On July 14, the Centers for Medicare & Medicaid Services (CMS) released its proposed rule for the 2026 Physician Fee Schedule. As expected, there are several meaningful updates that providers, practices, and health systems should be aware of.
One of the more significant changes is that CMS will split the conversion factor into two separate tracks beginning in calendar year 2026: one for qualifying Alternative Payment Model (APM) participants and one for everyone else. For those in qualifying APMs, CMS proposes a 3.83% increase in the conversion factor. For non-APM participants, the increase would be 3.62%. These increases include a blend of statutory updates and adjustments under the One Big Beautiful Bill Act, plus a 0.55% increase tied to changes in work RVUs.
CMS is also proposing a decrease of 2.5% efficiency adjustment to certain work RVUs, which could result in significant impact, depending on the specialty and service mix. The agency is also overhauling its practice expense methodology, which is something many in the industry have been advocating for. The goal is to better recognize the indirect costs shouldered by office-based providers versus those in facility settings. For example, radiation treatment and remote monitoring services are two areas where CMS plans to start using hospital cost data to inform relative rates.
The proposed rule also has suggested changes to telehealth. CMS wants to permanently adopt the waiver allowing direct supervision via real-time audio/video, which is good news for practices that have started to rely on such patient interactions over the past several years. The agency also proposes extending the ability for Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs) to bill for telehealth through 2026. However, the proposal does not address the continuing of the teaching physician virtual presence waiver, which may cause disruption in academic settings.
For providers working with 340B drugs, CMS is proposing a new claims-based method to exclude 340B units from drug inflation rebate calculations. Additionally, the proposed rule suggests the idea of a voluntary 340B claims data repository, suggesting a trend towards more data-driven transparency.
CMS also wants to engage specialists who frequently treat patients with heart failure and lower back pain by introducing an Ambulatory Specialty Model, a mandatory payment model aimed at improving specialty care for patients with such conditions.
Regarding Quality Payment Programs, CMS is recommending the creation of a new Advancing Health and Wellness subcategory within the area of Improvement Activities, pushing further simplification of Merit-based Incentive Payment Systems (MIPS) to prepare for a broader shift toward mandatory MIPS Value Pathways (MVP) participation.
CMS is accepting public comments through September 12. For providers and practices where these changes may have significant impact, now is the time to review the proposed rules and submit any comments that you may have heading in to 2026.
The entire proposed rule can be found here.
