The Proposed Medicare Part B Rules 2026

On July 14, the Centers for Medicare & Medicaid Services (CMS) issued the calendar year (CY) 2026 Medicare Physician Fee Schedule (PFS) proposed rule. This release represents the Trump administration’s first opportunity to enact Medicare payment policies that directly impact hundreds of thousands of physicians and other clinicians. CMS presented the reading public with 1800 pages of information--but there are a few themes to watch--reduction of the site of service differential between offices and hospitals, trashing of anything related to the social and financial disparities in healthcare, and insertion of 'health and wellness' into quality programs.

Here is a summary of the proposal's key points.

• The conversion factor update: The conversion factor (CF) is the standardized dollar amount used to convert relative value units (RVUs) into allowed payment rates. Despite rising practice costs and inflation, the CF has been reduced over the last five years due to policy and budgetary weirdness. Thanks to the Big Blowhard Bill, for the first time in six years, CMS proposes an increase to physician payments. The proposed CY 2026 PFS CF is $33.5875 for physicians who meet certain participation thresholds in advanced alternative payment models (APMs) and $33.4209 for other clinicians. These amounts represent increases of 3.8% and 3.3%, respectively, from the final CY 2025 CF of $32.3465. The positive updates are driven by three factors: A statutory update in the Medicare Access and CHIP Reauthorization Act (MACRA) of 0.75% for qualifying APM participants and 0.25% for all other clinicians, as well as the BBB increase of 2.5%.
• The Efficiency Adjustment: They should call this what it is, a cut, which may or may not reflect efficiency. Further, the new efficiency adjustment may slightly offset the higher payment update for some clinicians. CMS regularly revalues codes as part of its initiative to address potentially misvalued codes. However, CMS is concerned about the accuracy of the American Medical Association's survey data used for relative values.  For several years, CMS has also been concerned about not accounting for the efficiencies gained over time in work RVUs for non-time-based services. The Agency believes that non-time-based codes, such as those describing procedures, radiology services, and diagnostic tests, may require less work as clinicians become more familiar with them. In the real world, we refer to this as an experience curve. CMS proposes an efficiency adjustment to the work RVUs and corresponding updates to the intraservice portion of physician time inputs for certain services (i.e., the time allocated for actually performing the service). To reflect this alleged efficiency, CMS proposes to add the last five years of the Medicare Economic Index (MEI) productivity adjustment, which adds up to a 2.5% reduction. CMS also proposes to apply the efficiency adjustment to the intraservice portion of physician time and work RVUs on a three-year cycle.
• Practice expense methodology/site of service: CMS proposes a significant change to the PE methodology that affects Part B office-based reimbursement. As we all know too well, many services are paid differently depending on where they are furnished. In a non-facility setting (e.g., a physician’s office), payment includes both the work RVU (reflecting the physician’s time and effort) and a Practice expense RVU portion that supposedly captures practice costs, both direct and indirect. Direct costs (such as clinical labor, supplies, and equipment) and indirect costs (such as administrative overhead) should be reflected in fees so that physician practices can stay whole. In a facility setting (e.g., hospital), payment still includes both work and PE RVUs. However, the PE RVU is lower because direct costs—like staff, supplies and equipment—are paid separately to the facility under a different payment system (e.g., the outpatient prospective payment system). Hospitals can receive two fees — one for facility cost (APCs) and one for professional costs, sometimes for the same procedure. CMS posits that these assumptions may no longer hold with fewer physicians now in private practice. To address this potential inaccuracy, CMS proposes revising the methodology for allocating indirect PE costs for facility-based services. Beginning in CY 2026, CMS proposes to reduce the portion of PE RVUs allocated based on work RVUs in the facility setting to half the amount used in the non-facility setting. This policy would reduce the PE component of RVUs for clinicians working in facilities. Conversely, the proposed change would result in significant increases in overall PFS spending for most office-based specialties.. The result? In 2026, it is proposed that Hematologists/Oncologists will receive a 6% RVU increase in practices and an 11% decrease in hospitals. Many specialties will see similar results.
• Telehealth: Before we explain the proposals for 2026, bear in mind that the telehealth site (patient home) and payment waivers will expire on September 30 without Congressional action. This was not outlined in the Proposed Rule because it is not a CMS decision. Here is what was:
  • The Telehealth list--Currently, CMS uses a five-step process to review changes to the Medicare Telehealth Services List, which includes “permanent” and “provisional” codes. If a code passes all five steps, it is placed on the permanent list. If only steps one to three are met, the code is placed on the provisional (or temporary) list. CMS proposes to eliminate steps four and five, which would eliminate the need for a provisional list. All codes currently on the provisional list would be added to the permanent list.
  • Frequency Limits--CMS proposes permanently removing frequency limitations established in 2011 and 2017 for subsequent inpatient visits (previously once every three days), subsequent nursing facility visits (once every 14 days) and critical care consultations (once daily).
