On July 14, 2025, the Centers for Medicare & Medicaid Services (CMS) unveiled its proposed rule for the 2026 Medicare Physician Fee Schedule (PFS), aiming to enhance the quality of care for Medicare beneficiaries while significantly reducing unnecessary spending. This proposal is part of a broader strategy to modernize Medicare, focusing on efficiency, quality, and innovation.[1]
Key Proposals and Changes
- Quality Measures and Chronic Disease Management: CMS is introducing new quality measures to advance primary care management and improve chronic disease management. The proposal includes removing ten quality measures that do not directly improve patient health outcomes and adding five new outcome measures focused on chronic disease prevention, such as prescreening for diabetes.[2] This shift aims to enhance patient care and reduce the burden of chronic diseases, which affect a significant portion of the Medicare population.[3]
- Ambulatory Specialty Model (ASM): A new mandatory payment model, the Ambulatory Specialty Model (ASM), which will begin in 2027, is proposed to improve care for chronic conditions like heart failure and low back pain.[4] ASM will hold specialists accountable for patient outcomes and incentivize preventive care and early diagnosis.[5] This model is expected to reduce avoidable hospitalizations and unnecessary procedures, ultimately lowering costs for Medicare.
- Payment Structure Adjustments: The proposed rule introduces separate conversion factors for Qualifying APM Participants (QPs) and non-QP clinicians, with updates reflecting statutory requirements and adjustments for work RVUs.[6] This change aims to align payment structures with value-based care principles in order to reward high-quality, efficient care.
- Telehealth and Digital Health Innovations: CMS is proposing to make some COVID-era flexibilities permanent by simplifying the process for adding services to the Medicare Telehealth Services List and broadening payment policies for digital mental health treatment devices.[7] These changes are designed to enhance access to care and recognize technological advancements in healthcare delivery.
- Skin Substitutes and Spending Waste: In response to the dramatic increase in spending on skin substitutes, CMS proposes to categorize these products as incident-to supplies, which is expected to reduce spending by nearly 90% without compromising patient access or quality of care.[8]
Implications for Physicians
The proposed changes present both opportunities and challenges for physicians. The focus on quality measures and chronic disease management will require physicians to adapt to new reporting requirements and performance metrics.[9] However, these changes also offer the potential for improved patient outcomes and financial incentives for high-quality care.[10]
The ASM model, in particular, emphasizes the importance of collaboration between specialists and primary care providers, encouraging a more integrated approach to patient care.[11] Physicians participating in ASM will need to focus on preventive care and effective disease management to achieve positive payment adjustments.
Conclusion
In the proposed rule for the 2026 Medicare Physician Fee Schedule, CMS states that the new rule represents a significant step towards modernizing Medicare and aligning healthcare spending with value.[12] Whether this proves true or not, as the healthcare landscape continues to evolve, physicians must stay informed and adapt to these changes to succeed in a value-based care environment.
The 60-day comment period for the proposed rule ends on September 12, 2025.
[1] CMS Proposes Physician Payment Rule to Significantly Cut Spending Waste, Enhance Quality Measures, and Improve Chronic Disease Management for People with Medicare, CMS.gov, (July 14, 2025), https://www.cms.gov/newsroom/press-releases/cms-proposes-physician-payment-rule-significantly-cut-spending-waste-enhance-quality-measures-and; CMS Calendar Year (CY) 2026 Medicare Physician Fee Schedule (PFS) Proposed Rule (CMS-1832-P), CMS.gov, (July 14, 2025), https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-pfs-proposed-rule-cms-1832-p.
[2] See CMS Proposes Physician Payment Rule, supra note 1 (“CMS is proposing to improve the care of chronic diseases by reducing burdens associated with the integration of behavioral health treatment into advanced primary care management. Additionally, CMS is proposing to make Americans healthier by removing ten quality measures that did not directly improve patient health outcomes and adding five new outcome measures that focus on the prevention of chronic disease, including prescreening for diabetes.”).
[3] See CMS Calendar Year 2026 Medicare PFS, supra note 1.
