit contracting out to third-party companies beginning January 1, 2027. CMS notes that the time spent by clinical staff providing RPM or RTM services can be counted, provided that the clinical staff are under the general supervision of the billing practitioner, all other requirements of the “incident to” regulations are met, and the clinical staff are direct employees of the practitioner or the practitioner’s practice. CMS seeks input from stakeholders to understand how often third-party outsourcing occurs and how this proposed policy could impact access to remote monitoring services.
In the CY 2021 PFS final rule, CMS finalized separate payment for the O/O E/M visit complexity add-on code, HCPCS code G2211. While implementation was delayed by congress, CMS began actively paying for G2211 in CY 2024, and in the CY 2026 PFS final rule, CMS finalized its proposal to allow HCPCS code G2211 to be billed as an add-on code with the home or residence E/M visits code family.
For 2027, CMS proposes to transition the G2211 code to two modifiers rather than a standalone code. CMS now believes that the resource costs of longitudinal care are an inherent part of the visit instead of a separately billable service and would be more accurately captured as a modifier on the base E/M code.
MOD1 would increase the payment of the associated E/M code by 16%, creating an equal percentage increase across all E/M codes, which addresses CMS’s finding that the current code disproportionately boosts lower-intensity visits relative to higher-intensity ones. CMS established 16% using a weighted average of the percentage increase that G2211 comprised relative to the O/O E/M code, weighted by HCPCS code G2211 utilization and adjusted to achieve budget neutrality. CMS also proposes to match the code descriptor for HCPCS code G2211 to MOD1, with some technical changes.
For practitioners in the Medicare Shared Savings Program (MSSP) or Long-term Enhanced ACO Design (LEAD) accountable care organizations (ACOs), CMS proposes a MOD2 modifier that could increase payment of the associated E/M visit by 32%, to account for the additional resource costs associated with serving as the focal point of care for the beneficiary within an accountable care relationship. For both models, the modifier could be billed for all beneficiaries to whom an ACO participant furnishes services, meaning it would not be limited to only assigned beneficiaries. Claims submitted with the modifier would be included in beneficiary assignment calculations, historical benchmark expenditures, and other program calculations.
CMS expects that MOD1 would have minimal budget impact given that the volume previously reported using HCPCS code G2211 would now be reported with the modifier. However, if finalized, MOD2 is expected to increase payments specifically for practitioners with higher ACO participation, with no equivalent neutrality offset.
Under the quality payment program established by MACRA, most Medicare-participating clinicians can be subject to payment adjustments under a quality and cost performance program called the Merit-based Incentive Payment System (MIPS), or they can participate in the advanced APM track. Most clinicians are subject to MIPS. Eligible clinicians in MIPS have payments increased, maintained, or decreased based on relative performance in four performance categories: quality, cost, promoting interoperability, and improvement activities. Based on how that score compares to a pre-established performance threshold, a clinician receives an upward, downward, or neutral payment adjustment two years after the performance period. For example, performance in 2026 will impact Medicare payments in 2028.
In the proposed rule, CMS announces a formal transition from traditional MIPS to MIPS Value Pathways (MVPs). MVPs are a participation option to motivate clinicians to move away from reporting on self-selected activities and measures (traditional MIPS) and toward an aligned set of measure options designed to be meaningful to patient care, better connect measures across MIPS categories, and be more relevant to a clinician’s scope of practice. While past rules have signaled a timeline to transition away from MIPS to MVPs, the rule definitively proposes to have that transition fully occur by CY 2029. Beginning with the CY 2029 performance period, MVPs would be the only MIPS reporting option for clinicians who do not participate in a MIPS APM. Clinicians participating in a MIPS APM would continue to have the option to report the APM Performance Pathway (APP)/APP Plus. While clinicians have cited problems with the MIPS program, participation in MVPs remains low, with some reporting finding that clinicians perform better under traditional MIPS. CMS acknowledges that it will need to develop policies to support MVP reporting for all MIPS eligible clinicians by the CY 2029 performance period/2031 MIPS payment year. CMS states that it will continue engaging with specialty societies to identify gaps and opportunities, and will continue leveraging additional policy options as needed. CMS also solicits feedback on the future direction of MVP scoring.
CMS proposes three new MVPs for the CY 2027 performance period/2028 MIPS payment year, for a total of 30 MVPs. The new MVPs focus on diabetic disease, hospitalists, and hypertension. The diabetic disease and hypertension MVPs are specifically designed to address the prevention of chronic illnesses by including measures and activities aimed at reducing the incidence and impact of long-term conditions. With these additions, CMS estimates that 98% of MIPS eligible clinicians will be able to report through an MVP, and therefore the agency is confident that nearly all MIPS eligible clinicians will be able to choose an applicable MVP by the time the full transition occurs.
CMS also proposes a concept of reporting on “core measures” in both traditional MIPS and MVPs. Currently, MIPS participants must report on at least one outcome measure. If an applicable outcome measure is not available, the clinician can report a high-priority measure instead. Previous PFS rules defined measures as outcome or high priority. CMS would now remove this requirement and create a new concept focused on core measures.
For traditional MIPS, clinicians would be required to report a MIPS core measure as one of their six quality measures. For MVPs, clinicians would be required to report a MIPS core measure as one of their four quality measures.
The MSSP is the national ACO program under Medicare. As of January 1, 2026, MSSP has 511 ACOs with more than 700,000 healthcare providers and organizations providing care to more than 12.6 million beneficiaries. CMS proposes numerous changes (described over the course of 300 pages in the rule) aimed at enhancing this participation option in Medicare. Some of these proposed modifications address stakeholders’ direct feedback on the program, such as establishing asymmetric guardrails for the accountable care prospective trend to help set more accurate benchmarks. We may dive into these changes in a future Regs & Eggs post!
The CMS Innovation Center plans to launch the new mandatory five-year Ambulatory Specialty Model (ASM) on January 1, 2027. ASM aims to improve quality and reduce costs by holding individual specialists (not at the organizational level) accountable for performance on targeted quality, cost, care coordination, and electronic health record use metrics when managing heart failure and low back pain.
The CY 2026 PFS final rule established the model, and the CY 2027 proposed rule includes technical corrections and streamlining changes that respond to stakeholder feedback from the CY 2026 PFS rulemaking process.
The CY 2027 proposed rule includes several RFIs that run the gamut of all the themes expressed in the rule:
There are many other proposals in this major rule, so stay tuned for further updates as we continue to chew on this huge reg! You can also explore proposed CY 2027 payment rates, RVUs, and trends using our interactive dashboard. Comments on the proposed rule are due on September 14, 2026, and the final rule is likely to be issued by November 1, 2026.
Until next week, this is Jeffrey saying, enjoy reading regs with your eggs.
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