CY 2027 Medicare Physician Fee Schedule Proposed Rule: What It Means for Providers

A practical briefing on CMS-1848-P for physicians, virtual care organizations, ACOs, RHCs/FQHCs, and revenue-cycle teams by Olga Khabinskay, Director of Operations, WCH

The Headline: Another Rate Cut, and a Lot of Structural Change Underneath it

On July 14, 2026, CMS released the Calendar Year 2027 Physician Fee Schedule proposed rule (CMS-1848-P, RIN 0938-AV82), scheduled for Federal Register publication on July 16, 2026. Comments are due by September 14, 2026, and a final rule is expected around November 1, 2026, with provisions effective January 1, 2027.

The rule runs to roughly 1,600 pages and touches nearly every corner of Part B payment — but three storylines matter most to practicing providers: a conversion factor cut driven by an expiring statutory pay bump, a multi-year overhaul of how practice expense is calculated, and a set of virtual-care and care-coordination provisions that will directly affect how telehealth, remote monitoring, and value-based practices get paid in 2027.

1. The conversion factor is going down again

CMS proposes a qualifying APM conversion factor of $33.17 (down $0.40, or -1.19%, from $33.57) and a non-qualifying APM conversion factor of $32.84 (down $0.56, or -1.68%, from $33.40). The proposed statutory updates are actually positive — +0.75% for QPs and +0.25% for non-QPs, plus an estimated +0.53% tied to proposed work RVU changes — but they are outweighed by the scheduled expiration of the one-year 2.5% conversion factor increase Congress provided for CY 2026 under the Working Families Tax Cut legislation. Absent further congressional action, that increase simply falls away for 2027, producing a net cut even though the underlying statutory formula improved.

Provider action: Build CY 2027 financial plans around the reduced conversion factors as the base case, and treat any congressional fix as upside rather than something to count on.

2. Practice expense methodology: a multi-year shift away from AMA survey data

CMS has relied for years on physician-specialty survey data (much of it from 2007 or earlier) to help set the indirect practice expense component of RVUs. The agency is proposing to phase out the step of the methodology that anchors indirect PE allocation to that aging survey data, replacing it over roughly two years with an approach based more directly on current input costs, plus a new “PE stabilization” adjustment that caps year-over-year PE RVU swings at 5% to avoid the volatility this transition could otherwise cause.

A related and more immediately consequential change: CMS finalized a policy in the CY 2026 rule that cut in half the indirect PE allocated to services furnished in facility settings versus non-facility settings, on the theory that facility-based physicians increasingly don’t maintain independent offices. That change had an unintended side effect — it created a payment gap between nursing facility visits depending solely on whether the patient’s stay is billed under Medicare Part A or Part B, even though the physician’s actual costs don’t differ. CMS is proposing to fix this specific anomaly for CY 2027 by equalizing PE RVUs for the standard nursing facility E/M codes (CPT 99304–99310, 99315, 99316) regardless of the patient’s payment status.

More broadly, CMS is asking for public input on whether the facility/non-facility PE split still makes sense at all, particularly for physicians employed by hospitals or health systems — including whether a new billing modifier should identify hospital-employed physicians so their facility-setting payments better reflect the indirect costs they actually incur (which CMS suspects, in some cases, may be closer to zero than the current 50% allocation assumes).

Provider action: Independent hospital-medicine and facility-based groups should watch this closely and consider commenting — the direction of travel (further reducing facility-setting PE) is not finalized, but the agency’s language suggests it is actively considering going further, not reversing course.

3. Telehealth, virtual supervision, and communication-technology services

Several provisions bear directly on how virtual care is delivered and paid:

• RHC and FQHC telehealth flexibilities extended. Consistent with the Consolidated Appropriations Act, 2026, CMS proposes conforming rules confirming that the in-person visit requirement for mental health services furnished by RHCs and FQHCs will not apply through December 31, 2027, and that RHCs/FQHCs may continue billing for non-behavioral-health visits furnished via telecommunications technology through the same date. This is a straight statutory extension, not a new CMS policy choice, but it gives RHC/FQHC billing teams a full additional year of certainty.
• Remote physiologic monitoring (RPM) and remote therapeutic monitoring (RTM). CMS proposes several tightening measures: RTM services could only be furnished to established patients; practitioners billing RPM or RTM would need to have separately furnished an initiating visit when the monitoring begins; and payment would only be available when the monitoring service itself is performed by clinical staff employed by the billing practice — not by outside contractors. CMS is also revisiting the underlying valuation of these codes, noting that monitoring devices may now cost less than originally assumed, and is soliciting comment on consolidating the RPM/RTM code families into new bundled G-codes, partly in response to OIG concerns about the current coding structure.
• The Section 1834(m) telehealth services list and originating-site policy are addressed in a dedicated section of the rule (Section II.C). CMS’s public fact sheet for this cycle did not surface specific proposed additions or removals to the eligible telehealth services list or a proposed originating-site facility fee update in the summary materials reviewed for this briefing; practices should review Section II.C of the published rule directly (or wait for the forthcoming CCHP and telehealth-association summaries) for code-level detail once the rule publishes.

