Medicare Physician Fee Schedule Proposed Rule Explained

Even a small reduction in Medicare reimbursement can significantly impact a medical practice’s revenue. That’s why The CY 2027 Medicare Physician Fee Schedule (MPFS) Proposed Rule, released by CMS on July 14, 2026, is an important update for physicians, practice administrators and billing teams.

The proposed rule includes changes to physician payment rates, the conversion factor, telehealth policies, quality reporting, and care management services that could affect Medicare reimbursement on or after January 1, 2027.

In this guide, we will explain the key proposals, their potential impact on practice revenue and the steps your practice can take to prepare before the final rule is released.

The Medicare Physician Fee Schedule is the payment system CMS uses to reimburse physicians and other Medicare-enrolled providers for services delivered under Medicare Part B. Rather than paying a flat amount for every visit, CMS assigns each service a relative value based on three factors: physician work, practice expense and malpractice risk. That relative value is then multiplied by a dollar figure called the conversion factor to calculate the final payment amount.

CMS updates this fee schedule every calendar year through a two-step process. A proposed rule is published first, giving physicians, hospitals, and specialty societies a chance to submit feedback. CMS then reviews that feedback and publishes a final rule several months later. Because Medicare accounts for such a large share of outpatient volume in specialties like primary care, cardiology and orthopedics, this annual update directly shapes how much revenue a practice can expect to collect in the coming year.

This year’s proposed rule carries more weight than usual because of one specific issue. The proposed CY 2027 rates reflect the loss of the temporary 2.5% increase that applied in CY 2026. That increase expires at the end of this year and unless Congress acts again, the conversion factor is scheduled to drop back down starting January 1, 2027. That single change is the primary factor behind the payment reductions built into this proposal.

At the same time, CMS is using this rule to push several longer-term policy shifts, including changes to how practice expense is calculated, a proposed sunset of traditional MIPS reporting and continued expansion of telehealth access. Practices that understand these shifts early have more time to adjust their billing workflows, staff training and documentation habits before the final rule takes effect.

As required under MACRA, CMS is proposing two separate conversion factors again this year, one for clinicians who qualify as participants in an Alternative Payment Model (APM) and one for clinicians who do not.

• The qualifying APM conversion factor is proposed at $33.1693, a decrease of about 1.19% from CY 2026.
• The non-qualifying APM conversion factor is proposed at $32.8409, a decrease of about 1.68% from CY 2026.

These proposed rates reflect the loss of the temporary 2.5% increase from CY 2026, along with statutory updates of 0.75% for qualifying APM participants and 0.25% for non-qualifying participants, plus an estimated 0.53% adjustment related to work RVU changes. In simple terms, physicians who are not part of a qualifying value-based payment arrangement will absorb a larger cut

The overall payment impact varies significantly by specialty because of proposed changes to practice expense (PE) valuation. CMS is proposing to remove the Indirect Practice Cost Index (IPCI) from the PE methodology, a formula step that has historically shifted practice expense value toward specialties with higher reported overhead costs. Removing it changes how indirect costs are distributed across specialties, which is one reason some specialties see gains while others see losses despite facing the same conversion factor cut.

Specialty-level impact varies, and some specialties such as interventional radiology may see a net positive effect despite the lower conversion factor. CMS also proposed a new payment approach for same-day evaluation and management (E/M) visits and procedures: the higher-value service would be paid at 100%, while any additional E/M visit or procedure performed the same day would be paid at 50%

Telehealth policy continues to expand under this proposal, largely because Congress extended key Medicare telehealth flexibilities through December 31, 2027. As a result, Medicare telehealth flexibilities remain in place through December 31, 2027, including lifted geographic restrictions, expanded originating-site access, and audio-only coverage in applicable cases. The in-person visit requirement for mental health telehealth services is waived through December 31, 2027, and audio-only authority extends through January 1, 2028.

A few specific telehealth updates practices should note:

• The Medicare telehealth originating site facility fee (HCPCS code Q3014) would increase from $31.85 to $32.65, reflecting a proposed 2.5% Medicare Economic Index update.
• CMS proposes adding new telehealth-eligible services, including advance care planning, shared medical appointments, and pediatric speech therapy visits.
• Starting January 1, 2027, new telehealth-related modifiers are proposed, but the exact code pair should be verified against the final CMS text before publication.

CMS is proposing one of its more significant Quality Payment Program changes in recent years: officially sunsetting the traditional MIPS reporting option in 2029. CMS also proposes adding three new MVPs, covering diabetic disease, hypertension, and hospitalist care, while updating all previously finalized MVPs to include a required core measure.

Despite this major structural shift, CMS is not proposing any change to the MIPS performance threshold, which stays at 75 points through the 2028 performance year. That gives practices some short-term stability even as the long-term reporting framework changes.

Remote Patient Monitoring (RPM) and Remote Therapeutic Monitoring (RTM) services face tighter rules under the proposal. CMS also proposes requiring that clinical staff furnishing these services be directly employed by the billing practice, rather than outsourced, and that RTM services be limited to established patients only, matching a requirement already in place for RPM.

