The Centers for Medicare & Medicaid Services (CMS) on Monday released the 2026 Medicare Physician Fee Schedule (PFS) proposed rule. In addition to a pay bump for physicians, the agency announced significant policy changes for Medicare payments.
The 1,803-page proposed physician payment rule is scheduled to be published in the Federal Register on July 16. Comments are due by September 12.
The proposed PFS rule aims to “modernize Medicare, cut waste, and improve patient care.,
said CMS Administrator Dr. Mehmet Oz in an announcement. “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,” he said.
Among the proposed payment and policy changes:
Skin substitutes
Instead of the current model of treating skin substitutes as biologicals, which CMS said can cost $2,000 per square inch and has led to millions of dollars in improper payments, the agency proposes to pay them as incident-to supplies. The change could reduce spending on these products by nearly 90 percent but wouldn’t impact patient access or quality of care, CMS said. If finalized as proposed, the change will save Medicare billions of dollars.
Medicare Diabetes Prevention Program
In an attempt to get more people to access coaching and peer support to delay or prevent the onset of type 2 diabetes for people with prediabetes, CMS wants to test coverage of online sessions rather than strictly as an in-person program. Providers would have to adhere to program format, coach interaction, and program intensity and duration under the Centers for Disease Control and Prevention Diabetes Prevention Recognition Program to qualify for payment.
CMS also wants to add prescreening for diabetes as a new outcome measure that focuses on prevention of chronic disease.
The agency is also seeking recommendations on how to improve wellness, prevention, and chronic disease management, including input on nutritional counseling and physical activity.
Medicare Shared Savings Program
To encourage participation in a two-sided risk model, CMS wants to limit the amount of time an accountable care organization (ACO) can participate in the BASIC track to a maximum of five performance years. CMS also proposes to modify eligibility requirements that ACOs have at least 5,000 assigned Medicare fee-for-service (FFS) beneficiaries as of January 1, 2027.
It also proposes to remove the health equity adjustment applied to an ACO’s quality score beginning in performance year 2025, eliminate the screening for social drivers of health in the Alternative Payment Model Performance Pathway Plus quality measure set, and expand 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 wants to 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.
Other proposed changes include requiring 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; renaming the “health equity benchmark adjustment” to the “population adjustment”; and proposed changes to revise the Shared Savings Program quality monitoring policies.
New payment model
CMS proposes a new Ambulatory Specialty Model (ASM), a mandatory payment model that focuses on specialty care for beneficiaries with heart failure and low back pain, which the agency said is a significant area of Medicare spending. The model aims to improve patient and provider engagement, provide incentives for preventive care, and increase financial accountability for specialists. The model would reward specialists who detect early signs of worsening chronic conditions, 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 would begin in January 2027 and run for five performance years through December 2031.
New calculation for payment rates
To improve payment accuracy, CMS proposes 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. The agency said although it proposes different methodologies for the use of hospital Outpatient Prospective Payment System data based on service date, it wants feedback on whether it's better to adopt a single method, such as a scaler, and how that would account for differences in practice expenses between services.
2026 rate setting
For 2026, CMS proposes to set the conversion factor, or the number of dollars assigned to a work relative value unit, at $33.42, an increase of 3.62 percent over the 2025 rate of $32.35. The increase includes a 2.5 percent payment adjustment per statutory requirements within the Big Beautiful Bill Act and an increase of .55 percent to account for changes to some of the work relative value units.