The top line from the 2026 Medicare physician payment schedule proposed July 14 by the Centers for Medicare & Medicaid Services (CMS) reflects a welcome change after five consecutive years of cuts—an overall increase in pay for doctors.
Nevertheless, there remains a need for systemic Medicare physician payment reform to ensure the sustainability of physician practices, especially those that care for patients in rural and other areas underserved by limited access to health care. Physician pay, after adjusting for practice-cost inflation, has plummeted since 2001 and that is why the AMA is leading the charge to reform the Medicare payment system.
While the AMA’s expert staff is analyzing—and will develop a detailed summary of—the nearly 2,000-page CMS proposal, here are some Medicare Physician Fee Schedule highlights (PDF) that physicians should know about.
Multiple conversion factors
For the first time this century, CMS has proposed four conversion factors as part of its Medicare Physician Fee Schedule. The conversion factors reflect two different, small permanent updates to the baseline beginning Jan. 1, 2026, as required under the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. Under MACRA, physicians who are qualifying participants in advanced alternative payment models (APMs) will get a slightly higher conversion factor update and, in turn, slightly higher Medicare payments in 2026 compared with doctors who are not qualifying participants.
Each conversion factor also reflects the temporary, one-year 2.5% update enacted in the massive reconciliation package enacted in July—H.R. 1, the One Big Beautiful Bill Act.
First, for qualifying participants in advanced APMs, CMS proposes a conversion factor of $33.5875, up from $32.3465. That reflects a permanent 0.75% update, a temporary 2.5% update and a 0.55% budget-neutrality adjustment.
Meanwhile, for Medicare payments to all physicians who are not qualifying participants, including those who are eligible for Merit-based Incentive Payment System (MIPS), the conversion factor would be $33.4209. That is up from $32.3465 and reflects a permanent 0.25% update, a temporary 2.5% update and a 0.55% budget-neutrality adjustment.
Similarly, CMS is proposing two anesthesia-conversion factors, which both reflect permanent updates for qualifying and nonqualifying participants, a temporary update and a budget-neutrality adjustment.
The anesthesia-conversion factor for qualifying participants would be $20.6754. For physicians who are not qualifying participants, the anesthesia-conversion factor is $20.5728. Both would be going up from $20.3178 in 2025.
Additionally, the conversion factors are affected by a 0.55% budget-neutrality adjustment resulting from proposed misvalued code changes and a negative 2.5% efficiency adjustment, which CMS proposes to apply to work relative value units (RVUs) and the corresponding intraservice portion of physician time of nontime-based services that CMS believes accrue gains in efficiency over time. This adjustment affects radiology, pathology and most surgical specialties, and will cut overall payment by 1%.
Notably, CMS is proposing to accept nearly 90% of the AMA/Specialty Society RVS Update Committee’s (RUC’s) relative-value recommendations for 2026.
In a move that was deeply disappointing, CMS did not respond to AMA advocacy that called on the agency to propose an upward budget-neutrality adjustment to the 2026 conversion factors. This was needed to correct a utilization estimate made by CMS before the 2024 implementation of the new office visit add-on code, G2211, which claims data have since shown to be far too high. That projection contributed to a substantial cut to the 2024 conversion factor due to budget-neutrality requirements.
Longer-term fixes needed
Congress passed a temporary, one-year 2.5% update for 2026 in H.R. 1. The AMA continues to strongly advocate permanent baseline updates to the conversion factors that account for the growth in physician practice costs, which CMS projects will be 2.7% as measured by the Medicare Economic Index (MEI).
In its June report to Congress, the Medicare Payment Advisory Commission (MedPAC) expressed concerns about the growing gap between physicians’ input costs and Medicare payment.
“This larger gap could create incentives for clinicians to reduce the number of Medicare beneficiaries they treat, stop participating in Medicare entirely, or vertically consolidate with hospitals, which could increase spending for beneficiaries and the Medicare program,” the MedPAC report says. The influential MedPAC went on to recommend that Congress repeal current law updates and replace them with annual updates tied to MEI for all future years.
This year’s report from the Medicare trustees reiterated similar concerns about patient access to care, stating that under current law, the trustees “expect access to Medicare-participating physicians to become a significant issue in the long term.”
Big changes on practice expenses
In another disappointment, CMS did not propose to take into account information from the Physician Practice Information Survey in updating practice expense relative values to adjust MEI weights affecting the distribution of RVU components.
Independent from that survey, there are two new and concerning proposals in the rule that would cut most specialties and facility-based practices, such as those in hospitals and ambulatory surgical centers, while increasing payment to some office-based practices.
First would be a change to the efficiency adjustment, in which the agency proposes applying an arbitrary 2.5% decrease to the work relative value units (RVUs) and physician intraservice time of most services in the MPFS on the assumption that physicians have gained efficiency in providing them. This includes brand new services, surveyed for physician time and work within the past year. The decrease would be applied to 8,961 physician services.
