After years of Medicare physician pay cuts, there is a one-time 2.5% increase as part of the 2026 Medicare Physician Fee Schedule officially set to take effect Jan. 1. There also are key changes to telehealth rules.
But physician practices still have reasons to be concerned about what the 2026 Medicare physician payment schedule means for the overall financial well-being of their ability to provide care for patients, particularly as other adjustments in the schedule will offset that that 2.5% increase and result in some practices potentially seeing an overall cut in Medicare pay.
“That physicians are not facing a reduction in reimbursements—as we have in the past—is a significant positive for 2026 and a win for patients’ access to care. Yet, this one-time correction does not keep up with increasing costs, and private practices across the country are expressing concern this rule would further put them at a disadvantage merely for treating patients at a hospital or ambulatory surgery center,” said AMA President Bobby Mukkamala, MD, said in a statement when the pay schedule was published in the Federal Register in November.
“As the new rule is implemented and its changes are felt, we will share with CMS the real-world impacts—data and details not always easily available to policymakers in Washington. This exchange and collaboration are vital to keeping practices open during a physician shortage,” Dr. Mukkamala said.
Below are some highlights of AMA experts’ summary and analysis (PDF) of the Centers for Medicare & Medicaid Services’ (CMS) 2026 Medicare Physician Fee Schedule final rule.
Cuts offset gains for some
The pay gains Congress passed will be blunted or even reversed for some physicians thanks to finalized practice expense and efficiency adjustment cuts (PDF), which could result in lower-quality care, worse health outcomes and a less sustainable Medicare system.
The conversion factor that CMS used to determine payment updates for 2026 includes a 3.77% increase for qualifying participants in the advanced alternative payment model, slightly higher than the 3.26% increase for all other physicians. The conversion factor increases reflect:
- A temporary 2.5% pay increase that Congress passed as part of the One Big Beautiful Bill Act, H.R. 1.
- Small, permanent updates to the baseline that the Medicare Access and CHIP Reauthorization Act (MACRA) of 2025, including a 0.75% increase for qualifying participants and a 0.25% increase for all other physicians.
- A positive 0.49% budget-neutrality adjustment.
The budget-neutrality adjustment results from misvalued code changes and a negative 2.5% “efficiency adjustment.” AMA comments (PDF) on the proposed rule raised questions about the efficiency adjustment and recommended alternative approaches, but CMS finalized a 2.5% decrease in work relative value units (RVUs) and the corresponding intra-service portion of the physician time of existing, non-time-based services that CMS believe accrue gains in efficiency over time. That decision was not based on new data or physician input.
The change affects nearly 7,000 physician services and impacts 91% of services provided by physicians. The AMA says it may intensify barriers to care, including longer wait times for patients and challenges in accessing subspecialty care.
CMS also made changes to practice-expense payments. Specialists who primarily see patients in an office, including family physicians, rheumatologists, and allergists and immunologists will see a pay increase. But CMS finalized a reduction in practice-expense RVUs used in physician payment for services performed in a facility such as a hospital or ambulatory surgical center.
Physician payment for services performed in a facility will drop overall by 7%. This adjustment could overlook administrative costs for physicians in facility settings, threaten physician private practices and cut competition by encouraging consolidation.
Among the impacts of the practice expense and efficiency-adjustment changes:
- 81% of infectious disease physicians face cuts of 5% or more.
- 56% of internists face cuts of 5% or more.
- 54% of ophthalmologists face cuts.
- 39% of oncologists face cuts of 10–20%.
- 34% of ob-gyns face cuts.
The AMA was disappointed that CMS didn’t factor in the Physician Practice Information Survey information in updating the 2026 practice-expense relative values to adjust Medicare Economic Index (MEI) weights affecting how RVU components were distributed.
The AMA urges CMS to base policy changes on verifiable data, including results from the Physician Practice Information Survey, to ensure that payment adjustments reflect the true costs of delivering care.
“We’re concerned that, at a time of increasing consolidation in health care, this rule will make it harder for independent practices to remain viable parts of our health system. We look forward to working with CMS to address that concern, so Medicare patients can continue to see their physicians,” Dr. Mukkamala said.
Permanent inflation fix needed
The AMA is leading the charge to reform the Medicare payment system and continues to advocate that physicians receive an annual Medicare pay adjustment tied to the MEI to account for increases in physician practice costs. Hospitals and others automatically receive the annual adjustment, but physicians have not. CMS projects that practice costs will grow 2.7%, as measured by the MEI.
This has led to a growing gap between costs to provide care and the payment physicians are receiving. In a June report to Congress, the Medicare Payment Advisory Commission (MedPAC) expressed concerns that physicians could “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 Medicare trustees’ report this year echoed similar concerns about patient access to care.
Positive change on telehealth
Permanent telehealth changes that the AMA long advocated for are in the 2026 Medicare physician payment schedule.
As of Jan. 1, there will no longer be frequency limits on telehealth services for patients in hospitals and skilled nursing facilities. The rules will also permanently allow virtual direct supervision for most services that require supervision.
In addition, a policy allowing teaching physicians to provide virtual supervision to residents providing telehealth services in all training sites—not just rural areas—will continue.
In response to AMA advocacy, CMS issued important new guidance clarifying that physicians who have a practice location other than their home can continue to use that location as their Medicare enrollment address even if they provide some telehealth services from their home. The AMA had asked CMS to clarify the policy after the 2026 final rule stated only that the previous flexibility allowing physicians providing telehealth services from their homes to use their currently enrolled practice location instead of listing their home address in the Medicare enrollment database was not being extended.
The only physicians who need to report their home address to Medicare are those whose practice involves provision of telehealth services from their home and who do not have another practice location. Moreover, physicians who report their home address to the Medicare enrollment database can easily suppress their street address details so that their address is not accessible to patients or the public.
CMS also issued guidance responding to questions from AMA and others about the status of telehealth with the end of the government shutdown in November. Telehealth claims that had been held by CMS and returned to physicians unpaid could be resubmitted, and telehealth claims that physicians had been holding could be submitted.
The AMA’s final rule summary and analysis (PDF) includes more information on:
- Individual code changes and valuations.
- Skin substitutes.
- Geographic Practice Cost Indices.
- The Medicare Diabetes Prevention Program.
- The Medicare Shared Savings Program.
- The Merit-based Incentive Payment System (MIPS) and MIPS Value Pathways.
- Advanced alternative payment models.
- The Ambulatory Specialty Model.
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.
