The Centers for Medicare & Medicaid Services (CMS) has issued the CY 2026 Medicare PFS Final Rule (CMS-1832-F), and it brings major updates to payment policies under Medicare Part B. Here’s what you need to know:
- Separate Conversion Factors: Beginning in 2026, two conversion factors will apply—one for qualifying alternative payment model (APM) participants and another for all other services. Both reflect modest increases from 2025.
- The qualifying APM proposed conversion factor = $33.57, an increase of $1.22 (3.77%)
- The proposed conversion factor for all others = $33.40, an increase of $1.15 (3.62%)
- Efficiency Adjustment: A 2.5% decrease in physician payment for specific services in 2026. The adjustment applies to roughly 9,000 CPT/HCPCS codes for services including, diagnostic imaging, surgical procedures, and orthopedic services. Once posted on the CMS website, you can download a “Codes Subject to Efficiency Adjustment” file. CMS believes these services have become more efficient over time. The following will be exempt:
- Time-based codes
- Services on the CMS telehealth list
- New codes for CY 2026
- Major Overhaul for Skin Substitute Payments: CMS finalized their proposed “bundled” payment structure, reclassification of HCPCS codes, product specific pricing adjustments and additional utilization management policies. Specifically,
- CMS will pay for skin substitutes under the PFS as incident-to supplies
- CMS predicts the change will result in a 90% reduction in Medicare spending for these products
- New Physician Payment Rule: CMS aims to cut waste, improve quality care and improve chronic disease management with a new Ambulatory Specialty Model (ASM) payment model for specialty care of heart failure and low back pain.
- The new model will begin January 2027 and run through December 2031
- Telehealth Policy Updates: CMS has extended several flexibilities, including:
- Continued coverage for select audio-only services,
- Removing frequency limitation for subsequent inpatient/nursing facility visits and critical care consultations
- Provided clarity on direct supervision via virtual presence, and
- While not included in the proposed rule, will permanently allow teaching physicians to provide virtual supervision.
- Did not extend telehealth flexibilities for beneficiaries to receive telehealth services from their home, excluding certain behavioral health services and RHC/FQHC settings. Specifically, for RHC/FQHCs, they may continue using HCPCS code G2025 through December 31, 2026.
- Drug Pricing Reform: CMS finalized, with modification, the proposed policies and mechanisms for calculating rebates under the Medicare Prescription Drug Inflation Rebate Program, including 340B drugs.
- Behavioral Health & Enhanced Care Management: Expansion of services to increase access, including new digital mental health treatment options and support for complex patients.
Other Key Highlights:
- Changes to the Medicare Diabetes Prevention Program
- Practice expense methodology refinements
- Improvements to benchmarking and quality reporting to support ACO participation and performance
- Addition of 5 prevention-focused quality measures and removing 10 quality measures the did not directly improve patient health outcomes
We recommend reviewing the final rule in its entirety to identify the issues pertinent to your organization and begin developing an implementation plan.
Learn more and read the full final rule here: Federal Register :: Public Inspection: Medicare and Medicaid Programs: Calendar Year 2026 Payment Policies under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; and Medicare Prescription Drug Inflation Rebate Program
The Fact Sheet can be accessed here: Calendar Year (CY) 2026 Medicare Physician Fee Schedule Final Rule (CMS-1832-F) | CMS
The new ASM model can be accessed here: ASM (Ambulatory Specialty Model) | CMS
The CMS Press Release is here: CMS Modernizes Payment Accuracy and Significantly Cuts Spending Waste | CMS