Fact Sheet: Calendar Year (CY) 2027 Medicare Physician Fee Schedule Proposed Rule
On July 14, 2026, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that announces and solicits public comments on proposed policy changes for Medicare payments under the Physician Fee Schedule (PFS), and other Medicare Part B issues, effective on or after January 1, 2027.
The calendar year (CY) 2027 PFS proposed rule is one of several proposed rules that reflect a broader Administration-wide strategy to create a healthcare system that results in better quality, efficiency, empowerment, and innovation for all Medicare beneficiaries.
Background on the Physician Fee Schedule
Since 1992, Medicare payment has been made under the PFS for the services of physicians and other billing professionals in a variety of settings.
For most services furnished in a physician’s office, Medicare pays physicians and other professionals at a single rate based on the full range of resources involved in furnishing the service. In contrast, PFS rates paid to physicians and other billing practitioners in facility settings, such as a hospital outpatient department (HOPD) or an ambulatory surgical center (ASC), reflect only the portion of the resources typically incurred by the practitioner while furnishing the service.
For many diagnostic tests and a limited number of other services under the PFS, separate payment may be made for the professional and technical components of services. The technical component is frequently billed by suppliers for which no institutional payment is made, like independent diagnostic testing facilities and radiation treatment centers, while the professional component is billed by the physician or practitioner.
Payments are based on the relative resources typically used to furnish the service. Relative value units (RVUs) are applied to each service for work, practice expense, and malpractice expense. These RVUs become payment rates through the application of a conversion factor. Geographic adjusters (geographic practice cost indices) are also applied to the total RVUs to account for variation in costs by geographic area. Payment rates are calculated to include an overall payment update specified by statute.
CY 2027 PFS Rate Setting and Conversion Factor
As required by statute, beginning in CY 2026, there are two separate conversion factors: one for qualifying alternative payment model (APM) participants (QPs) and one for physicians and practitioners who are not QPs. By statute, QPs are those that meet certain thresholds for participation in an Advanced APM, which means generally that the payment model has features to ensure accountability for quality and cost of care. The update to the qualifying APM conversion factor for CY 2027 is +0.75% while the update to the non-qualifying APM conversion factor for CY 2027 is +0.25%. The changes to the PFS conversion factors for CY 2027 include these updates as required by statute and an estimated +0.53% adjustment necessary to account for proposed changes in work RVUs for some services. However, Public Law 119-21, which CMS refers to as the Working Families Tax Cut (WFTC) legislation, provided a one-year PFS conversion factor increase of 2.50% for CY 2026, which will no longer be in effect for CY 2027. This effectively means that current law requires -2.50% reduction in Medicare payment under the PFS compared to CY 2026. The proposed CY 2027 qualifying APM conversion factor of $33.17 represents a projected decrease of $0.40 (-1.19%) from the current conversion factor of $33.57. Similarly, the proposed CY 2027 nonqualifying APM conversion factor of $32.84 represents a projected decrease of $0.56 (-1.68%) from the current conversion factor of $33.40.
Accounting for Overlap Between Stand-Alone E/M Visits and Global Periods
For CY 2027, we are proposing to reduce payment when a separately identifiable office/outpatient evaluation and management (E/M) visit is furnished by the same physician (or a physician in the same practice) on the same day as a 0-, 10-, or 90-day global procedure. The most expensive service (either surgical or E/M visit) would be paid at 100% and all other surgical procedure(s) or E/M visit(s) furnished on the same day would be paid at 50%.
This proposed policy is like a proposal in the CY 2019 PFS proposed rule, made in the context of a broader proposal that would have modified the payment structure of E/M visits. While we did not finalize the proposal at that time, we noted that we continued to believe that there are efficiencies when the same physician (or a physician in the same group practice) provides an E/M service for the same patient in conjunction with a procedure with a global period and that we are likely duplicating payment under the current payment methodology. The current proposal would address that overvaluation.
E/M Visit Complexity Add-On (HCPCS code G2211)
In the CY 2021 PFS final rule, we finalized separate payment for the office/outpatient evaluation and management (O/O E/M) visit complexity add-on code, HCPCS code G2211. Policy implementation was temporarily delayed by statute but implemented for CY 2025.
