The CY 2027 Medicare Physician Fee Schedule Proposed Rule: Action Plan for Practices

On July 14, 2026, the Centers for Medicare & Medicaid Services (CMS) released the CY 2027 Medicare Physician Fee Schedule proposed rule (CMS-1848-P). The proposal introduces another round of physician reimbursement cuts alongside sweeping coding changes that take effect January 1, 2027. Non-Qualifying APM clinicians face a 1.68% conversion factor reduction to $32.84, while Qualifying APM participants face a 1.19% drop to $33.17.

Beyond the baseline rate reduction, the rule introduces a structural overhaul of same-day procedure billing, redesigns complexity code G2211 into a percentage-based modifier, and restricts remote patient monitoring to direct practice employees. Following the close of the 60-day public comment period on September 14, 2026, CMS is scheduled to issue the final rule on or around November 1, 2026. Independent practices must update their billing workflows now to prevent significant revenue losses.

This guide breaks down every core provision in the CY 2027 Medicare Physician Fee Schedule proposed rule. You will find worked revenue impact projections, operational checklists for specialty practices, and clinical documentation templates designed to defend your claims in future audits.

Key takeaways

• Non-Qualifying APM clinicians face a proposed 1.68% conversion factor cut to $32.84, while Qualifying APM clinicians drop 1.19% to $33.17.
• CMS proposes slashing reimbursement by 50% for the lower-valued service when a modifier 25 outpatient E/M visit occurs on the same day as a procedure with a global period.
• Standalone add-on code G2211 is scheduled for retirement, replaced by a 16% modifier bump on base E/M visits (increasing to 32% for ACO-enrolled clinicians).
• CMS proposes requiring all clinical staff performing RPM and RTM to be direct W-2 employees of the billing practice, effectively banning third-party clinical monitoring vendors.
• Traditional MIPS officially sunsets after CY 2028, requiring all participating clinicians to transition to MIPS Value Pathways (MVPs) or alternative payment models by CY 2029.

What is the proposed conversion factor for CY 2027?

The primary driver of the proposed payment drop is the statutory expiration of a temporary 2.50% payment increase enacted by Congress for CY 2026. While statutory updates provide minor positive adjustments (0.75% for qualifying APM participants and 0.25% for non-qualifying clinicians), alongside a 0.53% work RVU budget neutrality adjustment, these gains fail to cover the loss of the temporary fix.

Under the statutory formula established by the Medicare Access and CHIP Reauthorization Act (MACRA), CMS established two distinct conversion factors:

• Qualifying APM Participants (QPs): A proposed conversion factor of $33.1693, down 1.19% ($0.40) from the CY 2026 rate of $33.5675.
• Non-Qualifying APM Participants: A proposed conversion factor of $32.8409, down 1.68% ($0.56) from the CY 2026 rate of $33.4009.

These reductions compound because the minus 2.5% efficiency adjustment introduced in the 2026 final rule remains in full effect. Meanwhile, CMS estimates that medical practice operating expenses will increase by another 2.5% in 2027 under the Medicare Economic Index (MEI).

When base Medicare payments fall while practice operating expenses rise, independent practices face an immediate margin squeeze. Securing comprehensive revenue cycle management support is the first operational step to ensure clean claim submission and prevent avoidable cash flow interruptions.

Four years of cuts: physician pay declines while facility rates rise

This proposal marks the fourth consecutive year of Medicare physician fee schedule reductions, and the sixth proposed payment reduction in six years according to specialty societies. Following the release of CMS-1848-P, American College of Rheumatology (ACR) President Dr. William F. Harvey stated that cumulative payment cuts are pushing independent practices to their "breaking point." The ACR warned that continuous cuts force independent doctors to close clinical doors, stop accepting Medicare patients, or sell their practices to hospital conglomerates.

Data from the American Medical Association (AMA) underscores the depth of the issue. When adjusted for inflation in medical practice costs, Medicare physician payment rates plummeted 33% between 2001 and 2026. Physicians represent the only Medicare provider category whose reimbursement lacks an automatic annual inflation update.

Medicare Payment vs. Inflation Gap (2001–2026)
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Practice Operating Cost Inflation (MEI):      +47% Cumulative
Medicare Physician Payment (Nominal):          +9% Cumulative
Real Inflation-Adjusted Physician Pay:        -33% Real Decline
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The contrast becomes starker when comparing physician rates to hospital and facility updates. Under the companion CY 2027 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) proposed rule, CMS floated a 2.4% net facility rate increase for ASCs.

