Prepare for 2027 Medicare payment cuts and rule changes, from E/M billing and remote monitoring to the end of MIPS and ACO updates.
Final physician rates for 2027 are set with the release of the Centers for Medicare & Medicaid Services (CMS) Medicare Physician Fee Schedule.
Another Medicare physician payment cut
Physicians participating in qualifying Advanced Alternative Payment Models (APMs) will see a conversion factor cut of -1.83%, while those who are not in qualifying APM would experience a larger reduction of -2.31%.
- Qualifying APM conversion factor = $32.95, a projected decrease of $0.62 from 2026
- Non-qualifying APM conversion factor = $32.63, a decrease of $0.77 from 2026
The reduction is driven primarily by the expiration of the temporary 2.5% payment increase that Congress provided for 2026 only. Congress could still act during by year end during the “lame duck” session to close the gap, so physicians should monitor legislative activity.
As they plan for 2027, physicians should also consider how payment updates, combined with labor and practice costs, will shape staffing, hiring, and other practice decisions.
"Physicians face reduced Medicare reimbursement amid ongoing inflationary pressures and rising labor costs. For practices, particularly independent physician groups, we see the continued disconnect between Medicare payment updates and practice cost growth. This remains an ongoing concern." Emily Lambert, CLA leader for physician and dental segment
Reforming payments: Global procedures-E/M services, practice expense methodology
CMS continues a multi-year trend of reforming Medicare payments, including advancing changes related to methodologies and evaluation and management (E/M) reimbursements.
The final 2027 rule cuts reimbursements when a separately identifiable E/M visit is furnished by the same physician (or physician in same practice) on the same day as a 0-day global procedure. CMS did not include the 10- or 90-day global procedures as originally proposed.
When the E/M visits are billed separately with procedures on the same day, the most expensive service (either surgical or E/M visit) will be paid at 100% with the other surgical procedure(s) paid at 80%, not 50% as originally proposed.
CMS also continues reforming the practice expense (PE) methodology used in calculating physician payments:
- Phasing out the indirect practice cost index from the PE relative value unit (RVU) calculation over two years while also implementing a PE stabilizer to address volatility. The agency continues moving away from specialty society survey data from the American Medical Association and toward what it believes is more objective, routinely updated cost information that is not anchored to values at a specific point in time.
- Allocating indirect PE on both the work RVU and clinical labor PE RVU, rather than just the maximum of the two, for all codes except 10- and 90-day global period codes.
- Fixes a cut that inadvertently hit Part A skilled nursing facilities from 2026, related to facility versus non-facility reimbursements. To correct this, CMS finalizes that PE RVU are equal to the non-facility PE RVU for the following nursing facility codes: 99304-99310, 99315, 99316.
The result of these adjustments is likely ongoing redistribution of payments across specialties.
Remote monitoring, therapy programs face vendor restrictions
Physicians outsourcing their remote patient monitoring (RPM) or remote therapy monitoring (RTM) face a new future under a requirement that clinical staff providing these services be employed by the practice itself, not outsourced to a third-party vendor. CMS provides a two-year delay.
Beginning January 1, 2029, the RPM and RTM codes cannot be billed in cases where the service is not performed by clinical staff who are direct employees of the practitioner or the practitioner's practice. Contracting out to third-party companies will not be allowed after that time. CMS intends to publish sub-regulatory guidance to clarify clinical staff arrangements that may be appropriate for these remote monitoring services.
Limiting vendor involvement will require greater physician or clinician effort and oversight, and may increase costs. Organizations using third-party vendors should review these changes for the future related to supervision, billing, financials, and compliance obligations.
MIPS to end
The traditional Merit-based Incentive Payment System (MIPS) will end with performance year 2030 with physicians required to transition to MIPS Value Pathways (MVPs) in 2031. Per CMS, MVPs create a more aligned framework on quality, cost, and improvement activities based on specialty-specific measures and outcomes. CMS also finalizes three new MVPs: diabetes disease, hospitalists, and hypertension.
Physicians will want to analyze which MVPs offer alignment to their specialties and begin preparing for the future when MIPS may no longer be available.
A boost for accountable care organizations
CMS finalizes a package of substantial changes to the Medicare Shared Savings Program (MSSP), the largest Accountable Care Organization (ACO) program in the country, while also encouraging new ACO formation.
LEAD ACO launches 2027
While the MSSP is the largest ACO, LEAD is the newest. The Long-term Enhanced ACO Design, LEAD, model launches Jan. 1, 2027, and replaces the REACH ACO model. For physicians and others looking to move towards value models, LEAD is another option to consider. Read more about LEAD.
Among the changes are:
- Rebalance incentives across risk tracks, particularly between BASIC-Level E and ENHANCED, such as increasing the shared savings rates in BASIC-Level E from 50% to 60%
- Modifications that reduce the "benchmark ratchet" effect that can penalize successful ACOs
- Adjustments that create more stable spending benchmarks and improve provider participation in risk-based models
- Certain changes to beneficiary assignment
For physician organizations considering risk-based arrangements, the changes could make ACO participation more attractive than it has been in recent years.
Bonus topic: Rural health clinics (RHCs), federally qualified health centers (FQHCs)
CMS finalizes that RHCs can provide diabetes self-management training and medical nutrition therapy as services that are covered and paid the all-inclusive rate as stand-alone billable visits under the RHC benefit.
The rule also implements policies under the Consolidated Appropriations Act, 2026, related to in-person tele-mental health services by suspending this requirement through December 31, 2027. This applies to RHCs, FQHCs, and other providers.
How CLA can help
Physicians should analyze the rule’s policies and prepare for ongoing movements in PE changes, rise of MVPS, ACO flexibilities, and remote monitoring services.
However, it should be noted some policies do not take effect until 2029 or 2030. This means there is time to prepare but also time for the policies to change or pulled back entirely.