InSights 

The Proposed 2026 Physician Fee Schedule (PFS) has Two Separate Conversion Factors

Have you been watching your Ps and Qs on value-based (VB) care? Because Medicare’s 2026 physician reimbursement will be more closely tied to VB care, site-neutral payments, and more resourceful delivery of services. That said, there will also be another instance of it for providers who do not follow VB care.

 

Here are the details of how it would be if it were as proposed. We’ve tried to make this as readable as possible:

 

Again, as required by statute, Medicare will use two separate conversion factors (CFs) for the PFS: one that is better for providers in qualifying Alternative Payment Models (APMs), which calls for a +0.75% increase, and one for those who are not, which would have a +0.25% increase.  

 

When factoring in other items, such as RVU adjustments, the proposed conversion factor rises to $33.5875 for qualifying APM participants and $33.4209 for non-participants. Both of these are up from the current $32.35. When the dust settles, expect an overall payment increase of approximately 3.8% for APM’ers and 3.3% for non-APM’ers. 

 

How did this happen?

 

The proposed CF update is primarily based on three factors:

 

1. A statutory update in the Medicare Access and CHIP Reauthorization Act (MACRA): 0.75% increase for APMs and 0.25% CF increase for non-APMs,
2. A 0.55% RVU positive budget neutrality adjustment, and
3. A 2.5% one-year payment increase due to the budget reconciliation legislation

 

Moving on, be ready for a possible new -2.5% “efficiency adjustment” to the work RVUs of non-time-based services under the 2026 PFS. Why? It would correct possible overestimates of physician time and effort resulting from survey data from AMA RUC.

 

There are exclusions for Evaluation & Management (E/M), behavioral health, maternity, and telehealth codes. Instead of relying on surveys, CMS intends to shift toward using empirical time studies to better exemplify real-world practice, resulting in more accurate payments going forward.

 

Specifically noteworthy for telehealth, CMS proposes to:

 

• Permanently remove frequency limitations for subsequent nursing facility visits (99307-99310), as well as subsequent inpatient visits and critical care consultations
• Simplify the process for adding services to the Medicare Telehealth Services List by eliminating the distinction between “provisional” and “permanent” services

• Permanently allow direct supervision to be provided through real-time audio and video (not audio-only) for certain services
• End virtual presence for teaching physicians after December 31, 2025, reverting to the pre-pandemic policy requiring physical presence for resident services in metropolitan areas, with rural exceptions maintained

 

Other items of interest include:

 

• Advanced Primary Care Management (APCM): chronic care and behavioral health, where new add-on codes for APCM are proposed, supporting integrated behavioral health care
• CY 2026 Quality Payment Program (QPP): CMS released proposed updates for the 2026 Quality Payment Program (QPP), focusing on stability for MIPS participants while adding six new MIPS Value Pathways (MVPs) and updating existing ones.

• The performance threshold to avoid penalties will stay at 75 points through 2028, creating a degree of predictability for clinicians. Additionally, small and multispecialty practices, including any serving nursing homes, will still have flexibility in how they report MVPs.

• Medicare Shared Savings Program: The 2026 Medicare PFS proposed rule includes updates to the Medicare Shared Savings Program that primarily affects how Accountable Care Organizations (ACOs) operate and report quality.

• Proposals would (a) shorten how long ACOs can stay in low-risk arrangements, (b) adjust beneficiary count requirements, and (c) update quality scoring and reporting rules.

 

There’s a lot to unpack here with a lot of moving parts. We’ll provide updates as they become available. Meantime, click here for details from CMS about the 2026 PFS.

AI to the Rescue in Healthcare Fraud

AI is on the job, anti-fraudwise with CMS having promised to go after healthcare fraud, waste and abuse.

A new CMS Innovation Center modality will use artificial intelligence and other technologies to ensure Medicare is properly utilized and not abused.

 

Prior authorizations (PAs) will be involved with payers such as UnitedHealthcare, Humana, Cigna, and CVS Health agreeing to improve their PA processes. These will include processes involving services, standardizing electronic PA requirements, and increasing real-time decision making.

 

The CMS Wasteful and Inappropriate Service Reduction (yes, “WISeR”) model will be on the job to ferret out fraud and abuse.

 

Click here for details from CMS.

 

(Our automated PA option helps ensure any PAs needed are either automatically obtained or are red flagged if there are issues.)

Medical Fraud of the Month

 

On the heels of the previous article about cracking down on fraud, this month’s article concerns one that’s so extensive, it involves 324 defendants, over $14.6 billion in fraudulent charges, and more than 15 million illegally diverted controlled substance pills.

 

As described by the DEA, the takedown involved seizing more than $245 million in cash, luxury vehicles, and other assets.

 

Again, normally we’d encapsulate the particulars but this one makes encapsulating almost impossible. So, please click here for the DEA’s press release of 6/30/25.

Shedding Direct Light on Indirect Billing

According to a recent JAMA Health Forum study, indirect billing in Medicare is common for office-based encounters portending underrepresentation of care provided to patients by advanced practice clinicians (APCs).

 

The study analyzed both Medicare fee-for-service and Medicare Advantage claims to quantify indirectly billed APC services versus the share of billed claims among physicians in 2022. It showed that almost 40% of all office encounters were indirectly billed. This indicates that care was provided by an APC versus a physician, accounting for for 37.6 million APC-provided encounters billed indirectly. 

 

As a refresher, APCs include NPs, PAs, CNMs, and CRNAs.

 

(APC indirect billing is up so a reminder ADSRCM can help with your indirect billing!)