Medicare Physician Fee Schedule Changes: 2026 to 2027

By Awais Afzal, Healthcare Operations & Data Analyst · Published February 23, 2026 · Updated October 14, 2026

Medicare physician fee schedule changes for 2027 are proposed, not final. CMS proposed in July 2026 to lower the conversion factor from $33.40 to $32.84 (-1.68%) for most clinicians, mainly because the one-year 2.5% increase Congress gave for 2026 expires.

This post replaces an earlier article written when a 2025 cut was only proposed. That cut was finalized, 2026 brought a temporary increase, and CMS has now proposed a lower rate for 2027. The figures below come from CMS fact sheets, and the 2027 numbers can still change in the final rule.

What has changed, and what is only proposed?

Two years of rates are final and one is proposed. The 2025 conversion factor was finalized at about $32.35, down 2.83% from $33.29 in 2024. The 2026 factor is $33.40 for clinicians outside a qualifying advanced alternative payment model (APM) and $33.57 for those in one. The 2027 figures are a proposal published on July 14, 2026.

The conversion factor is the dollar value CMS attaches to each relative value unit (RVU). Medicare publishes a different payment amount for every service, and the factor is the multiplier that turns RVUs into dollars. A small percentage change in it touches every fee-schedule line you bill.

Source: CMS fact sheets for the CY 2025 final rule, CY 2026 final rule (CMS-1832-F) and CY 2027 proposed rule. The 2027 figures are proposed and may change.

Why is CMS proposing a lower rate for 2027?

The main driver is a one-year increase that ends. CMS states that a statute gave a 2.50% increase to the conversion factor for 2026 only, and that current law therefore requires a 2.50% reduction in 2027 compared with 2026. Statutory updates of +0.75% (qualifying APM) and +0.25% (non-qualifying) and an estimated +0.53% adjustment for work RVU changes offset part of that, which leaves the net proposed cuts of 1.19% and 1.68%.

Two other changes sit underneath the headline number. They move relative payment between services, so they can matter more to your practice than the conversion factor does.

Source: CMS fact sheets for the CY 2026 final rule (CMS-1832-F) and CY 2027 proposed rule.

The practical reading is that two practices with the same conversion factor can see different results. A practice that bills mostly time-based visit codes sits outside the 2026 efficiency adjustment. A practice that bills procedures and diagnostics is more exposed to it. Look at your own code mix, as covered under billing by specialty.

How does a fee-schedule payment get calculated?

A Medicare fee-schedule amount is the sum of three RVU components, each adjusted for locality, multiplied by the conversion factor. CMS publishes the formula for the non-facility amount as: (work RVU x work GPCI) + (non-facility practice expense RVU x PE GPCI) + (malpractice RVU x MP GPCI), all multiplied by the conversion factor. The facility amount uses the facility practice expense RVU instead.

Here is the arithmetic, using a made-up service with 2.00 total locality-adjusted RVUs. At the 2026 non-qualifying factor of $33.40 it pays $66.80. At the proposed 2027 factor of $32.84 it pays $65.68, a difference of $1.12 or 1.68%. This is an illustration of the mechanics, not a real code. Actual payment also depends on RVU changes for that code, the efficiency adjustment, the site of service and any adjustments applied at the claim level.

CMS publishes the facility and non-facility amounts for paid services in its fee schedule files, so you can compare current and proposed amounts for the codes you bill instead of relying on a headline percentage. The rule-based billing mechanics are explained in our guide to billing and coding of Medicare fee-for-service claims.

What does this mean for practice revenue?

The effect depends on your Medicare share and your code mix, and there is no single national answer. A practice with a small Medicare share and mostly time-based visit codes will see a different change from a procedure-heavy practice with a large Medicare population. The way to size it is to apply the proposed rates to last year’s paid Medicare claims.

Fee-for-service Medicare rates also feed other payers. Some commercial contracts and Medicare Advantage agreements are written as a percentage of the Medicare fee schedule, so a change in Medicare rates can flow into them when those contracts reprice. Check the wording of each contract. Whether a payer reprices automatically, on renewal, or not at all is a contract term, and we cannot tell you how any particular one reads.

Keep the scale in view. A 1.68% change on a Medicare line is real money, but it is not the largest leak in most billing operations. Denials, late filing, missed charges and unworked balances often cost more than a one-year rate change. For that reason, we recommend pairing any rate analysis with a look at denial management and the revenue cycle KPIs that show where cash is being lost.

What should a practice do before the final rule?

Start with data you already hold, and do it before the final rule so the result informs budgets rather than explaining a surprise. CMS issued the CY 2025 final rule on November 1, 2024 and the CY 2026 final rule on October 31, 2025, so a CY 2027 final rule around the start of November is a reasonable expectation, but CMS sets its own timing. Public comment on the proposal has closed.

Which billing steps protect revenue when rates tighten?

