Medicare CY2026 Physician Fee Schedule Final Rule Relevant Updates

On October 31, 2025, the Centers for Medicare & Medicaid Services (CMS) released the final 2026 Medicare Physician Fee Schedule (PFS) and related Quality Payment Program (QPP) policies, effective January 1, 2026. Unlike recent years, CMS finalized modest positive conversion factor updates, while also locking in new structural cuts that will continue to pressure physician practices and patient access.​

Conversion Factor

• CMS finalized two separate conversion factors for 2026:​ $33.57 for qualifying alternative payment models (APM) participants (a 3.77% increase from 2025) and $33.40 for all other clinicians, including those in merit-based incentive payment system (MIPS) (a 3.26% increase from 2025). While these increases represent the first positive conversion factor update in several years, the increases are partially offset by new cuts elsewhere in the rule.​
• Budget neutrality: CMS did not revisit its prior over‑estimate of G2211 utilization that contributed to the 2024 conversion factor cut, highlighting ongoing concerns about the reliability and transparency of CMS utilization assumptions and their downstream effects on physician reimbursement.​

Efficiency Adjustment

• CMS finalized a 2.5% “efficiency adjustment” that reduces work RVUs and intra-service time for most non-time-based services. The adjustment will be applied on a 3-year cycle and affect most procedural codes. Time-based services such as evaluation and management (E/M), care management, maternity care, and services on the Medicare Telehealth List are exempt, as are new 2026 codes.​
• AANEM is concerned that this approach relies on data and assumptions that are difficult for clinicians to independently evaluate and may further strain private practice sustainability at a time when many physicians are already struggling to keep pace with inflation.

Practice Expense (PE) Redistribution

• Indirect PE: CMS finalized a major change to indirect PE that shifts payment away from facility-‑based services and toward office-‑based care.​ CMS estimates that, on average, facility-‑based services may see a reduction of approximately 7%, while non-‑facility services may see an increase of about 4%, though actual impacts will vary depending by specialty and service mix.​
• Despite long-standing advocacy from the American Medical Association and other physician organizations, CMS again declined to incorporate updated Physician Practice Information (PPI) survey data into 2026 PE or Medicare Economic Index (MEI) calculations. As a result, Medicare payment continues to rely on outdated assumptions that may not reflect the real costs of operating a medical practice.
• For AANEM members, this means the net impact on reimbursement will depend heavily on how much Medicare work is furnished in office versus facility settings, as well as how many commonly billed codes are subject to the new efficiency adjustment.
  

Telehealth

• Telehealth and supervision: CMS permanently removed frequency limits for subsequent inpatient, nursing facility, and critical care telehealth visits and finalized virtual direct supervision as a permanent option for most services that require direct supervision, excluding 10- and 90-day global procedures.​
• In response to stakeholder feedback, CMS will continue to allow virtual teaching physician supervision of residents when services are furnished virtually across all training settings, rather than limiting this flexibility to non‑metropolitan areas.​
• Telemedicine E/M codes: CMS again declined to add the CPT telemedicine E/M codes to the Medicare Telehealth List, so clinicians must continue to bill in-person E/M codes with appropriate telehealth modifiers for Medicare patients.​

MIPS/Quality Payment Program (QPP) and Longer-term‑ Reform

• MIPS performance threshold: CMS is holding the MIPS performance threshold at 75 points through at least the 2028 performance year, providing some stability but continuing to pose significant penalty risk, particularly for small and rural practices.​
• Looking forward, AANEM remains concerned that physician payment policies are not sustainable without structural reform. We continue to urge CMS and Congress to pursue permanent, inflation-based payment updates, including through support for the recently reintroduced Strengthening Medicare for Patients and Providers Act (H.R. 6160).
• AANEM also supports simplifying quality reporting requirements and ensuring appropriate flexibility for neuromuscular (NM) specialists within MIPS and the QPP, including quality measures and payment models that reflect the realities of subspecialty and consultative care.

AANEM will continue to work with the AMA and other physician organizations to educate policymakers about how these policies affects NM and EDX practices and to advocate for long overdue structural reforms to the Medicare physician payment system.​ Questions and comments are always welcomed by the AANEM policy department: policy@aanem.org.