2027 Medicare primary care payment changes target longstanding undervaluation

Medicare payment for primary care is set to undergo noteworthy changes in 2027, with bigger updates looming.

The proposed rule for Medicare’s Physician Fee Schedule (PFS) includes provisions to address what CMS recognizes as a long-running undervaluation of primary care, according to an agency leader.

“We’re embarking on a two-year strategy to change that,” Jake Quinton, MD, chief medical officer for Medicare Parts A and B, said during a recent webinar hosted by the Primary Care Collaborative.

The objective is to shift PFS payment more toward primary care and behavioral healthcare, although that requires cuts to other areas of practice because of mandatory budget neutrality. CMS also wants to make participation in accountable care organizations (ACOs) a viable option for more primary care and behavioral-health physicians.

CMS proposes higher payment for longitudinal primary care

One goal of the targeted payment increases is to partially offset the impact of looming cuts to the PFS conversion factor. Unless Congress supplements the scheduled update going into 2027, Medicare payments to physicians are projected to drop by 1.19% for participants in advanced alternative payment models and 1.68% for nonparticipants.

A proposed change to counter those decreases is stratification of the G2211 payment code for complex, longitudinal care. The code would shift from a flat rate to a 16% add-on for applicable evaluation and management (E/M) services, or 32% if the practice participates in a qualifying ACO model.

“For the very first time in the Physician Fee Schedule, we’re recognizing that the resource cost associated with caring for patients in an accountable care relationship is different than typical Fee Schedule primary care,” Quinton said.

The change could make incorporating G2211 simpler for practices.

“A new code to memorize and work with is always going to be more challenging as an add-on code than [as] a modifier on the typical claim,” Quinton said.

Prospective primary care payment could expand through MSSP

CMS is looking to implement prospective primary care payment in its main ACO program, the Medicare Shared Savings Program (MSSP), “as soon as possible,” and ideally in 2027, Quinton said. A possible subsequent step could expand the payment approach across traditional Medicare.

The change would implement a feature of the ACO REACH (Realizing Equity, Access and Community Health) Model, in which ACOs receive an upfront amount per beneficiary per month instead of waiting for a retrospective, year-end determination of their earned incentives.

“ACO REACH demonstrated that they could establish prospective primary care payment, and do so effectively,” Quinton said, referring to the Center for Medicare & Medicaid Innovation (CMMI).

CMS similarly is looking to disseminate other features of ACO REACH and CMMI models such as ACO Primary Care Flex and the upcoming ACO LEAD (Long-term Enhanced ACO Design) pilot.

For example, ACO REACH, which wraps up at the end of 2026, introduced the template for a proposal to bring Part B beneficiary cost-sharing reduction waivers into the MSSP in 2027.

Behavioral health and health coaching would receive added support

Behavioral healthcare appears to be bolstered in the proposed rule. Among the services in line for roughly 20% payment increases via add-on codes is SBIRT (screening, brief intervention, referral to treatment) for issues related to use of tobacco or other substances.

The payment raises are “some of the highest increases of any service in the fee schedule this year,” Quinton said.

A substantial increase also is in store for services furnished through the Collaborative Care Model (CoCM). Payments for CoCM, which integrates mental- and behavioral-health services into primary care settings, would rise by between 20% and 40%.

There is robust evidence of the effectiveness of CoCM, said Quinton, but the current model is not optimized because the codes are underpaid.

New codes also mark a first-time recognition of group healthcare visits to support lifestyle and behavioral change. Health coaching would be formally recognized and remunerated.

Such changes are intended to support lifestyle-medicine and functional-medicine approaches within primary care, Quinton said.

Budget neutrality creates specialty payment trade-offs

Because of budget neutrality, payment gains for primary care will mean cuts to some specialties. For example, surgical and procedural specialties face implications from CMS’s proposal to implement a 50% cut for E/M visits that are billed for the same patient on the same day as a procedure via Modifier 25 (if the E/M service is higher paying than the procedure, payment for the procedure would be cut in half instead).

“After years of payment cuts to Medicare physician services generally, this rule would have irreparable damage by instituting acute cuts to orthopedic care that will change the face of American healthcare indefinitely,” the American Association of Orthopaedic Surgeons wrote, citing the likelihood that the cuts would diminish the availability of independent surgeons.

Other changes would affect the practice-expense methodology, phasing out historical specialty-level survey data by eliminating the Indirect Practice Cost Index over a two-year period. Payments are thus expected to shift away from high-resource specialties such as radiology and anesthesiology.

Primary care advocates say the proposed changes in relative value are essential to improve whole-person healthcare.

Miscalculation of primary care and behavioral health has “huge implications for the kind of care that people receive, because we do incent a whole set of services that are downstream — acute and specialty services,” Ann Greiner, president and CEO of the Primary Care Collaborative, said during the webinar.

Broader Medicare primary care payment redesign could follow

Farther-reaching changes to primary care reimbursement could be on the way in 2028, and perhaps even 2027, as indicated in a request for information (RFI) issued with the proposed rule.

The RFI solicits stakeholder feedback on whether office/outpatient E/M visits, annual wellness visits and care management services (e.g., chronic care management, advanced primary care management) are accurately valued in the PFS and whether HCPCS and CPT codes should be introduced to recognize longitudinal care

There also are inquiries about bringing prospective, population-based or monthly bundled payment for primary care into the MSSP and, ultimately, Part B reimbursement, while ensuring compliance safeguards are in place (e.g., to prevent cherry-picking of low-risk patients).

Another set of questions pertains to the reimbursement of digital health and other technological advances as utilized in primary care. One possibility is a bundled remote-monitoring code set to capture continuous, device-supported digital health management.