For CY 2027, we are proposing two changes. We are proposing to transition HCPCS code G2211 to a modifier that can be appended to the associated E/M base code (placeholder modifier MOD1 will be replaced with a two-digit HCPCS modifier if finalized). This modifier would increase the payment of the associated E/M code by 16%, instead of a flat rate, maintaining an equal percentage increase across all levels of E/M codes. We are also proposing to recognize additional resource costs incurred by practitioners in Accountable Care Organizations (ACOs) when providing longitudinal care, such as maintaining total cost of care accountability and reporting quality measures that can align with providing longitudinal care and care coordination. This modifier (placeholder modifier MOD2) would be available only for practitioners participating in a Shared Savings Program ACO or Participant Providers in a Long-term Enhanced ACO Design (LEAD) Model ACO and would increase payment of the associated E/M visit by 32%. Under the Shared Savings Program, use of the MOD2 modifier would be voluntary and available to be billed for all beneficiaries to whom an ACO participant or provider furnishes services, not limited only to Shared Savings Program-assigned beneficiaries. The MOD2 modifier would also be voluntary for the LEAD Model and could be billed for all beneficiaries to whom the Participant Provider furnishes services, not limited only to LEAD aligned beneficiaries. Claims submitted with MOD2 would be included in beneficiary assignment calculations, historical benchmark expenditures, and performance year expenditures for the Shared Savings Program.
Remote Monitoring
Recently, we have established payment for two code families that describe certain remote monitoring services: remote physiologic monitoring (RPM) and remote therapy monitoring (RTM). For CY 2027, we are proposing to require that RTM services be furnished only to established patients, that practitioners reporting RPM or RTM services must furnish a separately reportable initiating visit in association with the onset of RPM or RTM services, and only to allow payment for RPM or RTM services when performed by clinical staff employed by the practice and not when those services are delivered by contractors. We also are proposing updates to how these services are valued under the PFS as we understand the devices may be available at a reduced cost compared to our initial estimates. We also considered, and are seeking comments on, bundling the RPM and RTM CPT codes and creating four new HCPCS G-Codes to describe remote monitoring services. This approach would address recommendations from recent OIG reports that we do not believe can be fully resolved with the current coding structure of the remote monitoring code family.
Practice Expense
CMS has historically relied on the American Medical Association (AMA) surveys to estimate physician work, direct practice expense (PE) inputs, and overall PE for calculating payment rates. These recommendations have been limited by several factors, especially from a reliance on resource-intensive but ultimately unreliable surveys with low response rates asking for expert estimates that present significant discrepancies with alternative empirical data sources, in the cases where empirical data exists.
These dynamics are particularly problematic for specialty-level practice expense data. In these cases, data collection is particularly burdensome and subject to volatility based on low response rates and significant incongruities in collection methodologies between physician groups and other entities paid under the PFS. We are engaged in a multi-year effort to transition the PE methodology away from reliance on the AMA’s data and toward an approach that relies on more objective, routinely updated and auditable cost data. We believe this change will lead to PFS payments being more sensitive to market pressures, open broader possibilities for right-sizing payments across outpatient care settings and make payments more transparent for practitioners and beneficiaries.
As part of reforming the way PE RVUs are assigned to specific services, we are proposing to reduce reliance on outdated specialty-specific practice expense per hour (PE/HR) data. Specifically, we are proposing to phase out part of the methodology that ensures the overall number of PE RVUs by specialty is consistent with the old PE/HR data from 2007 or earlier. Under the proposed methodology, the final PE RVUs would still be derived from the input data (including both work RVUs and direct PE inputs, as well as specialty-specific indirect allocators). However, the existing final step would be phased out over several years and replaced with a PE stabilizer that mitigates short term volatility without anchoring overall values to a specific point in time. Based on feedback from interested parties, we also are proposing to adjust the indirect PE allocation for visits furnished to beneficiaries in a Part A stay in a skilled nursing facility consistent with our site of service payment differential policy finalized in the CY 2026 PFS final rule. We also are seeking comments on whether the site of service payment differential between Facility and Non-facility is still appropriate, or whether we should consider an alternative approach to improving assumptions about indirect practice costs, particularly for physicians employed by a hospital, health system, or other entity.
