2027 Medicare Physician Fee Schedule proposed rule includes broad payment changes

Physicians will incur a payment decrease in 2027 unless Congress intervenes, according to a CMS proposed rule issued July 14 for the Medicare Physician Fee Schedule.

Statutory provisions call for increases of 0.75% for clinicians participating in advanced alternative payment models (APMs) and 0.25% for nonparticipants. However, those raises and a 0.53% bump stemming from proposed adjustments to work relative value units (RVUs) would be negated by the expiration of a onetime 2.5% increase that was in place for 2026.

The 2027 conversion factor thus is projected to drop from $33.57 in 2026 to $33.17 (-1.19%) for APM participants and $32.84 (-1.68%) for nonparticipants.

The various policy changes in the nearly 1,600-page rule are projected to have disparate impacts across specialties, with double-digit payment increases projected for clinical social work (12%) and clinical psychology (11%), and 4% increases for diagnostic testing facilities and geriatrics.

Specialties that would see an especially significant decrease include dermatology (9%), otolaryngology (9%), orthopedic surgery (7%) and hand surgery (5%).

“The moment the temporary [payment] fix expired, the underlying erosion of physician payment reasserted itself,” Jerry Penso, MD, MBA, president and CEO of the American Medical Group Association, said in a written statement. “Medical groups and health systems cannot build sustainable, high-value, team-based care on a payment system that swings between modest relief and a renewed decline every 12 months.”

Bipartisan legislation known as the Patients First Act was introduced July 15 in the House of Representatives and would usher in changes that advocates have been seeking. The legislation includes a provision tying the annual physician payment update to an inflation-based index.

Proposed policies emphasize longitudinal and accountable care

The proposed rule includes a range of policies designed to reallocate reimbursement toward longitudinal, preventive and accountable care while reducing payments deemed to be duplicative or outdated.

“These changes would make it easier for clinicians to focus on prevention, improve coordination for patients and ensure Medicare rewards better outcomes rather than more services,” Mehmet Oz, MD, administrator of CMS, said in a news release.

The rule calls for a payment cut to certain evaluation and management (E/M) visits. If a physician performs a surgical procedure and a separately billable E/M visit, the highest-value service would be fully reimbursed. All other procedures provided to the patient on the same day would receive half the usual payment.

CMS said the provision mirrors a 2019 proposal that was not finalized. At that time, “We noted that we continued to believe that there are efficiencies when the same physician (or a physician in the same group practice) provides an E/M service for the same patient in conjunction with a procedure with a global period and that we are likely duplicating payment under the current payment methodology,” the agency wrote in a fact sheet on the 2027 rule.

G2211 and ACO modifiers would change visit-level payment

Another proposed change to E/M payment involves HCPCS code G2211, an add-on code for visit complexity pertaining to the provision of longitudinal, relationship-based care. Instead of entailing a flat payment, the code would be converted to a modifier that adds 16% to the underlying E/M payment.

Similarly, a new modifier is designed to encourage participation in APMs via a 32% payment boost per visit for clinicians participating in the Medicare Shared Savings Program (MSSP) or the upcoming Long-term Enhanced ACO Design (LEAD) accountable care organization (ACO) model. This modifier would cover a practice’s entire patient panel, not only attributed ACO patients.

Remote monitoring would face tighter billing requirements

New restrictions would apply to payment for remote physiologic monitoring and remote therapy monitoring as CMS looks to limit the potential for fraudulent billing.

Monitoring would have to begin after a separately billable initiating visit, according to the proposed rule. The clinical staff performing the monitoring must be employed by the practice, thus disqualifying services performed by outside contractors. Therapy monitoring would be limited to established patients.

CMS also is proposing to lower the valuation of monitoring services, saying, “We understand the devices may be available at a reduced cost compared to our initial estimates.” CPT codes would be revalued based on previously existing codes (e.g., code 99473 for self-measured blood pressure using a device validated for clinical accuracy).

Practice expense methodology would undergo a big change

In a methodological shift with long-term implications across settings, the calculation of practice expense (PE) RVUs would be overhauled over a multiyear period, with CMS planning to move away from basing the units on specialty surveys coordinated by the American Medical Association.

The plan is for a transition to objective, auditable and routinely updated cost data, starting with a 2027 change “to phase out part of the methodology that ensures the overall number of PE RVUs by specialty is consistent with the old PE/HR [practice expense per hour] data from 2007 or earlier.” A “PE stabilizer” would be incorporated to mitigate short-term volatility.

CMS said one reason for the proposed approach is to improve expense comparisons across physician offices, hospitals and health systems, and other outpatient settings. Such comparisons could form the basis of expanded site-neutral payment policies.

New codes would support preventive and team-based services

New HCPCS codes would pay for group appointments involving multiple patients with similar chronic conditions (e.g., diabetes, hypertension). CMS says such visits can improve patient engagement, peer support and lifestyle modifications.

Payment would increase for smoking-cessation services and a subset of substance-use disorder services known as SBIRT (“screening, brief intervention and referral to treatment”). The increase would match an ongoing payment upgrade for psychotherapy services.

A pair of new HCPCS codes would be available to cover clinical staff who perform components of advance care planning under the supervision of a physician.

MIPS and accountable care programs face changes

The rule proposes technical changes to the Ambulatory Specialty Model, a mandatory model beginning Jan. 1, 2027, in selected markets for specialists who treat heart failure and low back pain.

There also are updates to the Merit-based Incentive Payment System (MIPS), which helps determine payment for physicians who do not participate in APMs. One change would sunset the traditional MIPS reporting option after 2028, leaving the MIPS Value Pathways (MVPs) as the lone option.

Starting in 2027 for both traditional MIPS and MVPs, practices would have to report at least one newly designated MIPS core measure instead of an outcome measure or a high-priority measure. Small practices would be exempt from the requirement.

The sprawling rule also has a slew of updates to the MSSP, such as changes that would increase the potential savings for ACOs in Level E of the BASIC track and expand the share of savings that can be put back into an ACO’s financial benchmarks.