Ambulatory surgery centers and hospital outpatient departments will receive higher facility payments to manage rising overhead. However, the independent physicians performing the surgeries face a 1.68% fee cut for their professional time. This divergence widens the economic gap between health systems and independent medical groups.

How does the proposed 50% same-day E/M and global procedure rule work?

CMS proposes a policy that directly targets office and outpatient E/M visits billed with modifier 25 on the same date of service as a minor surgical procedure. The proposal encompasses any procedure with a 0-, 10-, or 90-day global surgical period when performed by the same physician or another physician within the same group specialty.

Under the proposed mechanics, the highest-valued service (either the procedure or the E/M visit) receives 100% of the allowable fee schedule rate. The lower-valued service is reduced by 50%.

CMS asserts that performing an evaluation and a minor procedure during a single clinical encounter creates administrative and operational efficiencies that justify halved payment. CMS floated a comparable reduction in the CY 2019 proposed rule but withdrew it following intense clinical opposition. Specialty groups have mobilized again. The American Academy of Otolaryngology–Head and Neck Surgery (AAO-HNS) submitted survey data from over 1,400 members demonstrating that cutting same-day E/M payments threatens outpatient clinic viability and reduces prompt access for acute conditions.

Specialties that routinely perform procedural interventions during diagnostic office visits face severe exposure:

• Dermatology: Clinicians evaluating multiple suspicious lesions who perform an immediate punch biopsy will see their E/M payment halved. Partnering with specialized dermatology medical billing teams ensures clinical templates clearly separate diagnostic work from procedural prep.
• Podiatry: Providers performing routine diabetic foot evaluations alongside nail debridements or callus removals will face automatic 50% reductions on the lower code. Practices must consult podiatry medical billing specialists to audit same-day encounter volumes.
• Rheumatology: Specialists assessing active systemic inflammation who perform an urgent joint aspiration or corticosteroid injection will absorb deep E/M cuts. Working with experienced rheumatology medical billing coders helps practices establish clear clinical thresholds for scheduling separate visits.

The G2211 modifier transition: flat-rate to percentage bump

In a structural coding change, CMS proposes deleting standalone HCPCS code G2211. Introduced in 2024, G2211 was established as an add-on payment to reimburse clinicians for the cognitive labor, care coordination, and continuity required during complex outpatient visits.

In CY 2026, billing G2211 generated a flat reimbursement of approximately $16.37. For CY 2027, CMS proposes converting G2211 into a percentage-based modifier appended directly to the base E/M code:

• Standard Modifier: Appending the standard complexity modifier adds a 16% payment bump to the allowable fee of the primary outpatient E/M code.
• ACO-Specific Modifier: Clinicians participating in a Medicare Shared Savings Program (MSSP) Accountable Care Organization or the CMS LEAD Model receive an enhanced modifier providing a 32% payment bump to the base E/M code.

CMS designed the 32% ACO modifier to provide a clear financial incentive for value-based care participation. The agency contends that longitudinal care management within an ACO demands higher resource intensity.

Because the payment is now calculated as a percentage rather than a flat dollar amount, revenue shifts across visit complexity levels. High-complexity visits (99214 and 99215) receive higher dollar additions than the old flat fee. Low-complexity visits (99213) receive less money than they did under the standalone code.

Accurate clinical documentation is essential under this percentage structure. Relying on certified medical billing services ensures your coding team captures appropriate complexity modifiers without exceeding medical necessity guidelines.

The G2211 revenue transition model: who wins and who loses?

The shift from a flat $16.37 add-on to a percentage-based modifier alters cash flow based on a clinic's code distribution. The table below compares 2026 national average non-facility payments against proposed 2027 standard (16% bump) and ACO (32% bump) rates, using the proposed non-QP conversion factor of $32.8409.

