Calling balls and strikes on reimbursement pitches

In July, I finally went to my first baseball game of the year—much later than usual for me—and watched the Nationals defeat the Reds. The Reds were my favorite team growing up, but I must admit that after living in Washington, D.C., and Maryland for the bulk of my adult life, I'm now more of a Nationals and Orioles fan (yes, I cheer for both!). Something else that happened a little later than usual this year and came with a couple of curveballs was the release of the proposed rule for the 2026 Physician Fee Schedule (PFS).

An expected but significant change for 2026 is the implementation of two conversion factors. This change goes back to the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. There will now be one conversion factor for physicians who are qualified participants in Alternative Payment Models (APMs), which provides a 0.75% update per year moving forward. Those who are not qualified participants in an APM will receive a 0.25% update annually. This was intended to help incentivize physicians to move into APMs over the course of the first decade of the law's implementation. However, most physicians remain in the Merit-based Incentive Payment System (MIPS), given the insufficient rollout of APMs over the years. It's also unclear whether such a small difference in the updates provides a meaningful enough incentive.

The 2026 conversion factor is also impacted by two additional changes, the most significant of which is the 2.5% update for both APM and non-APM-qualified participants implemented by the recently enacted H.R. 1, or the One Big Beautiful Bill Act. As I'm sure you are aware, the 2025 conversion factor followed a two-decade-long downward trend due to both budget neutrality and the lack of an inflationary update. Congress has stepped in several times over the past few years to provide a “doc fix” of some sort to address this issue; however, that did not occur for 2025. Therefore, a negative 2.8% update has been in place since Jan. 1. This new doc fix for 2026 is certainly helpful, but not sufficient to address the larger issues with the structure of the PFS, something that ACP will continue to advocate that Congress address in a more meaningful way.

The third element impacting the 2026 conversion factor is the budget neutrality update, which is positive, albeit small, this year at 0.55% for both APM and non-APM-qualified participants. This positive update is due to a new policy proposal by CMS (called the efficiency adjustment), other code valuation changes, and the changes being made to the calculation of indirect practice expenses (i.e., practice expense relative value units, or PE RVUs). All these changes result in a proposed increased conversion factor of 3.8% for APM-qualifying participants and of 3.6% for non-APM physicians.

The efficiency adjustment is what I am considering a “curveball” change by CMS, as it is not without controversy. It is intended to benefit those providing primary care and will lead to cuts for more procedurally focused specialties. In the proposed rule, CMS raises a variety of concerns with the utilization of the American Medical Association (AMA) Relative Value Scale Update Committee (RUC) for determining physician work RVU values in the Medicare PFS, which CMS indicates tends to benefit specialty practices more than primary care.

To address these concerns, CMS is proposing a negative 2.5% “efficiency adjustment” to all physician work RVUs that are not time-based codes. It does not apply to evaluation and management (E/M) codes, care management services, services on the CMS telehealth list, and maternity global period codes for deliveries. To calculate this adjustment, CMS used the sum of the past five years of the Medicare Economic Index (MEI) productivity adjustment percentage. The concept behind this policy is that over time physicians conducting procedures, diagnostic testing, and radiology and pathology reviews become more efficient. CMS is arguing that these efficiencies have not been accounted for adequately by the RUC. It is important to note that the adjustment only applies to the work RVUs, so it is expected to result in a 1% overall payment decrease to most surgical specialties, radiology, and pathology.

The second “curveball” in this rule is the proposed changes to indirect PE RVUs, that is, not utilizing the 2024 Physician Practice Information (PPI) Survey or the Clinical Practice Information (CPI) Survey conducted by the AMA to determine PE values for 2026. CMS cites concerns about sample sizes, representativeness, completeness of data, and measurement error related to the AMA's 2024 PPI survey and a lack of confidence that facility PE RVUs accurately reflect indirect practice costs, given the shift to hospital employment of physicians. Therefore, CMS is proposing to reduce the PE RVUs for all codes when conducted in a facility setting. This is a significant change and adds a great deal more complexity to the system. This is why the regulatory impact table (in the proposed rule) now includes a facility/nonfacility breakout of payment changes.

According to the impact table, the overall impact on internal medicine is estimated to be a negative 1% adjustment, with internal medicine physicians providing services in a facility seeing a negative 8% adjustment due to the PE RVU changes and those providing services in a nonfacility setting seeing a 6% increase. This foreshadows CMS’ intent to make policy changes that primarily benefit ambulatory primary care physicians.

However, it is important to note that this impact table does not tell the full story. The 0.75% and 0.25% updates to the 2026 qualifying APM and nonqualifying APM conversion factors, respectively, as well as the single-year increase of 2.50% to the conversion factor for 2026, are statutory changes that take place outside of budget neutrality. Therefore, they are not captured in the specialty impacts displayed in the table. This would mean that internal medicine physicians overall would actually see a positive update of approximately 2.6%, and those providing care in a nonfacility setting would see an increase of about 8.75% (equal to the 6% budget neutrality change reflected in the impact table plus 2.5% and then another 0.25%). Clear as mud—or as the dirt on a baseball player's cleats, right?

Obviously, numerous specialties are deeply concerned about these changes, arguing that the approaches to the efficiency adjustment and the PE RVUs are arbitrary and will have unintended consequences. With that said, these proposals do align well with ACP's recommendations to adopt a more comprehensive valuation approach that combines empirical data with physician input. Therefore, we will be analyzing them closely to provide the most constructive feedback to CMS that we can.

Beyond these curveballs, there are some other proposals in the rule worth noting. CMS is proposing changes to the Advanced Primary Care Management (APCM) services bundles that would facilitate behavioral health initiatives or collaborative care model services. It is also proposing to include preventive services within APCM services, which could then lead to the elimination of cost sharing for patients. Both changes would be a win for internal medicine and primary care overall. Additionally, the agency is looking to simplify how services are added to the Medicare telehealth list by removing the distinction between provisional and permanent.

Finally, an additional change worth noting is removal of coverage for screening for social determinants of health, as well as the related quality measure and quality improvement activity. This is disappointing given the importance of such screening to a patient's overall health. Additionally, many physicians have started to do this screening effectively and now will no longer be paid for it.

The bottom line is that the rule is a mixed bag of proposals that ACP is cautiously optimistic about, given its focus on addressing undervaluation of primary care services. ACP's comments on the rule are due on Sept. 12—so keep an eye out for them. Then, CMS typically releases the final rule by the end of October, right around the time the World Series usually begins. It remains to be seen if the agency will keep those curveballs in the rule, balk and pull them back, or instead throw a changeup.