Provider action: If your organization bills RPM or RTM using contracted monitoring staff rather than employees, this is the single highest-priority item to flag for your compliance and vendor-management teams — the proposed employment restriction would require restructuring those arrangements before January 1, 2027, if finalized as written.

4. E/M visit complexity add-on (G2211) is being restructured

CMS proposes converting HCPCS code G2211 from a stand-alone flat-rate add-on code into a percentage-based modifier appended to the base E/M code, increasing payment by 16% across all E/M levels rather than a flat dollar amount. A second, ACO-specific modifier would be available only to practitioners in Shared Savings Program ACOs or in the Long-Term Enhanced ACO Design (LEAD) Model, increasing payment by 32% to recognize the added resource costs of longitudinal, total-cost-of-care accountability. Use of the ACO-specific modifier would be voluntary and could be billed for any beneficiary the participant treats, not only those formally assigned to the ACO, and would feed into the ACO’s benchmark and performance-year expenditure calculations.

Provider action: Practices currently billing G2211 as a flat add-on should model the revenue impact of a percentage-based modifier — higher-level E/M visits would see a larger dollar benefit than lower-level visits under the proposed structure, a meaningful shift for coding-mix planning.

5. Same-day E/M and global-period overlap

CMS proposes to reduce payment when the same physician (or another physician in the same practice) bills a separately identifiable office/outpatient E/M visit on the same day as a procedure with a 0-, 10-, or 90-day global period: the higher-value service would be paid at 100%, and all other same-day procedures or E/M visits would be paid at 50%. This revives a concept CMS floated (but did not finalize) in the CY 2019 rule, framed around avoiding duplicate payment for overlapping pre- and post-procedure evaluation work.

Provider action: Surgical and procedural specialties that routinely bill a same-day E/M alongside a global-period procedure should model this against current billing patterns now, since the reduction applies at the practice level, not just the individual clinician level.

6. Rural Health Clinics and FQHCs: new preventive service coverage

CMS proposes to recognize Diabetes Self-Management Training (DSMT) and Medical Nutrition Therapy (MNT) as separately billable preventive services under the RHC all-inclusive rate methodology, aligning RHC policy with how FQHCs and physician offices already bill these services — a change intended to expand access to these services in rural areas.

7. Accountable Care Organizations: several changes worth ACO-participant attention

• CMS proposes raising the shared-savings rate for BASIC track Level E from 50% to 60%, based on evidence that Level E ACOs are already generating strong savings relative to the ENHANCED track.
• Starting April 1, 2027, eligible ACOs could enter arrangements to reduce or eliminate Medicare Part B cost sharing for beneficiaries under an approved plan — modeled on experience from the ACO REACH model.
• Beneficiary notification timing requirements would be simplified: instead of tying the notice to a beneficiary’s first primary care visit, ACOs would need to furnish a standardized notice once per agreement period, generally by May 30.
• CMS proposes a “Legacy TIN” concept clarifying that a participant TIN whose claims history was used only for financial reconciliation in a CMS Innovation Center model (without a written risk-sharing agreement) would not count as prior performance-based-risk experience — relevant to benchmark-rebasing calculations for ACOs re-entering the program.

Provider action: ACOs currently in or evaluating BASIC Level E should reassess the economics given the proposed rate increase, and organizations with “Legacy” TIN histories should confirm how the new definition would affect their experience classification.