To illustrate the bottom-line reality, consider an independent primary care physician billing 3,000 Medicare outpatient visits annually. The physician's typical historical code mix is:

• 99213 (Level 3): 30% of visits (900 encounters)
• 99214 (Level 4): 60% of visits (1,800 encounters)
• 99215 (Level 5): 10% of visits (300 encounters)

1. CY 2026 baseline revenue (flat G2211 model)

• 900 Level 3 visits: 900 * $106.46 =$95,814
• 1,800 Level 4 visits: 1,800 * $151.98 =$273,564
• 300 Level 5 visits: 300 * $198.40 =$59,520
• Total Annual Medicare Revenue: $428,898

2. Proposed CY 2027 standard structure (16% modifier)

• 900 Level 3 visits: 900 * $102.09 =$91,881
• 1,800 Level 4 visits: 1,800 * $154.66 =$278,388
• 300 Level 5 visits: 300 * $207.62 =$62,286
• Total Annual Medicare Revenue: $432,555
• Net Annual Impact: An increase of $3,657 (+0.85%).

3. Proposed CY 2027 ACO structure (32% modifier)

• 900 Level 3 visits: 900 * $116.17 =$104,553
• 1,800 Level 4 visits: 1,800 * $176.00 =$316,800
• 300 Level 5 visits: 300 * $236.25 =$70,875
• Total Annual Medicare Revenue: $492,228
• Net Annual Impact: An increase of $63,330 (+14.76%).

Standard practices with high Level 3 volume face net reimbursement declines on those visits. Conversely, practices that participate in qualifying ACOs or consistently document Level 4 and Level 5 medical decision-making realize strong revenue gains. If your practice plans to join an ACO to capture the 32% modifier, professional physician credentialing services can complete your enrollment before the January 1 start date.

Remote patient monitoring: the direct employment staffing mandate

One of the most consequential policy shifts in the 1,592-page proposed rule targets Remote Physiologic Monitoring (RPM) and Remote Therapeutic Monitoring (RTM). CMS proposes tightening clinical oversight across CPT codes 99453, 99454, 99457, and 99458.

Over the last 4 years, hundreds of medical practices launched RPM programs by partnering with third-party remote monitoring vendors. Under that model, vendor-employed nurses managed data tracking and patient communication under general supervision. CMS now views this outsourced model as prone to overutilization and weak clinical continuity.

Beyond the direct employment requirement, CMS proposed three additional restrictions:

1. Mandatory Initiating Visit: Billing practitioners must conduct a face-to-face or telehealth initiating visit before enrolling a patient in RPM or RTM, documenting clinical necessity and obtaining informed consent.
2. Established Patient Requirement for RTM: RTM services will now require an established patient relationship, aligning RTM rules with existing RPM standards.
3. Valuation and Practice Expense Reductions: CMS proposes crosswalking RPM codes to self-measured blood pressure monitoring, reducing relative value units and stripping direct practice expense inputs for clinical staff time.

Practices operating vendor-managed RPM programs must re-evaluate their contracts immediately. If this policy is finalized in November, you must either hire in-house clinical coordinators or shut down vendor-staffed monitoring programs before January 1.

Practice expense overhaul, MIPS sunset, and new delivery models

The CY 2027 proposed rule includes broad structural changes that reshape administrative compliance and practice overhead calculations over the next 24 months.

Practice expense methodology and IPCI phase-out

CMS proposes phasing out the Indirect Practice Cost Index (IPCI), which allocates indirect expenses such as administrative staff salaries, office rent, and utility overhead. Historically, the IPCI relied on AMA survey data from 2007. CMS proposes applying a 50% IPCI adjustment in 2027 and eliminating it entirely in 2028. To prevent wild swings in reimbursement, CMS introduced a Practice Expense stabilizer that caps annual code-level changes at ±5%. MedPAC officially endorsed eliminating the index.

Sunsetting traditional MIPS after CY 2028

CMS announced plans to sunset traditional MIPS reporting following the 2028 performance year. Beginning in CY 2029, clinicians must report through MIPS Value Pathways (MVPs) or the APM Performance Pathway. Practices must begin testing specialty-specific MVPs during 2027 to prepare their EHR infrastructure before traditional MIPS ends.

The mandatory Ambulatory Specialty Model (ASM)

Beginning January 1, 2027, the mandatory Ambulatory Specialty Model launches for selected specialty surgical procedures performed in outpatient hospital and ASC settings. The model links Medicare payments to episode-based cost and quality metrics, penalizing practices that fail to track post-procedural complications.

