Medicare Physician Fee Schedule for 2026 targets physician pay, prevention and wellness, skin substitutes

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Medicare physician reimbursement in 2026 would be tied to new quality measures, reducing waste and unnecessary use of skin substitutes, and a new payment model to improve chronic disease management.

The U.S. Centers for Medicare & Medicaid Services (CMS) announced the proposed 2026 Medicare Physician Fee Schedule with new rules and a deliberate nod to independent medical practices.

“For the last four years, powerful interests have targeted independent medical practices,” said U.S. Health and Human Services Secretary Robert F. Kennedy, Jr.

Robert F. Kennedy, Jr.
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“Thanks to Dr. Oz’s decisive leadership, this rule modernizes CMS payment systems, eliminates perverse incentives, and harnesses better data to improve care for patients with chronic disease while protecting the future of hometown doctors,” Kennedy said, referring to CMS Administrator Mehmet Oz, MD, MBA.

Kennedy, Oz and Chris Klomp, deputy administrator and CMS Medicare Center director, all had comments with the announcement, which touched on prevention and wellness, telemedicine and physician reimbursement.

Mehmet Oz, MD, MBA
_{© Centers for Medicare & Medicaid Services}

“We are taking meaningful steps to modernize Medicare, cut waste, and improve patient care,” Oz said in the announcement. “We’re making it easier for seniors to access preventive services, incentivizing health care providers to deliver real results, and cracking down on abuse that drives up costs. This is how we protect Medicare for the next generation while helping Americans live longer, healthier lives.”

New payment model

CMS is proposing a new Ambulatory Specialty Model (ASM), a mandatory payment model focusing on specialty care for beneficiaries with heart failure and low back pain. Participants will be accountable for performance and generating savings.

“ASM rewards 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,” the CMS announcement said. The ASM would run January 2027 to December 2031.

Physician payment

The announcement stopped short of committing to site-neutral payment, but there could be change coming for physician and hospital reimbursement.

“CMS is proposing to reduce payment differentials for physicians across settings of care by leveraging hospital data to calculate more accurate payment rates for certain services and better accounting for increased efficiencies in procedures and tests,” the announcement said. “ CMS is also signaling an interest in moving away from using low-response rate surveys of practitioners to value services, towards preferentially using empiric information instead.

“To ensure that Medicare recognizes innovations in medical care, CMS is also proposing to make some COVID-era flexibilities permanent, and to simplify the process for making services available by telehealth,” the announcement said. “CMS is also proposing to broaden its payment policies for digital mental health treatment devices to make more options available to patients.”

Medicare conversion factor

Beginning in 2026, there will be two separate conversion factors for Qualifying Alternative Payment Model (APM) Participants (QPs) and non-QP clinicians. The update to the qualifying APM conversion factor (which applies to PFS payments for QPs) for CY 2026 is 0.75%while the update to the nonqualifying APM conversion factor (which applies to MPFS payments for all other clinicians) for CY 2026 is 0.25%. The change to the PFS conversion factors for CY 2026 includes these updates as required by statute, a one-year increase of +2.50% for CY 2026 stipulated by statute, and an estimated 0.55% adjustment necessary to account for proposed changes in work RVUs. Thus, the CY 2026 qualifying APM conversion factor represents a projected increase of $1.24 (3.83%) from the current conversion factor of $32.35, for a total of $33.59. Similarly, the CY 2026 nonqualifying APM conversion factor represents a projected increase of $1.17 (3.62%) from the current conversion factor of $32.35, for a total of $33.42.

“This move reflects our continued shift toward smarter, data-informed policymaking,” Klomp said in the announcement. “We’re advancing technical improvements that reward high-quality, efficient care; addressing the root causes of unique health challenges; and aligning health care spending with value so that new innovations help to deliver better quality at a lower price.”

Prevention and wellness

The announcement included a plan to shift “the health care paradigm to prevention and wellness.”

There will be fewer burdens to integrate behavioral health treatment into advanced primary care management. CMS would eliminate 10 quality measures “that did not directly improve patient health outcomes,” and there will be five new outcome measures that focus on chronic disease prevention, including prescreening for diabetes.

“If the proposed rule is finalized, a change to the Medicare Diabetes Prevention Program will allow more people with Medicare to access coaching, peer support, and practical training in dietary change, physical activity, and behavior change strategies to delay or prevent the onset of Type 2 diabetes for people with prediabetes, at no cost to the beneficiary,” the CMS announcement said.

“CMS is also issuing a request for information (RFI) to gather recommendations on improving wellness, prevention, and chronic disease management,” the announcement said. “This includes input on nutrition counseling and physical activity.”

Skin substitutes

The use of skin substitutes has sparked “unprecedented growth,” ballooning from $256 million in 2019 to more than $10 billion in 2024, according to Medicare Part B claims data.

CMS leadership blamed abusive pricing practices in the sector. In one example, CMS’ Fraud Defense Operations Center stopped more than $1 million in improper payments to Medicare claims for wound care services allegedly performed by a psychiatrist.

CMS treats the skin substitutes as biologicals, with costs up to $2,000 per square inch. By paying for those as incident-to supplies, Medicare spending could drop by up to 90%, according to CMS.

“These proposed savings would not come at the expense of patient access or quality of care. If finalized, this will save billions for Medicare and taxpayers and incentivize the use of products with the most clinical evidence of success,” the CMS announcement said.