Medicare's next chapter: CMS targets ACOs, physician pay and the end of MIPS

There are big changes coming for physician pay, value-based care and data tracking in the next evolution of the Medicare Physician Fee Schedule, according to an announcement by the Centers for Medicare & Medicaid Services (CMS).

Medicare announced the proposal on July 14 to open a 60-day public comment period on the plans for 2027 beyond, including phasing out the Merit-based Incentive Payment System (MIPS) at the end of 2029. It will be replaced by “more clinically meaningful specialty-focused MIPS Value Pathways,” or MVPs.

“We’re proposing some of the most significant Medicare reforms in recent years to strengthen primary care, expand accountable care, and modernize physician payment,” CMS Administrator Mehmet Oz, M.D., MBA, said in the announcement. “These changes would make it easier for clinicians to focus on prevention, improve coordination for patients, and ensure Medicare rewards better outcomes rather than more services.”

The proposals would affect how primary care practices participate in Medicare's accountable care organizations (ACOs). The changes would also modernize the Physician Fee Schedule, the system that sets Medicare payment rates for physician services.

John Brooks, CMS deputy administrator and director of the Center for Medicare, said the agency's goal is to improve outcomes "by appropriately incentivizing providers, improving quality measurement, and reducing administrative burden."

Changes to accountable care organizations

CMS is proposing improvements to the Medicare Shared Savings Program (MSSP), the largest value-based payment program in the country. According to CMS, patients treated by ACO providers are more likely to receive preventive screenings and less likely to experience uncontrolled chronic conditions, such as diabetes and high blood pressure.

The program has also produced financial results. In 2024, 75% of the 476 participating ACOs earned shared savings payments totaling $4.1 billion. After those payments, the program still generated net savings of about $2.5 billion for the Medicare Trust Funds compared with projected spending. It was the eighth consecutive year the program has saved money for Medicare.

Under the proposed rule, the Shared Savings Program would:

• Increase opportunities for certain participating ACOs to share in savings.
• Offer new financial incentives for organizations joining for the first time.
• Set more predictable spending targets to help with planning.
• Cut administrative burden by simplifying technology requirements and streamlining patient notices.
• Allow ACOs approved beginning April 1, 2027, to reduce or eliminate out-of-pocket costs for patients for certain items and services — an approach already used in the ACO Realizing Equity, Access, and Community Health (ACO REACH) model.

For independent and smaller practices weighing whether to join or expand ACO participation, the proposed changes are intended to lower financial risk and administrative complexity, both of which have historically been cited as barriers to entry.

Updates to the Physician Fee Schedule

CMS also proposed updates to the Physician Fee Schedule, which the agency said has accumulated outdated payment policies and billing conventions that no longer reflect how care is delivered today. The proposed recalibration is intended to improve accuracy, transparency and consistency in payment rates.

Specifically, the changes would:

• Better align payments with the time, resources and complexity involved in delivering care.
• Account for efficiencies when multiple services are delivered during the same patient visit.
• Improve oversight of billing practices and address instances where claims may not accurately reflect services provided.
• Increase transparency into how physician payment rates are calculated.

CMS said the payment changes are meant to support the broader goal of shifting the health system's focus from treating illness to preventing it, by ensuring payment incentives reflect modern clinical practice.

MIPS reporting to sunset in 2029

Medicare also will sunset traditional MIPS reporting beginning with the 2029 performance period. MIPS, launched in 2017, was designed to move Medicare away from a fragmented fee-for-service system toward one that rewards quality, outcomes and value.

Under the proposal, clinicians would transition to MVPs as the primary reporting option. Eligible clinicians would have until the end of 2028 to make the switch, unless they participate in a MIPS Alternative Payment Model (APM) and report through the APM Performance Pathway.

CMS is proposing three new MVPs focused on diabetes, hypertension and hospital-based care. If finalized, the agency said, the MVP options would cover roughly 98% of medical specialties.

Starting in 2027, CMS also proposed introducing new MIPS Core Measures, which would require every clinician to report at least one measure considered fundamental to their specialty and patient population. CMS said the goal is to generate more consistent and meaningful quality data for patients, providers and policymakers.

Separately, CMS proposed changing how it calculates the APM incentive payment to close what the agency called a payment loophole. Left unaddressed, CMS estimated the loophole could result in $2.38 billion in windfall payments over the next decade to clinicians who do not actually participate in alternative payment models.

What's next

CMS described the proposals as one of the most significant Medicare modernization efforts in recent years and said they are intended to reduce administrative burden while preserving the program's long-term financial sustainability.

With the announcement, CMS published the proposed rule in the Federal Register. There are related fact sheets on the Quality Payment Program, the 2027 Medicare Physician Fee Schedule, and the coming changes to MSSP.