On July 14, 2025, the Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2026 Revisions to Payment Policies Under the Physician Fee Schedule (PFS) and Other Revisions to Medicare Part B [CMS-13271] Proposed Rule, which includes proposals related to Medicare physician payment and the Quality Payment Program. For the first time, CMS proposes two separate PFS conversion factor (CF) updates: one for clinicians who participate in advanced alternative payment models (APMs) and are considered qualifying APM participants, and one for all other clinicians. Both proposed CFs for 2026 would incorporate a one-time 2.5% payment increase provided by the One Big Beautiful Bill Act.

CMS proposes to make significant changes to physician rate setting by incorporating an efficiency adjustment for codes not based on time and adjusting the practice expense (PE) methodology. Other proposals include a new mandatory payment model related to heart failure and low back pain, telehealth updates, changes to the Merit-based Incentive Payment System (MIPS) program, and movement toward the MIPS Value Pathways.

Key takeaways from the CY 2026 PFS proposed rule

• CF update: The proposed CY 2026 resource-based relative value scale CF is $33.5875 for physicians who meet certain participation thresholds in advanced APMs, and $33.4209 for other clinicians. These amounts represent increases of 3.8% and 3.3%, respectively, from the final CY 2025 CF of $32.3465.
• Efficiency adjustment: CMS proposes an efficiency adjustment of -2.5% in CY 2026 to certain non-time-based codes, including those describing procedures, radiology services, and diagnostic tests. CMS believes that this negative adjustment would take into account efficiencies accrued over time as services become more common, professionals gain more experience performing them, technology improves, and other operational improvements are implemented.
• PE methodology: CMS proposes to reduce the portion of indirect PE allocated to facility-based services beginning in CY 2026, citing outdated assumptions about physician practice patterns.
• Global surgery package valuation: CMS does not propose changes for CY 2026 but seeks public input on whether and how to revise the portion of the global surgery package relative value unit attributed to the surgical procedure.
• Telehealth: The rule proposes significant changes to the Medicare Telehealth Services List and would expand permanent flexibilities for virtual direct supervision.
• MIPS: CMS proposes stability in quality reporting by maintaining the MIPS performance threshold at 75 points through the CY 2028 performance period/2030 MIPS payment year.
• Medicare Shared Savings Program: The rule proposes changes aimed at increasing participation and program integrity, including adjustments to beneficiary assignment thresholds, refinements to quality reporting requirements, protections against cyberattacks, and updated financial benchmarking and reconciliation methodologies.
• New mandatory Ambulatory Specialty Model: CMS proposes a new mandatory alternative payment model for heart failure and low back pain to start January 1, 2027, and run through December 31, 2031.
• Requests for information: The agency solicits feedback on future policy priorities and inquires whether the PFS adequately supports the prevention and management of chronic disease.

Lauren Knizner, Marie Knoll, Anthony Livshen, and Rachel Stauffer also contributed to this article.