2027 Medicare Physician Fee Schedule cuts persist despite CMS concessions

CMS heeded the calls of provider advocates to mitigate proposed reductions to Medicare physician payment for 2027, but the most direct cut remains in place and will require action by Congress to undo.

As published Nov. 9, next year’s final rule for the Medicare Physician Fee Schedule includes decreases of 1.83% for physicians meeting criteria related to participation in alternative payment models (APMs), and 2.31% for nonparticipants. CMS notes that the rates primarily are based on statutory provisions and there is little leeway to modify them in rulemaking.

While the underlying updates are positive numbers (0.75% for APM participants and 0.25% for nonparticipants), they are negated by the expiration of a 2.5% payment increase as legislated by Congress for 2026. There’s also a 0.12% reduction associated with standard adjustments to work relative value units (RVUs), according to a fact sheet.

Financial effects will vary by specialty and service mix based on the variable impact of the annual changes to work RVUs and practice-expense RVUs.

Physician advocates hope relief will be forthcoming during the final two months of the current Congress, which returned to Capitol Hill on Monday after more than a month away leading up to the midterm election. A payment boost could mirror the 2.5% raise that was passed to bolster the 2026 update (to 3.77% for APM participants and 3.26% for nonparticipants).

“Year after year, Medicare payment falls further behind what it actually costs to care for patients,” Jerry Penso, MD, MBA, president and CEO of the American Medical Group Association (AMGA), which represents integrated health systems and multispecialty medical groups, said in written comments.

Congress’s options for reversing physician payment cuts

Advocates such as the AMGA are calling for a structural fix rather than another one-year patch. But even a short-term approach might not be a routine matter.

A barrier to substantive action on healthcare policy arose in October when the Trump administration sent $90 rebate payments to Medicare Part B beneficiaries, with 20.8 million enrollees deemed eligible. 

The source for those payments was the Medicare Improvement Fund (MIF), which frequently is used as a cost offset for legislative initiatives. Of more than $2 billion that was authorized for the Fund in the current fiscal year, less than $170 million is estimated to remain if all eligible beneficiaries received a rebate payment.

“There are a lot of frustrated members [of Congress],” said Miranda Franco, senior policy advisor with Holland & Knight. “The MIF that I think everyone was anticipating having as at least some component of revenue to offset some of the extenders that need to be addressed is no longer on the table.”

With the depleted MIF, options for covering the cost of a physician payment increase likely would focus on healthcare policies. That could affect the 340B Drug Pricing Program or site-neutral payment, for example.

However, offsets would not be needed if Congress is willing to accept a higher budgetary cost of enacting a payment increase. That’s a possibility since the idea has bipartisan support.

CMS narrows cuts to same-day E/M services

In the final rule, CMS took steps to mitigate concerns that physicians would face other consequential cuts beyond the base payment decrease. But even the lessened provisions could have adverse impacts.

For example, the agency had proposed reducing payment by 50% for separately identifiable office/outpatient evaluation and management (E/M) visits furnished the same day as a procedure with a global period of 0, 10 or 90 days. Payment for the procedure would be reduced instead if it was lower-paying than the E/M visit.

The final rule reduces the cut to 20%, and it narrows application of the provision to procedures with a 0-day global period (i.e., a bundled-payment window that applies only to the day on which the procedure is performed).

The fact sheet states CMS’s perspective 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.” 

On the positive side for E/M visits, CMS is replacing the complexity add-on billing code G2211 with modifier B1, which raises payment for the associated E/M code by 16%. The change should simplify billing and improve the proportionality of the increase across E/M service levels, according to the fact sheet.

Another modifier, B2, will increase payment for an associated E/M visit by 32% for practices participating in the Medicare Shared Savings Program or the Long-term Enhanced ACO Design (LEAD) Model. It’s applicable to services furnished to all beneficiaries, including those not assigned to the ACO.

Remote monitoring requirements pushed to 2029

Another accommodation in response to stakeholder feedback will delay until 2029 a requirement that remote physiologic monitoring (RPM) and remote therapeutic monitoring (RTM) services be performed by clinical staff who are employed by the billing practice.

Thus, practices have two years to prepare for the pending restriction on contractor-provided RPM and RTM services. Among concerns expressed during the comment period on the proposed rule was that the provision would make hospital-at-home programs less sustainable.

The valuation of RPM and RTM direct practice-expense (PE) components will be modified to align with CMS’s view that the costs of supplying monitoring devices and setting up patients for monitoring have been overstated. The maximum first-year reduction for most of the affected codes is 19%, with additional reductions possible in 2028.

One concession relative to the proposed rule is that six treatment-management codes will retain direct PE inputs, whereas the proposed rule called for those inputs to be eliminated.

Practice-expense changes could redistribute physician payments

The final rule is part of CMS’s broader overhaul of the methodology for determining the PE component of Medicare physician payments. Historically, the calculation has been based primarily on specialty-specific data generated from American Medical Association surveys. CMS says limitations in the methodology include low response rates and discrepancies relative to other cost data.

As part of the change, which is expected to redistribute payment among specialties and service types, CMS is phasing out the indirect practice cost index (IPCI) over two years, replacing it with a new PE stabilizer to mitigate short-term volatility.

Indirect practice expenses will be allocated using both work RVUs and clinical labor PE RVUs, rather than only the higher of those two metrics. That change will not apply to 10-day and 90-day global-period codes.

In a prior request for information, CMS sought feedback on whether the existing payment differential between facility and non-facility services appropriately accounts for indirect practice expenses among physicians employed by hospitals and other providers. CMS is not implementing any resulting policy change but says the comments could factor into future rulemaking.