Updated Nov. 3, 11 a.m.
The Centers for Medicare & Medicaid Services (CMS) released its annual physician pay rule for 2026 on Friday night, which increases physician reimbursement by 3.77% for qualifying providers in advanced alternative payment models and 3.26% for other providers.
The bulk of the positive payment adjustment, 2.5%, comes from President Donald Trump's One Big Beautiful Bill Act enacted July 4.
Trump’s CMS touts that its final rule reduces unnecessary spending while honing payment accuracy. However, the rule is required to be “budget neutral” and thus does not increase or decrease overall spending by the agency.
The rule emphasizes the importance of shifting the incentives of healthcare to pay for prevention and wellness rather than downstream, expensive hospitalizations. The final physician fee schedule includes policies that promote advanced primary care and the treatment of chronic conditions, in line with the agenda of Department of Health and Human Services (HHS) Secretary Robert F. Kennedy Jr.
“The new Medicare fee schedule delivers a major win for seniors, protects hometown doctors, and safeguards American taxpayers,” RFK Jr. said in a statement. “It realigns doctor incentives and helps move our country from a sick-care system to a true health care system."
The CMS released the proposed physician fee schedule in July.
For the upcoming year, the CMS was newly required to create separate payment rates for qualifying providers in advanced alternative payment models and those that aren’t. The positive 3.77% and 3.26% adjustments it finalized come from a statutory update in the Medicare Access and CHIP Reauthorization Act, a 0.49% positive budget neutrality adjustment by the CMS and a 2.5% one-year payment increase from the One Big Beautiful Bill Act.
Though the top-line numbers show an increase in physician payment, the agency has enacted other policies that could reduce overall payment for some physicians. One policy changes how work relative value units are calculated, decreasing payment for a swath of services such as procedures. Physicians that perform those services will not experience the full benefit of the positive conversion factor.
"While we are pleased to see a marginal increase to the 2026 Medicare conversion factors, today’s final rule includes many policies that will threaten the financial sustainability of medical groups and cause significant disruption to their operations," the Medical Group Management Association said in a statement.
The CMS also finalized a change to the way indirect practice expenses are accounted for, which lowers the amount facility-based physicians are paid for administrative expenses. Many hospital-based physicians argue they have the same administrative overhead as independent providers.
The payment policies stand to benefit primary care providers working in outpatient offices, who will gain the full benefit of the increased payment rate.
The American Medical Association decried the proposals that decrease pay across the board for certain services and the finalized policy to pay facility-based doctors less for administrative costs. The organization says the policies will "directly undercut private practice viability."
AMA says the policies are estimated to result in 37% of oncologists facing cuts between 10% to 20%.
The CMS seeks to decrease spending on skin substitutes and has lowered the payment rate for the products to a single, averaged rate of $127.28 for hospital outpatient departments and physician practices. In future rules, the agency said it will create separate rates for the three FDA-recognized categories of products.
To advance treatment of chronic conditions, the CMS is adding opportunities to get paid for primary care services. It has created optional add-on codes for integrating behavioral health into the advanced primary care model, introduced in 2025.
“The Administration is directing our focus towards understanding and drastically lowering chronic disease rates, including thinking on nutrition, physical activity, healthy lifestyles, over-reliance on medication and treatments, the effects of new technological habits, environmental impacts, and food and drug quality and safety,” a press release said.
The agency has also finalized its proposal for a new Ambulatory Specialty Model, which focuses on specialty care for beneficiaries with heart failure and low back pain. The CMS says the model will promote higher quality of care and prevention. The model is mandatory.
The administration is also adding payment for the treatment of attention-deficit/hyperactivity disorder through digital mental health treatment, commonly known as prescription digital therapeutics.
In another win for digital health, the CMS is finalizing changes to the Medicare Diabetes Prevention Program to allow virtual-only providers to be paid for the service.
The annual pay rule finalizes telehealth policy updates in the Medicare program, though payment for the services is paused during the ongoing government shutdown, which now enters its second month.
Shutdown notwithstanding, the CMS modernized the way the agency adds new services to the Medicare telehealth program. Going forward, the agency will only consider whether the service can be furnished using an interactive, two-way, audio-video visit.
The rule permanently allows supervising physicians to be available virtually, as the agency proposed in July.
The agency will permanently allow teaching physicians to supervise residents virtually, but only when the patient, resident and supervising clinician are participating in a three-way telehealth visit. The policy applies to rural and urban areas.
In its proposed rule, the agency did not include this proposal, but stakeholder comments convinced the CMS to finalize the policy. However, the CMS will not allow teaching physicians to have a virtual presence when the resident and patient are working on-site and in person.
The CMS will also permanently remove frequency limitations on telehealth for subsequent inpatient visits, subsequent nursing facility visits and critical care consultations.
"The AMA is pleased that for 2026 CMS is finalizing its proposals, long advocated by the AMA, to permanently lift the frequency limits on telehealth services provided to patients in hospitals and skilled nursing facilities and permanently allow virtual direct supervision for most services that require supervision," a statement by the group said.
The Alliance for Connected Care sounded an alarm that the final fee schedule rule failed to extend a policy that allows telehealth providers to conduct visits from locations other than their enrolled practice location. Starting Jan. 1, telehealth provides will have to separately report each location from which they provide telehealth services and reflect the location on billing claims.
The alliance argues that the policy will reduce flexibility for telehealth providers and create undue administrative burden for practices.