2026 Medicare Physician Fee Schedule: Payment up 2.5% as CMS shifts from ‘sick-care’ to health care

Physician reimbursement will hold steady in 2026 as Medicare leaders aim to reinforce primary care as the foundation of American health care, according to the U.S. Centers for Medicare & Medicaid Services (CMS).

However, the final rule of the 2026 Medicare Physician Fee Schedule (MPFS) will have a -2.5% efficiency adjustment for some services such as surgical procedures, diagnostic imaging interpretation, outpatient interventions, interventional pain management, and orthopedic services. “These tend to benefit from technological advancements or standardized workflows that reduce time and resource use, without corresponding payment adjustments,” CMS’ news release said.

“CMS is reinforcing primary care as the foundation of a better health care system while ensuring Medicare dollars support real value for patients, and not the kind of waste or abuse that erodes trust in the system,” CMS Deputy Administrator and Medicare Center Director Chris Klomp said in a news release. “Our goal is simple: deliver better outcomes for patients and be wise stewards of the taxpayer resources that make Medicare possible.”

‘A major win’

The announcement, published late Oct. 31, included statements from Health and Human Services Secretary Robert F. Kennedy, Jr., and CMS Administrator Mehmet Oz, MD, MBA.

“The new Medicare fee schedule delivers a major win for seniors, protects hometown doctors, and safeguards American taxpayers,” Kennedy said in the news release. “It realigns doctor incentives and helps move our country from a sick-care system to a true health care system.”

The official summary said the 2026 MPFS will:

• Advance primary care management through improved quality measures
• Reduce waste and unnecessary use of skin substitutes
• Introduce a new payment model focused on improving care for chronic disease management

“CMS is working to strengthen and transform Medicare for the current and future generations while cracking down on waste and abuse that drives up costs,” Oz said. “The actions we are taking will improve seniors’ access to high-quality, preventive care that will help them to live longer, healthier lives.”

Physician reimbursement

The 2026 MPFS included a fact sheet with an explanation for physician reimbursement.

As required by statute, beginning in calendar year 2026, there will be two separate conversion factors:

• one for qualifying alternative payment model (APM) participants (QPs)
• one for physicians and practitioners who are not QPs

By statute, QPs are those that meet certain thresholds for participation in an Advanced APM, which means generally that the payment model has features to ensure accountability for quality and cost of care. The update to the qualifying APM conversion factor for 2026 is 0.75% while the update to the nonqualifying APM conversion factor for 2026 is 0.25%. The changes to the PFS conversion factors for 2026 include these updates as required by statute, a one-year increase of 2.50% for 2026 stipulated by statute, and an estimated 0.49% adjustment necessary to account for finalized changes in work reltive value units (RVUs) for some services.

The final 2026 qualifying APM conversion factor of $33.57 represents a projected increase of $1.22 (3.77%) from the current conversion factor of $32.35. Similarly, the final 2026 nonqualifying APM conversion factor of $33.40 represents a projected increase of $1.05 (3.26%) from the current conversion factor of $32.35. Per statutory requirements, CMS will finalize updates to the geographic practice cost indices (GPCIs) and malpractice RVUs.

Gaining efficiency

CMS will rebalance the approach to the efficiency adjustment because some medical services are more likely to become more efficient over time. Technological advances or standardized workflows may reduce time and resource use, according to HHS, and the federal leaders will not eliminate use of the American Medical Association surveys to value services.

CMS also is finalizing policies to analyze data from the Hospital Outpatient Prospective Payment System and other sources to establish relative values for technical services, the announcement said. That will improve payment accuracy and predictability, with easier comparisons of rates across settings of care, according to CMS plans.

Skin substitutes

CMS will revise reimbursement for skin substitutes, a treatment with skyrocketing costs in recent years. Skin substitutes will be reimbursed as incident-to supplies, which could cut expenditures up to 90%, without compromising patient access or quality of care, according to plans.

Up to now, Medicare covered skin substitutes as biologicals, and reimbursement exploded from $256 million in 2019 to more than $10 billion in 2024. “This dramatic spending increase is largely attributed to abusive pricing practices in the sector, including the use of products with limited evidence of clinical value,” the CMS announcement said. “Current prices can reach more than $2,000 per square centimeter.”

Skin substitutes have become a potential source of health care fraud. CMS’ announcement noted this year, the Fraud Defense Operations Center stopped almost $185 million in improper payments for skin substitutes, and in September stopped payment of more than $4.3 million to a medical group for wound care services billing for treatment to a single beneficiary with no evidence of prior wound treatment.

New payment model

CMS is finalizing its new Ambulatory Specialty Model, which will be mandatory for beneficiaries with heart failure and low back pain. The payment model will reward specialists “who detect signs of worsening chronic conditions early, enhance patients’ function, reduce avoidable hospitalizations, and use technology that allows them to communicate and share data electronically with patients and their primary care providers.” That will enhance patient treatments through engaging beneficiaries and physicians and other clinicians.

The new model will start in January 2027 and run for five years.

Prevention and wellness

Physical activity, nutrition and behavioral health all will be part of CMS’ role in the federal initiative to Make America Healthy Again. CMS will repurpose a previous risk assessment code that focuses on those, while ensuring advanced primary care services integrate behavioral health.

CMS will eliminate 10 quality measures that did not directly improve patient health, while adding five new outcome measures that focus on preventing chronic disease, according to plans.

For people with prediabetes, there will be more coaching, peer support and practical training in dietary change, physical activity and behavioral change to delay or prevent the onset of Type 2 diabetes. That will happen at no cost to beneficiaries through the Medicare Diabetes Prevention Program, CMS’ announcement said.