CMS arrives at a 2.5% efficiency adjustment by tallying the last five years’ productivity adjustments in the MEI. CMS states that it will exempt time-based services, such as E/M, care management, maternity care, and services on the telehealth list. Only 393 services will be exempted from the decrease. Of note, although CMS states that they will exempt time-based services and services on telehealth list from the efficiency adjustment, several of these codes remain on the pending cut list.
The adjustment affects most specialties by reducing overall payment by 1%. The only specialties or professions to gain at least 1% from this proposal are: clinical psychology (3%), clinical social work (4%), geriatric medicine (1%), and psychiatry (1%)—these are the professionals who perform a more significant amount of telehealth services, which CMS has exempted from efficiency adjustments.
This proposal—combined with the recommendations from the AMA/Specialty Society RVS Update Committee (RUC) on individual CPT codes—results in the 0.55% budget-neutrality adjustment to the conversion factor.
This proposal is based on the premise that physician time in the resource-based relative value scale (RBRVS) is inflated, with criticism of using physician surveys to estimate physician time.
In a statement, AMA President Bobby Mukkamala, MD, responded to this unfair criticism.
“Proposals to exclude or limit the input of expert practicing physicians and health care professionals in the development of Medicare payment policy would ultimately harm patients and represents a radical departure from the time-tested CMS decision-making process,” he said. “This proposal would have negative repercussions for appropriately determining the resources required for effective patient care. To label practicing physicians conflicted when all they are doing is sharing their real-world patient experiences where empirical data often do not exist is biased, unfair and a skeptical opinion of community-based physicians.
“Academic researchers and federal officials established survey protocols that are currently used to gather information from practicing physicians. They did this because they knew Medicare depended on expert physician insight to create Medicare payment policy that mirrors the evolution of science, technology, and innovations in patient care,” added Dr. Mukkamala, a Flint, Michigan, otolaryngologist.
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“There is no substitute for relying on experienced practicing physicians when creating Medicare payment policy,” he said. “No one knows more about what is involved in providing services to Medicare patients than the physicians who care for them. The valuable expertise of physicians makes them an indispensable source of survey information that Medicare can count on to create payment policy. By substituting arbitrary and flawed proposals in place of front-line, real-world knowledge from expert physicians, Medicare is proposing to cut itself off from the most credible insights into the complexities of patient care, which will ultimately lead to lower-quality care, inferior health outcomes and a less sustainable Medicare system.”
The second concerning change regards the indirect practice expenses adjustment. CMS chose to modify the indirect practice-expense methodology to redistribute indirect practice costs from facility-based services to nonfacility-based services. This change in practice-expense methodology—only recognizing 50% of the physician’s work of facility-based services in the indirect cost method—would result in a dramatic shift of payment between sites of service.
Under the CMS proposal, facility-based payment to physicians would drop overall by 7%, while payments to physicians for nonfacility-based care would rise by 4%. Payment cuts for individual physicians, however, could be significantly higher than 7% depending on how many services they provide in facilities.
Telehealth codes
Another concerning absence in the CMS rule is the decision not to add the Current Procedural Terminology (CPT®) telemedicine evaluation-and-management (E/M) codes to the Medicare Telehealth List effective for 2026.
In 2025 rulemaking, CMS determined that Medicare would not recognize the then-new CPT telemedicine E/M codes, although it published the codes and relative values so that they could be used by other payers. In February, the AMA sent a letter to CMS (PDF) urging that the codes be added to the 2026 Telehealth List so that Medicare joins other payers that recognize these E/M codes.
MIPS penalties
Meanwhile, on MIPS, CMS is proposing to maintain the 75-point threshold for physicians to avoid a penalty of up to negative 9% for the 2026 performance year, which would be paid out in 2028. The 75-point threshold would stay in place through the 2028 performance year, which is paid out in 2030.
At the same time, CMS also is proposing to implement a new payment model in 2027 in select areas that would be mandatory for physicians who treat patients with heart failure or low back pain. This Ambulatory Specialty Model is intended to encourage better collaboration between specialists and primary care physicians to prevent exacerbations and avoidable surgical procedures and hospital admissions.
Like MIPS, however, performance under this model could mean pay bonuses or penalties, starting in 2029, as high as 9% and as low as negative 9% for the doctors who would be mandated to participate in it.
Research continues to show (PDF) that MIPS:
- Is unduly burdensome.
- Disproportionately harmful to small, rural and independent practices.
- Exacerbates health inequities.
- Divorced from meaningful clinical outcomes.
In 2025, 14% of all MIPS-eligible clinicians are subject to a penalty of up to negative 9% of their Medicare paid amount for covered services as a result of MIPS. By comparison, 29% of small practices, 49% of solo practices and 18% of rural practices are getting a MIPS penalty.
Worse yet, 13% of small practices and 29% of solo practices are getting the maximum MIPS penalty of negative 9%. The AMA is strongly urging Congress (PDF) to make statutory changes to improve MIPS and address fundamental problems with the program by replacing steep penalties that disproportionately hurt small and rural practices and prioritizing access to timely and actionable data.
Visit AMA Advocacy in Action to find out what’s at stake in reforming Medicare payment and other advocacy priorities the AMA is actively working on.