  • Virtual Supervision--To meet Medicare Part B regulations, "direct supervision" required a physician to be physically present in the office suite (though not necessarily in the same room) to provide immediate assistance if needed. During the COVID-19 PHE, CMS allowed virtual presence via real-time two-way audio/video to meet this requirement, a policy extended through December 31, 2025. Recognizing the benefits of virtual supervision for patient access and care modernization, CMS proposes to make virtual supervision permanent for most incident-to services under Section 410.26, effective January 1, 2026. YAY!!!! Exceptions include higher-risk surgeries with global surgery indicators 010 or 090, which would still require in-person supervision.
  • Teaching Physicians--CMS proposes not extending the temporary PHE policy that allowed teaching physicians to have a virtual presence for billing services involving residents. Instead, the agency proposes reverting to the pre-PHE requirement for teaching physicians to be physically present during critical portions of resident-furnished services in Metropolitan Statistical Areas (MSAs), while maintaining the existing rural exception.
• Valuation of Specific Codes for CY 2026: CMS proposes valuations for 149 codes across multiple specialties. Notable proposals include
  • creating 46 new codes for lower extremity revascularization to replace 16 existing codes,
  • establishing national pricing for previously contractor-priced services such as tympanostomy and prostate procedures,
  • seeking additional data for services such as MRI-guided ultrasound ablation (CPT 61715).
  • proposing changes for radiation oncology services, CMS posits using the Outpatient Prospective Payment System (OPPS) APC relative weights rather than direct PE inputs to establish PE RVUs, addressing the capital-intensive nature of these services. The CPT Editorial Panel reviewed the radiation oncology delivery treatment family at the September 2024 CPT meeting and established a technique-agnostic family of codes and bundled imaging into all three services. The Panel approved the revision of CPT codes 77402, 77407 and 77412 and the deletion of 77385, 77386 and 77014. The specialty societies have also requested that CMS delete the related G-codes, G6001 through G6017, which is proposed.
  • using for remote monitoring codes (RPM/RTM) OPPS cost data due to concerns about RUC-recommended PE input accuracy. But, the new code 98XX6 will be Carrier-priced. As you may also be aware, the AMA will modify the coding for RPM/RTM to address the hated 16-day rule in 2026, and
  • paying for the new scalp cooling codes 9XX01, 9XX02, 9XX03 (these are dummy codes).
• Expansion to Home and Residence E/M Visits: CMS is proposing to expand the use of HCPCS Code G2211 to include home and residence-based E/M visits (CPT Codes 99341, 99342, 99344, 99345, 99347, 99348, 99349, 99350). This proposal reflects community input, emphasizing that home-based primary care often involves similarly complex, longitudinal relationships as those seen in office settings, particularly for patients who are unable to travel for care. To support this, CMS proposes modifying the code descriptor for G2211 to explicitly include "home or residence" settings, thereby allowing clinicians to bill the add-on code when furnishing complex, relationship-based care across both office and home-based settings.
• Enhanced Care Management: CMS is proposing three new add-on codes (GPCM1, GPCM2, GPCM3) to integrate behavioral health services into Advanced Primary Care Management (APCM) without requiring time-based documentation. Of note, CMS plans to value these codes by directly cross-walking from existing behavioral health integration (BHI) and collaborative care model (CoCM) codes and seeks input on cost-sharing for APCM services that may include preventive care and on potential new payments to accountable care organizations (ACOs) to promote broader use of APCM in primary care settings.
• Expanded Coverage for Digital Mental Health Treatment (DMHT): CMS proposes expanding coverage to include U.S. Food and Drug Administration (FDA)-classified attention-deficit/hyperactivity disorder (ADHD) digital therapy devices under Section 882.5803, provided they are adjuncts to clinician-supervised care and meet special control requirements. Devices would follow the same payment conditions finalized for Codes G0552 to G0554 in CY 2025.
• PIN, CHI, and SDOH: CMS proposes clarifying that marriage and family therapists (MFTs) and mental health counselors (MHCs) may deliver comprehensive health integration (CHI) and principal illness navigation (PIN) services as auxiliary personnel under supervision, aligning their role with clinical social workers. CMS also proposes expanding allowable initiating visits for CHI to include CPT Codes 90791 and 96156 to 96168 when addressing mental illness. CMS plans to delete HCPCS Code G0136 for social determinants of health (SDOH) risk assessment, citing duplicative costs already captured in E/M services. We all know the real reason for the deletion is that this Administration hates poor people.
• Payment for Skin Substitutes: Starting January 1, 2026, CMS proposes to implement separate payment for skin substitutes when furnished as incident-to supplies in conjunction with a covered procedure (same for OPPS), marking a notable departure from the current bundled payment approach. Beginning in CY 2026, among other things, CMS proposes to:
  • pay separately for skin substitutes not licensed as biologicals under Section 351 of the Public Health Service (PHS) Act,
  • classify these products as incident-to supplies when used in conjunction with a covered application procedure under the PFS in non-facility settings and OPPS, and
  • continue paying for Section 351-licensed biologicals using the existing ASP methodology.
