CMS is proposing a major overhaul to how it calculates indirect practice expense (PE), which represents the overhead costs such as rent, staff, and other office expenses built into the Medicare physician fee schedule (PFS) payment. CMS implemented the policy to better align its payment policy with contemporary physician practice patterns and to address potential duplicative payment for indirect costs. Two big changes are driving this overhaul:
For a broader overview of the CY 2027 PFS proposed rule, including the conversion factor update, modifier -25, and other key provisions, refer to M+’s 2027 PFS Proposed Rule Summary. This +Insight focuses specifically on the IPCI removal and the 5% PE stabilization cap.
This is the second year in a row in which CMS is proposing changes to indirect PE, albeit in distinct ways. 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 relative value unit (RVU) to 50% of the amount allocated for non-facility services.
The proposed changes in the CY 2027 PFS proposed rule could result in substantial shifts in PE RVUs for individual services. To mitigate these abrupt changes, CMS proposes to cap annual changes in a code’s PE RVU at ±5%. The 5% cap is not a ceiling on the total cut/gain – it is a speed limit on how fast a code gets there. Codes whose PE RVU under the fully phased-in methodology differs from their current published PE RVU by more than 5% will continue moving toward that target in future years, even after the two-year IPCI phase-out period ends in CY 2028. Thus, looking at just the 2027 number can be misleading if you do not know how big the underlying change really is.
CMS has not published a list of which specific codes are hitting this cap, and its own specialty-level impact estimates reflect only the capped, partially phased-in effect for 2027. The size of the eventual effect will vary by specialty, depending on the magnitude of each specialty’s IPCI change and the share of its billed services that are indirect- versus direct-cost-driven, meaning the true multi-year shift, in either direction, is likely larger than what CMS’s specialty tables show today.
| Specialty | 2026 IPCI | 2027 IPCI | % Change from 2026 to 2027 |
|---|---|---|---|
| Clinical Psychologist | 0.28 | 0.66 | +133% |
| Licensed Clinical Social Worker | 0.28 | 0.64 | +130% |
| Mental Health Counselor | 0.30 | 0.64 | +113% |
| Vascular Surgery | 0.37 | 0.69 | +85% |
| Clinical Laboratory (independent) | 0.43 | 0.74 | +73% |
CPT 37252 (intravascular ultrasound of a non-coronary vessel) is set to see its non-facility PE RVU go up by 5.0% in 2027 (24.68 to 25.91). This is a vascular procedure code billed predominantly by vascular surgeons (about 40% of the time), along with cardiologists and interventional radiologists.
M+ estimates that without the 5% cap, but still applying the partially phased-in IPCI as proposed for 2027, this code’s non-facility PE RVU would be 27.91. If the IPCI is removed entirely, the fully phased-in non-facility PE RVU would reach 31.27, a 27% increase over its 2026 value. While CMS is proposing a non-facility PE RVU of 25.91 for 2027, if the rule is finalized as proposed, we would expect this figure to continue increasing 5% each year until it reaches its full value. Note that these estimates are based on the public datasets CMS had published as of July 22, 2026, and are subject to change as CMS releases updated data or finalizes its methodology.
On the flip side of this equation are specialties negatively impacted by this proposed policy.
| Specialty | 2026 IPCI | 2027 IPCI | % Change from 2026 to 2027 |
|---|---|---|---|
| Medical Oncology | 1.94 | 1.46 | -25% |
| Speech Language Pathology | 1.41 | 1.07 | -24% |
| Hematology/Oncology | 1.80 | 1.38 | -23% |
| Infectious Disease | 1.95 | 1.51 | -22% |
| Ophthalmology | 1.61 | 1.30 | -20% |
Codes billed predominantly by these specialties are likely to show only a partial decline in 2027, capped at -5%, even though the underlying IPCI correction implies a much larger cut once fully phased in.
CMS has yet to publish the fully phased-in PE RVUs for codes impacted by the 5% cap.
M+ is working with clients to replicate CMS methodology and estimate the PE RVUs for procedure codes without the 5% cap. Clients are using this information to understand the likely Medicare physician fee-schedule payment rates in 2028 and beyond, if key CMS proposals are finalized, and to support their comment letters.