[4] See CMS ASM (Ambulatory Specialty Model), CMS.gov, (July 14, 2025), https://www.cms.gov/priorities/innovation/innovation-models/asm (“The proposed Ambulatory Specialty Model (ASM) aims to improve prevention and upstream management of chronic disease, which would lead to reductions in avoidable hospitalizations and unnecessary procedures. Participation in ASM would be mandatory for specialists who commonly treat people with Original Medicare for heart failure or low back pain in an outpatient setting across selected regions. ASM would begin on January 1, 2027 and run for five performance years through December 31, 2031.”).
[5] See CMS Proposes Physician Payment Rule, supra note 1 (“The proposed ASM, one of the newest CMS Innovation Center models, aims to improve beneficiary and provider engagement, incentivize preventive care, and increase financial accountability for specialists. 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. If finalized, the model will begin in January 2027 and run for five performance years through December 2031.”).
[6] See CMS Proposes Physician Payment Rule, supra note 1 (“Beginning in 2026, there will be two separate conversion factors for Qualifying 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 percent while the update to the nonqualifying APM conversion factor (which applies to PFS payments for all other clinicians) for CY 2026 is 0.25 percent. The change to the PFS conversion factors for CY 2026 includes these updates as required by statute, a one-year increase of +2.50 percent for CY 2026 stipulated by statute, and an estimated 0.55 percent 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.”); See CMS Calendar Year 2026 Medicare PFS, supra note 1 (“The update to the qualifying APM conversion factor for CY 2026 is +0.75 percent while the update to the nonqualifying APM conversion factor for CY 2026 is +0.25 percent. The changes to the PFS conversion factors for CY 2026 include these updates as required by statute, a one-year increase of +2.50 percent for CY 2026 stipulated by statute.”).
[7] See CMS Proposes Physician Payment Rule, supra note 1 (“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. 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. CMS is also proposing to broaden its payment policies for digital mental health treatment devices to make more options available to patients.”); CMS Calendar Year 2026 Medicare PFS, supra note 1 (“For CY 2026, we are proposing to streamline the process for adding services to the Medicare Telehealth Services List. We are proposing to simplify our review process by removing the distinction between provisional and permanent services and limiting our review on whether the service can be furnished using an interactive, two-way audio-video telecommunications system.”).
[8] See, e.g., CMS Proposes Physician Payment Rule, supra note 1 (“CMS currently treats skin substitutes as biologicals for the purposes of Medicare payment, which can reach as high as $2,000 per square inch. CMS is proposing to pay for skin substitutes as incident-to supplies, a change expected to reduce spending on these products by nearly 90%. 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.”); CMS Calendar Year 2026 Medicare PFS, supra note 1 (“Currently, most skin substitutes are paid as if they are biologicals under the average sales price (ASP)-based payment methodology described in section 1847A of the Social Security Act. Using this methodology, each skin substitute product receives a unique billing code and payment limit. This has led to significant growth in spending under Medicare Part B for skin substitutes in the non-facility setting. According to Medicare claims data, Part B spending for these products rose from $252 million in 2019 to over $10 billion in 2024, a nearly 40-fold increase. Most of that increase is directly attributable to increases in stated prices for specific products.”).
[9] See CMS Proposes Physician Payment Rule, supra note 1.
[10] Id.
[11] See CMS ASM (Ambulatory Specialty Model), supra note 4 (“ASM would test tools designed to improve collaboration, such as a Collaborative Care Arrangement in which each provider would have clearly defined roles, responsibilities and expectations for data sharing, co- management of patient care and referral processes with primary care providers. Both specialists and primary care providers would contribute to screening for health-related social needs, and they would jointly prepare plans for patient transitions between care settings, such as an outpatient treatment facility and home.”).
[12] See CMS Proposes Physician Payment Rule, supra note 1 (“‘We are taking meaningful steps to modernize Medicare, cut waste, and improve patient care,’ said CMS Administrator Dr. Mehmet Oz. ‘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.’”); id. (“‘This move reflects our continued shift toward smarter, data-informed policymaking,’ said Chris Klomp, Deputy Administrator and Director of the Center for Medicare at CMS. ‘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.’”).
