The Centers for Medicare and Medicaid Services (CMS) recently released a final rule to update the Medicare fee-for-service physician fee schedule for calendar year (CY) 2027. The final rule will:
Physician Fee Schedule
- Decrease the conversion factor by 1.83% for qualifying alternative payment model participants and 2.31% for non-qualifying physicians and practitioners. Both conversion factors reflect the expiration of the 2.5% statutory increase for CY 2026.
- Reduce payment by 20% for the lower-cost service when a separate office visit is furnished by the same physician or practice for the same patient on the same day as a 0-day global procedure. This is an improvement from the CMS’ proposed policy to reduce the lower-cost service by 50% when a separate office visit is furnished on the same day as a 0-, 10- or 90-day global procedure.
- Convert 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).
- Overhaul how the CMS calculates practice-expense payments as part of a multi-year effort to transition away from physician surveys and instead use “routinely updated and auditable cost data.” The CMS also solicited comments on whether it should continue paying site of service differentials for indirect practice costs or consider an alternative approach, and indicated the agency would consider the comments it received for future rulemaking.
- Tighten billing for remote monitoring, including requiring an initiating visit, decreasing the direct practice expense inputs used to value the resource costs of monitoring devices and limiting remote therapy monitoring services only to established patients. The CMS is delaying its proposal to only allow payment for services performed by practice staff (not contractors) to begin Jan. 1, 2029.
- Allow 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 remove in-person visit requirements for mental health visits furnished through Dec. 31, 2027.
- Update the requirements for data collection and reporting, and phase 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.
- Make 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. The CMS is delaying the first mandatory quarterly submission for claims with dates of service from Jan. 1, 2027 through March 31, 2027, to Sept. 30, 2027.
- Refine the valuation of Psychiatric Collaborative Care Model services by increasing the work relative value units and updating the clinical labor rates for the behavioral health care manager.
- Update codes for maternity care services and reallocate relative value of services from prenatal visits to labor and delivery. The CMS did not finalize its proposal to create 15 new HCPCS G-codes but indicated the agency may consider bundled codes in future rulemaking.
- Modify 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, 2031.
- Establish new payments for well-being coaching under general supervision, shared medical appointments, advance care planning and counseling for patients experiencing vaccine adverse effects, and increase the valuation for smoking and tobacco use cessation services and structured assessment, brief intervention and referral to treatment services
Medicare Shared Savings Program
- Increase opportunities to share savings for certain participating ACOs, provide new financial incentives for first-time participants and establish more predictable spending targets.
- Simplify electronic health record reporting requirements and streamline patient notices.
- Allow 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
- Sunset traditional Merit-based Incentive Payment System reporting beginning with the CY 2031 performance period and transition clinicians toward specialty-focused MIPS Value Pathways (MVPs) as the primary reporting option.
- Establish three new MVPs focused on diabetes, hypertension and hospital-based care.
- Require all clinicians to report at least one specialty-specific MIPS Core Measure beginning in 2027.
The MHA will provide an updated impact analysis in the next few weeks. Hospitals are encouraged to review the final rule and contact the MHA Health Finance department with questions.
