The Centers for Medicare & Medicaid Services (CMS) recently released the calendar year (CY) 2027 Medicare Physician Fee Schedule (PFS) proposed rule.
In addition to proposed updates to the physician fee schedule, the rule includes changes to Medicare Part B payment and coverage policies, as well as to the Medicare Shared Savings Program and the Quality Payment Program.
Key provisions include:
Physician Fee Schedule
- Continuing two separate conversion factors: one for qualifying alternative payment model (APM) participants (QP) and another for nonqualifying physicians and practitioners, with both conversion factors updated to reflect the expiration of the 2.5% statutory increase for CY 2027:
- The QP conversion factor would decrease by 1.2% from $33.57 to $33.17.
- The non-QP conversion factor would decrease by 1.78% from $33.40 to $32.84.
- Reducing payment when a separate office visit is furnished by the same physician or practice for the same patient on the same day as a global procedure, with the CMS paying the most expensive service in full and the others at 50%.
- Converting the office visit complexity add-on implemented in 2025 from a flat fee to a modifier that increases the underlying visit payment by 16% (or 32% for practitioners participating in certain Accountable Care Organization (ACO) models).
- Overhauling how the CMS calculates practice-expense payments, transitioning away from physician surveys to instead using “routinely updated and auditable cost data.”
- The CMS is also soliciting comments on whether it should continue paying site-of-service differentials for indirect practice costs or consider an alternative approach.
- Tightening billing for remote monitoring, including requiring an initiating visit, limiting payment to services performed by practice staff (not contractors), lowering the estimated cost of monitoring devices and limiting remote therapy monitoring services to established patients.
- The CMS also seeks comments on bundled payments and four new codes to describe remote monitoring services.
- Allowing teaching physicians to bill for telehealth services involving residents when either the teaching physician or resident is in the same physical location as the beneficiary and removing in-person visit requirements for mental health visits furnished through Dec. 31, 2027.
- Updating the requirements for data collection and reporting, and phasing in payment reductions of up to 15% per year through CY 2029 for clinical diagnostic laboratory tests paid under the Medicare Clinical Laboratory Fee Schedule, in alignment with the Consolidated Appropriations Act of 2026.
- Making mandatory the claims data repository established on a voluntary basis in the 2026 rule for 340B hospitals and other covered entities to submit Part D claims-level data on drugs dispensed through the 340B drug pricing program.
- Modifying the Ambulatory Specialty Model, a mandatory payment model within selected core-based statistical areas, focused on specialists who frequently treat beneficiaries with congestive heart failure and low back pain, which was established in the CY 2026 rule and is set to begin Jan. 1, 2027, and run through Dec. 31, 2030.
- Requesting information on how to:
- Redesign the primary care service valuation to focus on preventive care.
- Improve the accuracy of payment values for global surgical services.
- Address interoperability and duplicate testing when diagnostic imaging and laboratory test results are inaccessible within electronic health records.
Medicare Shared Savings Program
- Increasing opportunities to share savings for certain participating ACOs.
- Creating new financial incentives for organizations joining the program for the first time.
- Establishing more predictable spending targets to improve planning and participation.
- Simplifying technology requirements and streamlining patient notices.
- Allowing ACOs with approved applications beginning April 1, 2027, to reduce or eliminate beneficiary out-of-pocket costs for certain items and services.
Quality Payment Program
- Sunsetting traditional Merit-based Incentive Payment System (MIPS) reporting in 2029 and transitioning clinicians toward specialty-focused MIPS Value Pathways (MVPs) as the primary reporting option.
- Establishing three new MVPs focused on diabetes, hypertension and hospital-based care.
- Introducing new MIPS Core Measures beginning in 2027, requiring all clinicians to report at least one measure considered fundamental to their specialty and patient population.
- Reforming how the CMS pays the APM incentive by linking it to the practice a clinician bills under, not the individual clinician.
- Converting the electronic prior authorization measure within the MIPS Promoting Interoperability category to a required measure beginning with the 2028 performance period and adding electronic prior authorization for prescription drugs as a required measure under the Health Information Exchange objective.
Hospitals are encouraged to contact the MHA health finance team by Aug. 24 regarding issues identified and submit comments to the CMS by the Sept. 14 comment deadline. The MHA will provide an impact analysis in the next few weeks. A final rule is expected around Nov. 1 for an effective date of Jan. 1, 2027.
Members with questions should contact the MHA health finance team.
The Centers for Medicare & Medicaid Services (CMS) recently released the calendar year (CY) 2027 Medicare Physician Fee Schedule (PFS) proposed rule.
