The U.S. Centers for Medicare & Medicaid Services (CMS) has finalized the 2026 Physician Fee Schedule (PFS). The rule governs payment rates for physician services, including those in hospice and palliative care, among other provisions.
The 2026 PFS includes a 2.5% increase in physician Medicare payments, as well as a 0.75% bump in rates for qualifying alternative payment model participants.
Since 1992, Medicare payment has been made under the PFS for the services of physicians and other billing professionals. This includes practitioners in a variety of settings, including physician offices, hospitals, ambulatory surgical centers, skilled nursing facilities and other post-acute care settings, hospices, outpatient dialysis facilities, clinical laboratories and beneficiaries’ homes.
“CMS is working to strengthen and transform Medicare for the current and future generations while cracking down on waste and abuse that drives up costs,” said CMS Administrator Dr. Mehmet Oz, in a statement. “The actions we are taking will improve seniors’ access to high-quality, preventive care that will help them to live longer, healthier lives.”
Payments through the PFS are based on the relative resources usually used to provide the service for which a provider is billing. CMS applies relative value units to each service for the work involved, physician practice expenses and malpractice expenses. The agency then uses a conversion factor against those numbers to reach the payment rates. The relative value units are also adjusted geographically to reflect variations in costs around the country.
CMS made changes in the schedule to how it calculates aspects of the PFS. Historically, CMS has relied on survey data from the AMA Relative Value Scale Update Committee to estimate the potential costs to providers.
To counter common discrepancies in the results, CMS is now applying an efficiency adjustment to those relative value units. This would apply to all billing codes except for those that are time-based, including evaluation and management services, care management, behavioral health and some telehealth services. The agency will now use data from the Medicare Economic Index to calculate the efficiency adjustment.
“These changes address concerns about distorted payment values that have existed for years. The Medicare Payment Advisory Commission, the Government Accountability Office, and researchers across the political spectrum have called out long-standing overvaluation of certain procedures and undervaluation of time-intensive services like primary care,” CMS indicated in a statement. “Left unaddressed, these gaps compound over time, especially as digital tools and automation accelerate efficiency gains in some specialties.”
CMS also updated its methods for determining practice expenses to “better reflect current clinical practice,” according to the agency. The new approach is designed to recognize greater indirect costs for practitioners in office-based settings compared to facility settings.
The rule also finalized the launch of the new Ambulatory Specialty Model (ASM), designed to improve care for patients with chronic conditions. The new payment model focuses on some of the most significant areas of Medicare spending, particularly specialty care for patients with heart failure and low back pain. The ASM model aims to enhance quality and reduce low-value care by improving upstream chronic disease management.
CMS in the rule also finalized a new streamlined process for adding services to the Medicare Telehealth Services List. Physicians will also be allowed to provide some services that require a physician’s supervision via telehealth. This does not include face-to-face recertifications for hospice.
