CMS finalizes Medicare pay hike for doctors

Modern Healthcare – Friday, October 31, 2025
By Bridget Early

Doctors who treat Medicare beneficiaries are getting a 2.5% raise next year under a regulation the Centers for Medicare and Medicaid Services issued Friday.

The 2026 Medicare Physician Fee Schedule final rule implements provisions from the tax law President Donald Trump enacted in July, which mandated a pay hike and reversed a multiyear trend of reimbursement cuts. CMS also spells out its plans for an “efficiency adjuster” that will reduce some payments, a lower back pain and heart failure payment model, and new flexibilities for telehealth coverage.

“The actions we are taking will improve seniors’ access to high-quality, preventive care that will help them to live longer, healthier lives,” CMS Administrator Dr. Mehmet Oz said in a news release.

Reimbursements

CMS calculates the Medicare physician payments using three factors: Relative value units, or RVUs, based on procedure costs; geographic price indices that regionally adjust RVUs; and a conversion factor that translates those factors into dollar amounts.

In 2026, the conversion factor is 3.26%. The conversion factor for doctors participating in alternative payment models is 3.77% due to provisions from the Medicare Access and Children’s Health Insurance Program Reauthorization Act of 2015.

Efficiency adjuster

The regulation creates a 2.5% payment reduction for about 9,000 billing codes for services including surgery, diagnostic imaging interpretation, outpatient care, interventional pain management and orthopedic services. Notably, CMS will exempt new services from the adjuster, even if they otherwise meet the criteria.

CMS contends the efficiency adjuster will redistribute payments among different types of physicians and better support primary care. Medical specialty groups charge that the policy doesn’t account for complex services, while primary care organizations favor it.

The agency also finalized an update to the practice expense methodology that will boost pay to office-based doctors while reducing reimbursements to facility-based doctors.

Ambulatory Specialty Model

The final rule establishes a mandatory, five-year bundled payment program called the Ambulatory Specialty Model, which seeks to promote preventive care and early management of chronic conditions. The model will launch in 2027 with an initial focus on lower back pain and heart failure.

CMS will use the Merit-based Incentive Payment System’s Value Pathways program to track quality, spending, technological interoperability and early intervention.

Telehealth

CMS is simplifying the process for making additional telehealth services reimbursable under Medicare, and is permanently removing frequency limits for subsequent inpatient visits, nursing home stays and critical care consultations.

The agency will permit physicians to carry out direct supervision of services such as cardiac rehabilitation via audiovisual telecommunications. CMS added academic medical centers to the policy after leaving them out of the proposed rule it published in July.

Medicare Shared Savings Program

Beginning in 2027, CMS aims to encourage two-sided risk-sharing arrangements by limiting how long some Medicare Shared Savings Program participants can remain in one-sided risk arrangements to five years, down from seven years.

CMS also finalized a proposal to relieve Shared Savings accountable care organizations from a requirement that they cover at least 5,000 Medicare beneficiaries beginning in 2027.

Chronic illness and behavioral health

In line with Trump and Health and Human Services Secretary Robert F. Kennedy Jr.’s “Make America Healthy Again” agenda, CMS created a handful of primary care and behavioral health billing codes.

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