8. Other provisions with broad reach

• Chronic disease and behavioral health: CMS proposes new coding and payment for shared medical appointments, and would complete the four-year transition increasing valuation for smoking/tobacco cessation and SBIRT services, consistent with the prior transition for psychotherapy codes.
• Advance care planning: two new HCPCS codes would separately value clinical-staff time (under physician supervision) from time personally spent by the billing practitioner on advance care planning, with the existing CPT codes 99497/99498 reserved for practitioner-personal time only.
• Clinical Laboratory Fee Schedule: conforming changes implement the Consolidated Appropriations Act, 2026, including a phase-in of payment reductions of up to 15% per year through CY 2029 for tests priced from private-payor rate data.
• 340B Part D reporting: covered entities would be required to submit Part D 340B claims data to CMS’s claims data repository beginning with 2027 dates of service — a new mandatory data submission obligation for 340B hospitals and their contract pharmacies.
• Medicare eligibility restrictions: CMS proposes implementing Working Families Tax Cut Act provisions limiting Medicare eligibility to U.S. citizens/nationals, lawful permanent residents, Cuban/Haitian entrants, and individuals lawfully residing under a Compact of Free Association — with associated termination procedures and appeal rights for those found ineligible. Eligibility and enrollment staff should review this section closely, as it affects verification workflows, not just payment policy.

Practical Checklist

1. Re-model CY 2027 revenue using the reduced conversion factors ($33.17 QP / $32.84 non-QP) as the baseline.
2. If you use contracted (non-employee) staff to furnish RPM/RTM monitoring, prepare a contingency plan and consider commenting.
3. Model the G2211-to-modifier conversion against your current E/M coding mix.
4. Surgical/procedural practices: assess exposure to the proposed same-day E/M/global-period payment reduction.
5. RHCs and FQHCs: confirm your telehealth and mental-health-visit billing systems reflect the extension through December 31, 2027, and evaluate adding DSMT/MNT as billable preventive services.
6. ACOs: reassess BASIC Level E economics under the proposed 60% sharing rate, and review “Legacy TIN” treatment if re-entering the program.
7. 340B covered entities: begin preparing systems for mandatory Part D 340B claims data submission starting with 2027 dates of service.
8. Submit comments by September 14, 2026, on any provision materially affecting your practice — CMS has a track record of revising PFS proposals in response to specific, operational public comments.

A Note on Scope

This briefing is based on the CMS fact sheets accompanying CMS-1848-P and the unpublished Federal Register text as of mid-July 2026; it does not capture every provision in the roughly 1,600-page rule, and CMS’s dedicated telehealth-services-list and originating-site sections (II.C) should be reviewed directly, or via forthcoming detailed summaries from telehealth policy organizations, once the rule is formally published on July 16, 2026. This is general regulatory information, not legal, coding, or reimbursement advice for any specific organization; provisions described here are proposed, not final, and CMS may materially change them in the final rule expected around November 1, 2026.

Sources

• Centers for Medicare & Medicaid Services, Fact Sheet: Calendar Year (CY) 2027 Medicare Physician Fee Schedule Proposed Rule (July 14, 2026): https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2027-medicare-physician-fee-schedule-proposed-rule
• Centers for Medicare & Medicaid Services, Fact Sheet: CY 2027 PFS Proposed Rule — Medicare Shared Savings Program Proposals (July 14, 2026): https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2027-medicare-physician-fee-schedule-proposed-rule-cms-1848-p-medicare-shared
• Federal Register / Public Inspection, CMS-1848-P, “Medicare and Medicaid Programs; CY 2027 Payment Policies under the Physician Fee Schedule…” (filed July 14, 2026; scheduled publication July 16, 2026): https://www.federalregister.gov/public-inspection/2026-14327/medicare-and-medicaid-programs-calendar-year-2027-payment-policies-under-the-physician-fee-schedule
• American Hospital Association, “CMS issues CY 2027 physician fee schedule proposed rule,” AHA News (July 14, 2026): https://www.aha.org/news/headline/2026-07-14-cms-issues-cy-2027-physician-fee-schedule-proposed-rule
• McDermott+ Consulting, “Preview and perspective: What’s on the menu for the 2027 PFS?” Regs & Eggs blog (June 11, 2026): https://www.mcdermottplus.com/blog/regs-eggs/preview-and-perspective-whats-on-the-menu-for-the-2027-pfs/
• VBCA, “CY2027 Physician Fee Schedule Proposed Rule: What Specialists Should Watch” (July 3, 2026): https://www.vbca.com/insights/2027-physician-fee-schedule-proposed-rule/
• American Telemedicine Association (ATA Action), “ATA Action Letter in Advance of CY2027 Medicare Physician Fee Schedule Proposed Rule” (April 14, 2026): https://www.americantelemed.org/policies/ata-action-letter-in-advance-of-cy2027-medicare-physician-fee-schedule-proposed-rule/

For code-level and effective-date detail, consult the full CMS-1848-P text once published in the Federal Register on July 16, 2026, and CMS’s PFS Federal Regulation Notices page for the associated Addenda and public use files.