Rate pressure makes accuracy more valuable, because the same work has to produce a correct, complete claim. The basics do not change: capture every billable service, code to the note, submit clean claims, work denials and follow up on unpaid balances. The earlier version of this post listed these too, but without telling you how to know they are working.

• Charge capture: compare services documented against services billed, by provider, each month.
• Coding review: check codes and modifiers against the documentation and Medicare policy, including rules such as Medicare incident-to billing where they apply.
• Clean claims: catch missing or mismatched data before submission rather than after a rejection.
• Denials and appeals: track denial reasons by payer and code, and fix the cause upstream.
• Underpayment checks: compare each Medicare payment with the expected allowed amount for that code and locality.

Outsourcing is one option for covering this work, alongside training in-house staff. If you are weighing it, our medical billing services cover claims, charge entry and coding support. It helps to have the claim picture in one place, whichever route you take, such as a practice management system that tracks claims by stage with an owner on each claim.

Can Congress or CMS still change the 2027 rate?

Yes. The 2027 numbers are proposed, and CMS can change them in the final rule. Congress set the 2026 increase by statute, which shows the rate can also be altered by law. CMS’s own fact sheet says current law requires the 2.50% reduction, so a different outcome would need either CMS to change the policy it has proposed or Congress to act.

Practices can follow these developments through the Federal Register, CMS fact sheets and their specialty society or state medical association. We recommend budgeting on the proposed numbers and holding any upside back until a rule or law makes it final. For wider tactics on payer contracts and coding, see these strategies to maximize Medicare reimbursement and our Medicare billing guide for providers.

Our recommendations

1. Budget on the proposed 2027 rate. Use $32.84 for clinicians outside a qualifying APM and $33.17 for those in one, and revisit when the final rule is published.
2. Model by code, not by percentage. Apply current and proposed fee schedule amounts to your top Medicare codes for your locality. A blended percentage hides which services move most.
3. Separate time-based and non-time-based services. The 2026 efficiency adjustment excludes time-based codes such as E/M and behavioral health. Know how much of your Medicare revenue falls on each side.
4. Read your payer contracts. Note which agreements reference a Medicare percentage and when they reprice, so a Medicare change does not reach your cash flow by surprise.
5. Verify payments against expected amounts. Check that new-year rates are loaded correctly in your billing system and that payments match the expected allowed amount.
6. Measure the leaks first. Review denial rate, days in A/R and unbilled charges. Those are usually larger and more fixable than a one-year rate change.

Bottom line

Medicare physician fee schedule changes are a yearly event: a 2.83% cut for 2025, a temporary lift for 2026, and a proposed 1.68% cut for most clinicians in 2027. Model the effect on your own codes, plan on the proposed rate, and keep billing accuracy tight. If you want help with that, see our revenue cycle management services or run your numbers through the revenue calculator.

Frequently asked questions

What is the Medicare conversion factor for 2026?

CMS finalized $33.57 for clinicians in a qualifying advanced APM and $33.40 for everyone else. Compared with 2025’s $32.35, that is an increase of about 3.77% and 3.26%. The rise includes a one-year 2.50% increase set by statute, which does not continue into 2027.

What is the proposed Medicare conversion factor for 2027?

CMS proposed $33.17 for qualifying APM participants and $32.84 for others in its July 14, 2026 proposed rule. Those are decreases of 1.19% and 1.68% from 2026. The numbers are not final until CMS publishes the CY 2027 final rule.

Why are Medicare physician payments proposed to fall in 2027?

CMS says Congress gave a 2.50% conversion factor increase for 2026 only, and current law requires a 2.50% reduction against 2026 for 2027. Small statutory updates and an estimated work RVU adjustment offset part of it, leaving the proposed net cuts.

Does the conversion factor change what I am paid for every code?

It changes the multiplier for every fee-schedule service, but your payment per code also depends on that code’s RVUs, your locality and site of service. The 2026 efficiency adjustment also lowered work RVUs for non-time-based services, so results differ by code.

When will the 2027 final rule come out?

CMS has not announced it in the sources used here. The CY 2025 final rule came out on November 1, 2024 and the CY 2026 final rule on October 31, 2025, so early November is plausible. Watch the CMS newsroom and the Federal Register.

Do Medicare fee schedule cuts affect commercial payers?

Only where a contract ties rates to Medicare. Many commercial and Medicare Advantage agreements reference a percentage of the Medicare fee schedule, but the wording differs. Read each contract for how and when it reprices, and ask the payer if it is unclear.

Sources

1. Calendar Year (CY) 2027 Medicare Physician Fee Schedule Proposed Rule — CMS (2026)
2. Calendar Year (CY) 2026 Medicare Physician Fee Schedule Final Rule (CMS-1832-F) — CMS (2025)
3. Calendar Year (CY) 2025 Medicare Physician Fee Schedule Final Rule — CMS (2024)
4. Physician Fee Schedule Search: Documentation and Files — CMS (2026)