The Centers for Medicare & Medicaid Services (CMS) on Friday released the 2026 Medicare Physician Fee Schedule final rule.
The 2,375-page rule, which is scheduled to be published in the Federal Register on November 5, finalized many of the policies CMS proposed in July.
“CMS is working to strengthen and transform Medicare for the current and future generations while cracking down on waste and abuse that drives up costs,” said CMS Administrator Dr. Mehmet Oz in an announcement. “The actions we are taking will improve seniors’ access to high-quality, preventive care that will help them to live longer, healthier lives.”
Among the changes:
Payments
CMS finalized a one-time 2.5 percent increase for physicians as provided for the One Big Beautiful Bill Act. However, the agency also established a -2.5 percent efficiency adjustment for services that it says are likely to become more efficient over time, such as surgical procedures, diagnostic imaging interpretation, outpatient interventions, interventional pain management, and orthopedic services. CMS said these services benefit from technological advancements or standardized workflows that reduce time and resource use, without corresponding payment adjustments.
However, the American Medical Association (AMA) cautioned in a statement that while the one-time 2.5 percent increase is vital, other policies in the final rule will directly undercut private practices. For example, the efficiency adjustment will reduce payment for more than 7,000 physician services—95 percent of all services provided by physicians, the AMA said.
CMS also reduced physician payment rates for services performed in hospitals and ambulatory surgical centers. The AMA said the cuts don’t reflect the resource cuts that physician practices incur in the facility setting. The policy may lead to reduced competition and increased consolidation, according to the AMA.
Skin substitutes
To curb increasing Medicare spending on wound care products or skin substitutes, CMS now will pay for skin substitutes as incident-to supplies, a change it said will reduce Medicare spending by nearly 90 percent without compromising patient access or quality of care. Indeed, CMS estimates the change in policy will reduce gross fee-for-service program spending for skin substitute services by $19.6 billion in 2026, while creating incentives for the use of products with the most clinical evidence of success.
New ambulatory specialty payment model
The final rule creates a mandatory payment model focused on specialty care for beneficiaries with heart failure and low back pain. The model aims to improve beneficiary and provider engagement, incentivize preventive care, and increase financial accountability for specialists. CMS will reward 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. The model will begin in January 2027 and run for five performance years through December 2031.
Focus on prevention and wellness
The final rule repurposes a previous risk assessment code to focus on essential patient behaviors to reduce chronic disease and improve health through physical activity and nutrition. CMS said it will also improve chronic disease care by making sure advanced care management services integrate behavioral health. The agency also says it is shifting its focus away from quality measurement toward prevention-focused measures by introducing five new outcomes measures focused on the prevention of chronic disease – while simultaneously working to reduce unnecessary burden in quality reporting by removing 10 quality measures that did not directly improve patient health outcomes.
The final rule also makes changes to the Medicare Diabetes Prevention Program, which will allow more people with Medicare to access coaching, peer support, and practical training in dietary change, physical activity, and behavior change strategies to delay or prevent the onset of Type 2 diabetes for people with prediabetes, at no cost to the beneficiary.
Telehealth
CMS ended frequency limits on telehealth services for subsequent inpatient and nursing facility visits, as well as critical care consultations. The final rule also adopts a definition of direct supervision that allows the physician or supervising practitioner to provide supervision through real-time audio and visual interactive telecommunications (excluding audio only). Virtual direct supervision will be allowed for applicable incident-to services, diagnostic tests, pulmonary rehabilitation services, cardiac rehabilitation and intensive cardiac rehabilitation services.
CMS will also end its policy that paid teaching physicians for having a virtual presence for services that residents performed in teaching facilities. That policy will end on December 31. However, the agency will permanently allow teaching physicians to have a virtual presence in all teaching settings in clinical instances when the service was furnished virtually.
Medicare Shared Savings Program
CMS finalized several of its proposed changes to the Medicare Shared Savings Program. To encourage organizations to take on two-sided risk, beginning in 2027, accountable care organizations (ACOs) will only be allowed to participate in the BASIC track, a one-sided risk arrangement, for five years instead of seven years. CMS will no longer require ACO participants to cover 5,000 assigned Medicare beneficiaries
The final rule also removes the health equity adjustment applied to an ACO’s quality score beginning in performance year 2026, eliminates the screening for social drivers of health in the Alternative Payment Model Performance Pathway Plus quality measure set, and expands the survey mode for Consumer Assessment of Healthcare Providers and Systems (CAHPS) for Merit-based Incentive Payment System (MIPS) Survey from a mail phone administration protocol to a web-mail-phone administration protocol beginning with performance year 2027.
CMS also will expand quality and finance extreme and uncontrollable circumstances policies to an ACO affected by a cyberattack, including ransomware/malware, for performance year 2025 and subsequent performance years.
The final rule also requires ACOs to report certain changes to their ACO participant list during the performance year, such as when an ACO participant experiences a Change of Ownership (CHOW) or when an SNF affiliate undergoes a CHOW; and renames the “health equity benchmark adjustment” to “population adjustment.” CMS also revised the Shared Savings Program quality monitoring policies and for performance years beginning on or after January 1, 2026, the agency will monitor whether ACOs have met the quality performance standard and alternative quality performance standard. For more information, see the CMS fact sheet about the changes.