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Physicians will get a 2.5% pay increase in the 2026 Medicare Physician Fee Schedule Final Rule released by the Centers for Medicare and Medicaid Services on Friday.
The rule also includes payment increases based on conversion factors.
It includes provisions welcomed by the American Medical Association for continued virtual care.
The 2.5% increase was voted into law by Congress in the One Big Beautiful Bill Act in July to counteract years of payment cuts. Rather than reverse the cuts, as recommended by the American Medical Association, Congress provided a one-time 2.5% increase to physician payment rates through 2026.
However, the final rule includes an “efficiency adjuster” of -2.5% that the AMA said would reduce total reimbursement to most specialties by about 1%, according to the American College of Cardiology.
This is because the efficiency adjustment affects select services that CMS deems will become more efficient over time due to technological advancements and workflows. These reportedly include surgical procedures, diagnostic imaging readings, outpatient pain management and orthopedic services.
The efficiency adjustment would reduce payment for more than 7,000 physician services — 95% of all services provided by physicians, the AMA said.
CMS also finalizes updates for costs for practitioners in office-based settings compared to facility settings, such as a hospital or ambulatory surgery center.
“CMS also finalized a reduction in physician payment rates for services performed in facilities such as hospitals or ambulatory surgical centers. Because these cuts fail to reflect true resource costs incurred by physician practices in the facility setting, they risk reducing competition and encouraging consolidation, results that CMS itself has explicitly sought to avoid,” the AMA said.
When CMS proposed these policies, the AMA estimated that the reductions would result in 37% of oncologists facing cuts between 10% and 20%. It would also affect 37% of obstetricians and gynecologists, the AMA said.
WHY THIS MATTERS: WHAT’S IN THE FINAL RULE
Total physician payment is based on two separate conversation factors in the final rule.
One conversation factor is for qualifying Alternative Payment Model (APM) participants, and the other is for physicians and practitioners who are not in these models, according to the American Hospital Association.
The rule increases the conversion factor for APM participants by 3.77% in CY 2026 as compared to CY 2025. It increases the non-participating conversion factor by 3.26% in CY 2026 as compared to CY 2025.
Payment also includes a 0.55% budget neutrality adjustment.
CMS also finalized proposals, long advocated by the AMA, to permanently lift the frequency limits on telehealth services provided to patients in hospitals and skilled nursing facilities.
The final rule also allows for virtual direct supervision for most services that require supervision.
In addition, CMS is continuing the current policy of allowing teaching physicians to provide virtual supervision to residents providing telehealth services in all training sites.
CMS has also finalized several proposals regarding the Medicare Shared Savings Program, including modifications to the eligibility and financial reconciliation requirements to increase the flexibility in the number of assigned beneficiaries in benchmark years.
CMS is finalizing the Ambulatory Specialty Model, a mandatory payment model focused on specialty care for beneficiaries with heart failure and low back pain – significant areas of Medicare spending.
THE LARGER TREND
In November 2024, CMS finalized a 2.83% decrease in the physician fee schedule conversion factor, which resulted in an average payment cut of 2.93% starting on Jan. 1, according to KFF.
In July, CMS proposed a 3.62% pay bump for physicians. This included the mandatory 2.5% payment adjustment required by the One Big Beautiful Bill Act, as well as the additional 0.55% increase.
ON THE RECORD
“CMS is reinforcing primary care as the foundation of a better healthcare system while ensuring Medicare dollars support real value for patients, and not the kind of waste or abuse that erodes trust in the system,” said Chris Klomp, CMS deputy administrator and director of the Center for Medicare. “Our goal is simple: deliver better outcomes for patients and be wise stewards of the taxpayer resources that make Medicare possible.”
Email the writer: SMorse@himss.org