👉What Providers Need to Know: 2026 Medicare Physician Fee Schedule Proposed Rule (CMS-1832-P)

2026 Medicare Physician Fee Schedule Proposed Rule

The Centers for Medicare & Medicaid Services (CMS) has released its Calendar Year (CY) 2026 Medicare Physician Fee Schedule (PFS) Proposed Rule, a sweeping regulatory update poised to reshape payment policies for physicians and practitioners nationwide. This rule is vital reading for healthcare leaders, administrators, and clinicians planning their compliance and contracts for the coming year. You can access the full rule and official fact sheet directly on the CMS website.

Key Highlights from the CY 2026 Proposed Rule

1. Dual Conversion Factors and Updated Payment Rates

For the first time, CMS will implement separate conversion factors for qualifying Alternative Payment Model (APM) participants and non-qualifying providers. The qualifying APM conversion factor jumps to $33.59 (+3.8%), while the non-qualifying factor rises to $33.42 (+3.3%). This nuanced split is designed to reward value-driven care but also folds in an efficiency adjustment, resulting in a one-year increase of +2.5%, as stipulated by law, and a +0.55% fine-tune related to work RVU updates. Direct link to official CMS summary.

2. Efficiency Adjustments—What’s Changing?

CMS recognizes potential overstatements in historical practitioner time and cost estimates. To modernize these valuations, the agency will apply a -2.5% efficiency adjustment to the work RVUs for non–time-based procedures, excluding E/M services and others closely tied to time. This aims to reflect real-world productivity and mitigate distortions in resource allocation.

3. Practice Expense Reforms

The 2026 proposal focuses on refining how Practice Expense (PE) data are collected and applied. Notably, CMS will prioritize updated indirect cost allocations, offering greater recognition of overhead for office-based practices compared to facility settings. While new survey data from the AMA is still under review due to sample size and validity concerns, CMS is leveraging auditable hospital and outpatient data for rate setting on selected services, including radiation therapy and remote monitoring.

4. Telehealth Services: Permanent Flexibilities

CMS plans to overhaul the review process for adding new services to the Medicare Telehealth Services List by removing provisional/permanent distinctions and focusing only on audio-video compatibility. Frequency limits for certain visits will be permanently lifted, and the definition of “direct supervision” will continue to include real-time audio-visual telecommunication, enhancing flexibility for virtual care and hybrid models.

5. Incentives for Behavioral Health & Chronic Disease Management

With chronic disease rates rising, CMS is prioritizing prevention and care coordination. CY 2026 introduces optional add-on codes for Advanced Primary Care Management (APCM) integrated with behavioral health services, including new digital mental health treatment device policies, especially for conditions like ADHD. CMS is actively seeking feedback on these initiatives and anticipates expanded payment policies for digital tools in mental health.

6. Skin Substitute Payment Overhaul

Skyrocketing Medicare Part B spending on skin substitutes prompted CMS to propose paying these products as incident-to supplies aligned with their FDA regulatory categories. The new payment policy will apply across both hospital and physician office settings, supporting innovation and cost control.

7. Drugs and Biologicals: Transparency and Cost Controls

The proposed rule clarifies ASP calculations for bundled price concessions and bona fide service fees, addresses maximum fair price for selected drugs, and integrates preparatory procedures for autologous therapies into product payment and ASP calculations. The Inflation Reduction Act policies continue to shape drug rebate and claims-based methodologies with new transparency tools for 340B units.

8. Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs)

RHCs and FQHCs will benefit from improved care management alignment, expanded telehealth billing codes, and permanent virtual supervision options for select services. The policy aims for transparency and flexibility in care delivery across settings.

9. Streamlining Regulations & Reducing Administrative Burdens

CMS is inviting public comments on strategies to simplify Medicare regulations, reduce paperwork, and streamline provider experience. Stakeholders are encouraged to share their experiences and suggestions via dedicated channels in the official RFI.

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Why This Matters

The CY 2026 PFS Proposed Rule represents a significant opportunity—and challenge—for payers, providers, and those managing chronic and behavioral health needs. It rewards value-based models, adapts to contemporary practice realities, and invests in digital health. Organizations should:

Review payment impacts by setting (office vs. facility).

Examine how efficiency adjustments may affect specific service lines.

Explore expanded telehealth opportunities and behavioral health coding changes.

Plan for new compliance strategies and comment on proposed changes.

For a deeper dive into each policy, read the full official CMS summary here:

Read more….

Stay tuned to os-healthcarepro.com for expert webinars and practice optimization tips to help you thrive under these changing regulations.