Coding accuracy becomes especially important in years with major rule changes, and this is particularly true for behavioral health billing. Correctly matching ICD-10 codes mental health diagnoses to the appropriate CPT and E/M codes has a direct effect on whether a Medicare claim is paid the first time it’s submitted. Practices billing for depression screenings, anxiety treatment, or integrated behavioral health visits should plan to review updated code sets closely once the final rule is published, since diagnosis-to-procedure mismatches remain one of the most common and preventable reasons Medicare claims get denied.

Some practices stand to benefit despite the lower conversion factor. Interventional radiology is projected to see a net positive impact, and the continued expansion of telehealth billing codes gives practices with strong virtual care programs a chance to grow that revenue stream further. Rural Health Clinics also gain some new billing options, including stand-alone reimbursement for diabetes self-management training.

The core challenge remains straightforward: reimbursement is proposed to decrease at the same time operating costs, including staffing, supplies, and technology, continue to rise. For practices already running on tight margins, a conversion factor cut of roughly 1.2% to 1.7% can be difficult to absorb without adjusting staffing levels or renegotiating vendor contracts.

• Primary care and emergency medicine practices with high Medicare volume will feel the conversion factor cut most directly.
• Audiology services face one of the larger proposed reductions among ancillary specialties.
• Interventional radiology is expected to see a positive net impact despite the lower conversion factor.
• Behavioral health providers need to pay close attention to diagnosis-to-procedure coding accuracy as documentation requirements tighten.

Independent and rural practices tend to have less financial flexibility, which makes them more exposed to reimbursement cuts. Rural Health Clinics do receive some relief in this proposal, including an estimated 2.5% increase to the Federally Qualified Health Center (FQHC) Prospective Payment System base rate. Larger multi-specialty groups generally have more room to absorb short-term cuts because of diversified service lines, though they still face added administrative work from new claims modifiers and reporting requirements tied to the MVP transition.

Start by reviewing your current billing performance, including denial rates, days in accounts receivable, and payer mix. Understanding where your Medicare revenue currently stands makes it far easier to estimate how the proposed conversion factor changes will affect your specific practice.

Once the final rule is published, update your fee schedules, CPT code sets, and claim scrubbing rules right away. Practices that delay these updates typically see a noticeable rise in denied or underpaid claims during the first quarter of the new year.

Accurate documentation supports accurate coding, and accurate coding supports faster reimbursement. This connection matters even more for services tied to specific diagnosis requirements, where incomplete documentation is a leading cause of avoidable denials.

Physicians and billing staff both need a clear understanding of what’s changing before January 1. A short internal training session covering new codes, telehealth modifiers, and updated E/M billing rules can prevent costly errors during the first few months of the new payment year.

Remember that this is still a proposed rule. CMS is accepting public comments through September 14, 2026, and specialty societies are actively submitting feedback that could shift some of these figures before the final rule is released. Practices should track CMS announcements directly rather than finalizing budgets around proposed numbers alone.

Submit clean claims the first time by verifying patient eligibility, coding accuracy, and modifier usage before submission. Fewer resubmissions mean faster payment turnaround and lower administrative cost per claim.

Track denial reasons on a monthly basis and address recurring patterns, whether they stem from missing documentation, incorrect modifiers, or outdated fee schedules. A consistent denial management process protects revenue that would otherwise be lost to preventable errors.

Many practices are turning to specialized billing partners to manage the growing complexity of Medicare policy changes. Revix MD helps practices across the country stay current with coding updates, denial follow-up, and claims accuracy, so physicians can focus on patient care rather than chasing reimbursement. Working with an experienced billing partner also makes it easier to adjust quickly once the final CY 2027 rule takes effect.

Internal or third-party audits help catch coding errors and documentation gaps before they turn into denied claims or compliance concerns. A quarterly audit schedule is a reasonable starting point for most small to mid-sized practices.

Even well-managed practices can face revenue loss if they fail to prepare for Medicare payment updates. Avoiding these common mistakes can help ensure a smoother transition when the final rule takes effect.

• Waiting too long to update billing systems: Delaying software and fee schedule updates until January can lead to claim denials and reimbursement delays.
• Using outdated coding guidelines: Relying on old CPT and ICD-10 code sets increases the risk of coding errors and payment rejections.
• Ignoring telehealth policy updates: Medicare telehealth rules continue to evolve, making it essential to verify the latest CMS guidance before submitting claims.
• Neglecting staff education: Providers and billing teams should understand new coding, documentation, and reimbursement requirements before implementation.
• Failing to monitor the final rule: The proposed rule may change before it’s finalized, so practices should stay informed and adjust their workflows accordingly.

The CY 2027 Medicare Physician Fee Schedule proposed rule brings genuine financial pressure through the conversion factor reduction, but it also introduces real opportunities through expanded telehealth coverage, new billing codes, and targeted relief for certain practice settings. The practices that manage this transition well will be the ones that start preparing now, reviewing their coding processes, training their teams, and tracking CMS updates through the comment period and beyond.

If your practice wants to support navigating these changes without losing revenue along the way, Revix MD provides dedicated medical billing services built around current CMS rules, helping your team adapt with confidence once the final rule is published.