Telehealth updates

The Consolidated Appropriations Act, 2026 extended core Medicare telehealth flexibilities through December 31, 2027. In the proposed rule, CMS proposed increasing the telehealth originating site facility fee (HCPCS code Q3014) from $31.85 to $32.65. CMS also proposed two new claims modifiers ("BB" and "BC") to track visits conducted via third-party digital health platforms.

What are the proposed updates for skin substitutes and wound care?

CMS proposed major changes to outpatient wound care reimbursement, specifically targeting advanced cellular and tissue-based products (skin substitutes).

Under the proposal, CMS transitions non-sheet skin substitutes from local Medicare Administrative Contractor (MAC) pricing to a standardized national pricing methodology. Non-sheet products will be reimbursed at the identical per-square-centimeter rate assigned to traditional sheet-form products. CMS justified this change by noting that clinical resource costs between forms are equivalent.

Crucially, billable product units must reflect the actual surface area of the treated wound in square centimeters, rather than the total packaged size of the opened graft. Clinics can no longer bill for unused product wastage on non-sheet applications.

CMS also proposed national valuation for a new Category I CPT code, 976XX, covering real-time fluorescence wound imaging. This technology visualizes bacterial burden during debridement procedures, giving clinicians objective data to guide treatment. Specialized wound care medical billing partners help clinics update product charge sheets to maintain compliance under these standardized metrics.

Turning payment changes into revenue workflows before November

Waiting for the final rule to arrive in November before making operational changes guarantees first-quarter revenue leaks. Divan Dave, CEO of OmniMD, summarized the challenge: "The 2027 fee schedule pays practices for how well their workflows match the rule. A visit that qualifies for the new G2211 modifier but goes out without it is lost revenue. So is a same-day E/M paid at half because the documentation didn't separate it from the procedure."

Practices must implement a 5-step operational playbook immediately:

CY 2027 Practice Preparation Roadmap
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Step 1: Re-Model Top CPT Revenue Against the $32.84 Non-QP Baseline Rate
Step 2: Audit Modifier 25 Same-Day Encounters for Documentation Separation
Step 3: Program EHR Templates to Prompt for the New 16% / 32% G2211 Modifier
Step 4: Audit RPM/RTM Clinical Staffing to Ensure Direct W-2 Employment
Step 5: Review Commercial Contracts Benchmarked to Medicare Fee Schedules
========================================================================

The decision table below provides an operational framework for evaluating same-day procedure billing under the proposed 50% modifier 25 reduction.

To withstand auditor scrutiny under the 50% modifier 25 rule, clinical notes must be physically distinct. Never blend examination notes into procedural summaries. Use this documentation structure:

[DATE OF SERVICE: 10/14/2026]
SECTION 1: SEPARATE EVALUATION & MANAGEMENT NOTE
CHIEF COMPLAINT: Patient presents for evaluation of a suspicious, enlarging lesion on the left forearm.
HISTORY OF PRESENT ILLNESS: Lesion noticed 4 months ago. Patient reports rapid color darkening and bleeding upon contact.
PHYSICAL EXAMINATION: Volar aspect of left forearm reveals a 7mm asymmetrical, hyperpigmented macule with irregular margins.
MEDICAL DECISION MAKING: Moderate complexity. Discussed differential diagnosis (dysplastic nevus vs. cutaneous melanoma). Reviewed risks, benefits, and alternatives of excision. Patient consented to immediate diagnostic biopsy.
SECTION 2: DEDICATED PROCEDURAL REPORT (SEPARATE ENTRY)
PROCEDURE PERFORMED: Full-thickness shave biopsy, left forearm lesion (7mm).
TECHNIQUE: Area prepped with chlorhexidine. Local anesthesia infiltrated using 1.5 cc of 1% lidocaine with 1:100,000 epinephrine. Tangential shave excision performed down to mid-dermis. Hemostasis achieved using aluminum chloride. Sterile pressure bandage placed.
SPECIMEN: Specimen placed in formalin and routed to dermatopathology for evaluation.

Keeping the evaluation note physically partitioned from the procedural description provides undeniable evidence that the visit met all medical necessity requirements for modifier 25.

If your clinic lacks the internal capacity to audit same-day procedure coding or model your 2027 fee impact, requesting a comprehensive medical billing audit will pinpoint your exact revenue vulnerabilities before the final rule takes effect on January 1.

Frequently asked questions