The Centers for Medicare and Medicaid Services (CMS) this week released the proposed 2026 Medicare Physician Fee Schedule and Quality Payment Program rule. Most physicians would see an average 3.6% conversion factor increase, while qualifying Alternative Payment Model (APM) participants would receive an average 3.83% conversion factor bump. The fee schedule also includes two additional conversion factors for anesthesia services. 

The conversion factor is the multiplier used to determine Medicare reimbursement rates for physician services. The increases are due to a one-year 2.5% increase provided by Congress in HR 1, an additional 0.75% increase for APM participants and a 0.25% increase for all other physicians based on current the Medicare Access and CHIP Reauthorization Act (MACRA) law and a 0.55% increase due to work relative value unit (RVU) changes.  

But the conversion factor increase is only part of the story. CMS is also proposing structural reforms that could significantly reshape how physicians are reimbursed—including a major shift in site-of-service payments and new efficiency adjustments.

Key provisions include:

• New site-of-service payment adjustments: CMS proposes increasing indirect cost payments by an average 4% for services delivered in non-facility (e.g., office-based) settings, while reducing payments by an average 7% for the same services in facility settings (i.e., outpatient hospital settings and ambulatory surgery centers). The change aims to reduce hospital consolidation and ensure payment parity across care settings. It would result in a nearly $280 billion reduction in payments to hospitals. (See the payment impact table here by specialty and site of service.)
• New efficiency adjustment: CMS proposes a new -2.5% adjustment to work RVUs for all CPT codes except time-based codes (e.g., E/M visits). According to CMS, the goal is to better reflect service intensity and rebalance valuation between primary care and procedural services.
• Telehealth policy updates: CMS is proposing to permanently adopt a revised definition of “direct supervision” that would allow supervising physicians to be immediately available via real-time audio/video technology. However, CMS plans to end current flexibilities that allow teaching physicians to be virtually present when billing for services involving residents after December 31, 2025—returning to pre-pandemic in-person supervision requirements. An exception would remain for rural areas. CMS did not add the telemedicine E/M office visit codes to the authorized Medicare Telehealth Services List effective for 2026.
• MIPS: CMS will maintain the 75-point performance threshold to avoid a penalty for the 2026–2028 performance years/2028–2030 payment years.
• ACOs: CMS is limiting Medicare Shared Savings Program accountable care organization participation in one-sided financial risk models to 5 years.
• New mandatory payment model: Beginning in 2027, CMS will test a five-year model in select regions for physicians treating heart failure or low back pain, with payment adjustments of up to ±9%.
• GPCI update: CMS has updated the Geographic Practice Cost Index that upon initial analysis is accurate for California.
• Hospital outpatient and ASC payments: Hospital outpatient fees and ambulatory surgery center payments would increase by 2.4% in 2026.
• AMA survey data: In a controversial move, CMS said it will not rely on the new AMA Physician Practice Information Survey for Medicare Economic Index weighting of practice expenses, or on AMA RVS Update Committee (RUC) survey data for RVUs. CMS cited concerns about low physician response rates, incomplete data, and evidence that physicians may overstate the time and intensity required for certain procedures—leading to overvaluation of some services. This shows CMS’ intent to transition away from the AMA RUC process.

While CMA is concerned about the negative impact of higher hospital site-of-service (facility fee) payments on independent physician practices, we will be thoroughly reviewing the impact of the proposal on the viability of all practices. CMA has opined that any savings from reducing the hospital facility fee should be reinvested in the Medicare fee schedule for all physician practices.

Overall, the proposed fee schedule falls far short of addressing physician payments that have declined by 33% (adjusted for inflation) since 2001.  

“While we appreciate CMS  working to stabilize primary care, Congress continues to fail to address the decades of underpayment that threaten all physician practices and patient access,” said CMA President Shannon Udovic-Constant, M.D. “Without permanent, inflation-adjusted reforms, physicians will continue to face financial instability—and patients will pay the price by not being able to find a physician taking Medicare patients.”

CMA is reviewing the proposed rule in full and will submit comments. Stay tuned for more details.

For More Information:

• CMS Press Release
• Physician Payment Schedule Fact Sheet
• Medicare Shared Savings Program Fact Sheet
• Quality Payment Program Fact Sheet
• Ambulatory Specialty Model Fact Sheet
• Impact by specialty and site of service