Comment Solicitation on Redesigning Primary Care to Make America Healthy Again
For CY 2027, we are seeking comments on how we might reconsider primary care service valuation to better support our objectives of shifting the U.S. healthcare system toward a focus on preventive rather than reactive medicine. We want to expand on previous work to improve primary care valuation in the PFS, as well as CMS Innovation Center Models. We are seeking comments on three main topics: 1) reconsidering relative primary care payment in the PFS; 2) understanding the payment implication of including technology in primary care; 3) establishing prospective primary care payment in the Medicare Shared Savings Program and potentially in the Original Medicare program broadly.
Comment Solicitation on Strategies for Improving Global Surgery Payment Accuracy
For CY 2027, as part of an iterative process to improve global surgical service valuation and payment accuracy, we are proposing to pause the data collection required by section 523 of the Medicare Access and CHIP Reauthorization Act (MACRA). We can continue to assess how best to use the data and what we can do to improve this data collection going forward. We currently have several years of data showing that the post-operative visits during the global period are not occurring, yet providers are still being paid for these visits under the current global payment policy. Additionally, we believe that current data collection requirements may be causing undue burden to providers and that pausing the data collection will help reduce the burden for practitioners. We are soliciting public comments on expanding our data collection as well as other data sources we might consider to more accurately value payments for global surgical services. Additionally, we are posting a public use file with this proposed rule to display the imputed RVUs associated with both the 10-and 90-day post-operative visits based on a purely arithmetic approach to understand the valuation of the services based on the analyzed data. We also welcome comments on potential revaluation strategies that we may consider through future rulemaking.
Policies to Improve Care for Chronic Illness and Behavioral Health Needs
Three in four American adults have at least one chronic condition, and more than half have two or more chronic conditions.2 Per President Trump’s Executive Order, “Establishing the President’s Make America Healthy Again Commission,3” the Administration is directing our focus toward understanding and drastically lowering chronic disease rates, including thinking on nutrition, physical activity, healthy lifestyles, over-reliance on medication and treatments, and the effects of new technological developments. As such, focusing on the prevention and management of chronic disease is a top priority for us. In CY 2026, we broadly solicited feedback to help us better understand how we could enhance our support of the prevention and management of chronic disease. Based on commenters’ feedback, we recognize the importance of healthcare delivery approaches that enable multidisciplinary support, foster beneficiary engagement, and encourage sustainable lifestyle and behavioral changes. Shared medical appointments are one such approach to offer a group-based environment in which beneficiaries can receive clinical guidance while also engaging with peers facing similar health challenges. Shared medical appointments may also help address social isolation and loneliness for some beneficiaries. Currently, no HCPCS code specifically describes shared medical appointments. Therefore, for CY 2027, we are proposing to establish separate coding and payment for shared medical appointments.
Behavioral health conditions are some of the most common chronic health conditions nationwide. Even patients with physical chronic health conditions frequently experience related behavioral health concerns and achieve better management and improvement of their physical chronic conditions when these behavioral health concerns are also addressed. In the CY 2024 PFS final rule, we finalized an increase in the valuation for timed behavioral health services by applying an upward adjustment to the work RVUs for psychotherapy codes payable under the PFS. This increase is being implemented over a four-year transition period. We believe similar adjustments are warranted for smoking and tobacco use cessation and screening, brief intervention, and referral to treatment (SBIRT) services. Therefore, for CY 2027, we are proposing to include smoking and tobacco use cessation services and SBIRT services in this final year of the transition for timed behavioral health codes.
Supporting Beneficiaries Planning for Future Medical Decisions
We are proposing to create two new HCPCS codes to describe advance care planning (ACP) services furnished by clinical staff under the direct supervision of the billing physician or other practitioner. These new codes will more accurately distinguish and value the work done by billing practitioners from time spent by their clinical staff providing ACP services. We are further proposing that the existing ACP CPT codes 99497 and 99498 would only be used to report time personally spent by the billing practitioner.
Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs)
We are proposing to recognize Diabetes Self-Management Training (DSMT) and Medical Nutrition Therapy (MNT) services as qualified preventive services that are covered and paid the all-inclusive rate as stand-alone billable visits under the RHC benefit. We believe aligning payment policies in RHCs with other settings, for example FQHCs and physician offices, would help expand access to these services for Medicare beneficiaries in rural areas while supporting Federal initiatives to strengthen rural healthcare.
For CY 2027, we are proposing conforming regulatory changes to implement the Consolidated Appropriations Act, 2026 Section 6209(c) to require that in-person visit requirements for mental health visits not apply to any services furnished through December 31, 2027. We note, the CAA, 2026 also extended the authority for CMS to pay RHCs and FQHCs for non-behavioral health visits furnished via telecommunication technology through December 31, 2027.
Clinical Laboratory Fee Schedule (CLFS) Payment and Reporting Requirements
For CY 2027, we are proposing conforming regulatory changes to implement the Consolidated Appropriations Act, 2026 amendments affecting the Medicare Clinical Laboratory Fee Schedule (CLFS). These changes would update the requirements for data collection and data reporting as well as the phase-in of payment reductions for clinical diagnostic laboratory tests (CDLTs) paid under the CLFS. The next data reporting period for CDLTs that are not advanced diagnostic laboratory tests (ADLTs) is occurring from May 1, 2026, through July 31, 2026, based on applicable information collected from January 1, 2025, through June 30, 2025. Beginning in CY 2027, payment reductions from the implementation of CLFS payment based on private payor rate data would be subject to a phase-in reduction of up to 15% per year through CY 2029.
Medicare Prescription Drug Inflation Rebate Program
The Inflation Reduction Act of 2022 (IRA) (Pub. L. 117–169, enacted August 16, 2022) established requirements under which drug manufacturers must pay inflation rebates if they raise their prices for certain drugs payable under Part B and/or covered under Part D faster than the rate of inflation. In this proposed rule, CMS is proposing new policies for the Medicare Part B Drug Inflation Rebate Program and Medicare Part D Drug Inflation Rebate Program (collectively referred to as the “Medicare Prescription Drug Inflation Rebate Program”) that include, but are not limited to, clarifying that the Consumer Price Index for All Urban Consumers (CPI-U) data used to determine the benchmark period CPI-U for subsequently approved drugs when such data are unavailable is the first month for which CPI-U data are available following the month for which CPI-U data are unavailable. The rule would also require providers and suppliers that are covered entities as defined at 42 CFR 10.3 to submit to CMS certain data elements associated with each claim for units of a covered Part D drug billed to Medicare Part D and dispensed by such covered entity or its contractor(s) (such as contract pharmacies) for which a manufacturer provides a discount under the 340B Program to such covered entity to the Medicare Part D Claims Data 340B Repository beginning with claims with a date of service on or after January 1, 2027.
Limiting Medicare Coverage of Certain Individuals
We are proposing rules to implement the statutory changes made by section 71201 of Public Law 119-21, which CMS refers to as the “Working Families Tax Cut” (WFTC) legislation, which amended Title XVIII of the Social Security Act and limits Medicare eligibility to individuals in the following four groups:
- A citizen or national of the United States;
- An alien who is lawfully admitted for permanent residence under the Immigration and Nationality Act;
- An alien who has been granted the status of Cuban and Haitian entrant; or
- An individual who lawfully resides in the United States in accordance with a Compact of Free Association.
CMS is proposing to implement the WFTC legislation and is proposing amendments to current Medicare regulations to incorporate the newly specified groups of individuals who may be eligible for Medicare, procedures for termination and applicable appeal rights for those found ineligible, and enrollment options for individuals who later gain or regain eligibility.
Request for Information (RFI) on Duplicate Laboratory Testing, Imaging, and Result Sharing and Interoperability
Diagnostic imaging and laboratory test results are frequently siloed within acquiring electronic health record systems, leaving treating healthcare providers unaware of their existence and unable to access them across care settings. This inaccessibility leads to incomplete or delayed care management, duplicative testing, increased program costs, and unnecessary radiation exposure to patients. We are issuing a RFI to gather input from stakeholders, including clinicians, laboratories, imaging healthcare providers, health systems, payers, health IT developers, and other interested parties, to inform potential actions aimed at addressing these interoperability and duplicate testing concerns.
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