The Centers for Medicare and Medicaid Services (CMS) published its proposed 2026 Medicare Physician Fee Schedule on July 14. The agency’s announcement emphasized “significantly cutting spending waste, enhancing quality measures, and improving chronic disease management for people with Medicare.” While the fee schedule is still under review, and CMS is soliciting suggestions and public comment, health care providers should familiarize themselves with what CMS has proposed.
Here are some key highlights.
Enhancing Payment & Quality Measures: Revised Physician Payment Rates & Telehealth Flexibilities
CMS determines Medicare physician payments using three key components: relative value units (RVUs), which reflect cost and complexity of procedures; geographic price indices, which adjust RVUs based on local cost variations; and a conversion factor, a fixed-dollar amount used to translate the adjusted RVUs into an actual payment.
Beginning in 2026, CMS proposes two conversion factors depending on whether a provider is a Qualifying APM Participant (QP), meaning it participates in Advanced Alternative Payment Models, such as accountable care organizations, that emphasize accountability for quality and cost.
For QPs, CMS is proposing a 3.83% increase from the current conversion factor of $32.35, for a total of $33.59 in 2026.
For non-QPs, the conversion factor would be increased by 3.62% from the current conversion factor of $32.35, for a total of $33.42.
On the telehealth front, CMS is proposing to simplify the process for making additional telehealth services reimbursable under Medicare. The agency proposes to focus its review in determining whether to add a service solely on whether the service can be effectively delivered via two-way audio-video communication.
Among other changes, CMS also proposes permanently allowing physicians to carry out direct supervision for certain services — such as cardiac rehabilitation — using audio-visual communication. Specifically, CMS proposes to revise the definition of “direct supervision” to allow supervising physicians to be “immediately available” via telehealth for most lower-risk services that do not have a 10- or 90-day global period, the time following a procedure during which follow-up care is bundled into the original payment and not reimbursed separately. CMS currently allows this particular use of telehealth, but the policy is currently set to expire Dec. 31.
Creating a New Payment Model for Chronic Care
CMS is also proposing a new mandatory payment model focused on two high-cost clinical areas: heart failure and lower back pain. Under the Ambulatory Specialty Model, providers would be required to report a select set of measures and activities clinically relevant to their specialty type and the chronic condition of interest with the overarching aim of improving upstream management of chronic disease and ultimately reducing unnecessary hospitalizations and procedures. The Model will launch in 2027 and require participants to take on a two-sided financial risk, meaning they will share in savings and be held accountable for excess costs.
CMS also intends to use the Merit-based Incentive Payment System’s Value Pathways quality measurement program to measure provider performance, emphasizing early intervention, care coordination, and overall cost effectiveness.
Behavioral Health
CMS also proposes to create add-on billing codes for advanced primary care management that would facilitate providing complementary behavioral health integration or psychiatric collaborative care model services. This would include three new G-codes, special billing codes used by Medicare for specific services that do not have standard CPT codes. These G-codes would be billed as an add-on service, allowing primary care practices to receive payment for behavioral health integration and potentially improving coordination and outcomes for patients with mental health needs.
Spending Reductions: Changes in Medicare Spending for Skin Substitutes
Currently, CMS reimburses skin substitutes (e.g., wound grafts) as biologicals for the purposes of Medicare payment, with payments reaching up to $2,000 per square inch. Under the proposed rule, CMS would instead pay for skin substitutes as incident-to supplies, a change expected to cut spending by approximately 90%.
Moving Forward
Taken together, these proposed changes signal CMS’s interest in value-based and cost-conscious care. These adjustments could have significant implications for practice finances, care delivery and patient access. Providers should carefully review the proposed updates and consider submitting comments to CMS before the Sept. 12 deadline, as CMS will finalize the rule shortly thereafter.
Miles & Stockbridge’s health care lawyers will continue to closely monitor developments in the rulemaking process and are available to answer providers’ questions about the proposed rule and its implications.
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.
[View source.]
