Physicians will see positive changes in Medicare payment rates in 2026, alongside significant adjustments in how payments are determined.
Proposed CY 2026 physician fee schedule
Physicians receive a payment update next year coupled with changes to how their Medicare payment rates are set if the Centers for Medicare & Medicaid Services (CMS) finalizes the proposed calendar year (CY) 2026 physician fee schedule (PFS) rule.
Each year, CMS releases changes to Medicare reimbursement rates, regulatory requirements, and quality benchmarks for a spectrum of care settings, including physicians. The PFS runs on the calendar year and governs payment for thousands of services delivered by physicians and other practitioners.
5 key items to watch in the proposed 2026 payment rule
1. Positive 2026 payment update
The good news is that physicians and other practitioners paid under the PFS receive a welcome Medicare reimbursement increase next year. Interestingly, there are multiple conversion factors in play for 2026 related to the amount of that increase — a mandatory 2.5% increase (the result of OBBBA’s enactment) plus a second update based on involvement in a Qualifying Alternative Payment Model (APM) or not. If in a qualifying APM, an update of 0.75% and if not, 0.25%. Additionally, CMS proposes a 0.55% adjustment to account for other changes in the rule.
“There was a collective sigh of relief that, at least for 2026, physicians will have a positive update. That said, what I’m seeing in this rule is more of a focus on the efficiency adjustment and facility-based reimbursement cuts.
Many groups base compensation on work relative value units (wRVU), which means the efficiency adjustment to wRVU change could have a negative impact on many providers.
Understanding compensation approaches and the potential impact there, plus overall revenue impacts, will be important.”
— Larry Jurgens, CLA
Combined, these policies will result in payment updates for 2026 of:
- Qualifying APM — Total conversion factor of $33.59 or 3.8% (projected increase of $1.24)
- Nonqualifying APM — Total conversion factor of $33.42 or 3.3% (projected increase of $1.07)
On a related note, physicians have been advocating for a long-term solution for the annual payment update. One proposal physicians and others, such as MedPAC, have supported is tying the annual update to the Medicare Economic Index (MEI). Unfortunately, CMS cannot make this adjustment without an act of Congress.
2. CMS begins move away from AMA data, surveys
Historically, CMS uses and generally accepts information collected through survey data and recommendations from the American Medical Association (AMA) to help inform its payment decisions. The proposed 2026 rules begins a move away from using certain surveys, such as the physician practice and clinical practice information surveys. As detailed in parts of the rule, CMS believes these have had low response rates and/or could have “inherent conflicts of interest” since provider responses are used in setting payment rates.
3. Efficiency adjustment
CMS proposes a new “efficiency adjustment” factor for work relative value units (RVUs) and corresponding intraservice portion of physician time of non-time-based services. The adjustment would be a negative 2.5% for CY 2026. The 2.5% reduction is based on the sum of the past five years of the MEI productivity adjustment percentage. In proposing adjustments, CMS specifically states it did not rely on AMA survey data — as discussed under #2 — and that the valuation of many PFS services are likely overinflated. The efficiency adjustment relates to the work RVU and corresponding intraservice portion of physician time of non-time-based services.
4. Practice expense changes
CMS proposes a practice expense change to indirect cost based on whether those are office-based or facility-based. The proposal would recognize only 50% of physician work for facility-based practice expenses. This would reduce reimbursements in those settings — such as hospitals, ambulatory surgery centers, or nursing homes — while increasing reimbursements in office-based settings due to budget-neutrality requirements. There are some exempted services.
“With the development of a mandatory ambulatory specialty model, there could be real impacts for pain, orthopedic, neurology and cardiology groups, for example, depending on which geographies and specialists are selected. This could ultimately result in more shifting to and from health systems.”
— Larry Jurgens, CLA
5. New ambulatory specialty model
(ASM) CMS proposed the mandatory ASM model for certain specialties related to lower back pain and heart failure. The model would begin January 1, 2027, and last five years. Its focus is to reduce unnecessary costs and improve outcomes for these chronic conditions. This would be a two-sided risk model, meaning payments would be adjusted up or down depending on outcomes.
CMS will select individual specialists who frequently treat low back pain or heart failure and practice within certain, selected geographies across the country (called core-based statistical areas or metropolitan divisions). The model applies only to patients in traditional, fee-for-service Medicare. The mandated specialties included are anesthesiology, pain management, interventional pain management, neurosurgery, orthopedic surgery, physical medicine, rehabilitation, and cardiology.
How CLA can help
These changes and many others in the PFS 2026 rule are still in proposed form. CMS will release the final rule on or around November 1, 2025.
Right now, physicians can proactively review compensation approaches to assess how the proposed efficiency adjustment impacts revenues. It’ll also be important to understand impacts of lower reimbursements for facility-based services.
CLA’s physician and medical group team can help with these reviews and more.