• Global Surgery: CMS is still trying to determine how to handle post-op care and surgeons who only do the operation. CMS included a new request for information related to payment for 10- and 90-day global surgery codes in this proposed rule. They are inquiring about the additional steps that should be taken to ensure the accuracy of these codes, specifically how payment should be allocated between different practitioners when a provider other than the surgeon furnishes postoperative care. They also would like comments on the post-op care code, G0559.
• The Ambulatory Specialty Model: The CMS Innovation Center ("CMMI") is proposing a mandatory (by zip code) five-year ASM aimed at holding specialists who historically treated at least 20 Original Medicare patients with heart failure (HF) or low back pain and within selected core-based statistical areas or metropolitan divisions (roughly one quarter) financially accountable for management of these chronic conditions. The ASM is proposed for the performance period from January 1, 2027, through December 31, 2031 (payment period from January 1, 2029, through December 31, 2033).
• Drug Provision Proposals
  • Part D Drug Inflation Rebates: CMS proposes implementing the statutory requirement to exclude 340B units from Part D rebate calculations beginning January 1, 2026, through a "Prescriber-Pharmacy Methodology" that identifies potentially 340B-eligible claims based on prescriber affiliation with 340B covered entities and pharmacy designation as 340B contract pharmacies. CMS is also proposing to establish a voluntary 340B repository where covered entities can submit data on Part D 340B claims.
  • Refunds Based on Waste: CMS received two applications (Leukine and Jelmyto) for an increased applicable percentage threshold. In both cases, CMS proposes maintaining current rates and does not anticipate any impact on Medicare spending.
  • Average Sales Price: Price Concessions and BFSFs: The CMS is constantly updating the Average Sales Price methodology. Here are some 2026 proposals:
    • Price Concessions--CMS is proposing to add a definition of "bundled arrangement" at Section 414.802, requiring manufacturers to allocate discounts proportionally across all products in bundled sales arrangements, consistent with Medicaid's approach. The proposal addresses how manufacturers should unbundle" both contingent and noncontingent discounts and allocate them proportionally to the total dollar value of all products in the arrangement. CMS seeks comment on alternative allocation methods for complex bundled arrangements and how to handle discounts across periods for value-based purchasing arrangements.
    • Bona Fide Service Fees--CMS may revise the definition of "Bona Fide Service Fees" (BFSFs) by 1) specifying the methodology that should be used to determine Fair Market Value (FMV) and the time period after which manufacturers should reassess the FMV and 2) further explaining what CMS considers to be sufficient evidence of whether or not a fee is passed on in whole or in part to an affiliate, client or customer of an entity. Effective January 1, 2026, manufacturers must submit certification letters from BFSF recipients confirming fees are not passed to affiliates, clients or customers under the proposal. CMS provides specific examples of fees that should be considered price concessions rather than BFSFs, including payments to distributors for credit card processing fees that enable purchasers to avoid additional charges, payments for tissue procurement as part of manufacturing processes, certain data-sharing service fees that exceed FMV or are required for legal compliance, and distribution service fees that exceed FMV.
    • Units Sold under MFP Negotiated Price--Under the Medicare Drug Price Negotiation Program, CMS negotiates an MFP for certain high-expenditure, single-source drugs payable under Medicare Part B and covered under Part D (i.e., selected drugs). In this proposed rule, CMS clarifies that because the statute does not explicitly exclude these sales, units of selected drugs sold at the MFP must be included in the calculation of a manufacturer's ASP, effective January 1, 2026.
  • Autologous Cell-Based Immunotherapy and Gene Therapy Payment--Consistent with current payment policies for Chimeric Antigen Receptor (CAR) T-cell therapies, CMS proposes to pay nothing for individual steps involved in manufacturing autologous cell-based immunotherapies or gene therapies, such as raw material collection or related labor. CMS considers these manufacturing steps to be included in the payment for the drug or biological itself, as reflected in the billing and payment code for the product. Beginning January 1, 2026 (for sales occurring on or after that date), CMS also proposes that any preparatory procedures for tissue procurement paid by the manufacturer must be included in the calculation of the manufacturer's ASP. Additionally, payments made by the manufacturer to an entity for tissue procurement would not qualify as BFSFs, as CMS considers these services integral to the product's manufacture and, therefore, part of its total price.
• Merit-Based Incentive Payment System: In the proposal, CMS tries to promote stability in the program. CMS proposes to maintain the MIPS performance threshold of 75 points through performance year 2028/payment year 2030. The agency has maintained a 75-point threshold since performance year 2022, allowing MIPS participants to avoid additional quality reporting challenges. Other proposals include:
  • CMS also proposes updates to the MIPS Value Pathways (MVPs). The MVPs are a participation option to motivate clinicians to move away from reporting on self-selected activities and measures (traditional MIPS) and towards an aligned set of measure options designed to be meaningful to patient care, better connect measures across MIPS categories, and be more relevant to a clinician’s scope of practice.
    • CMS proposes six new MVPs for the CY 2026 performance period/2028 MIPS payment year, for a total of 27 MVPs. The proposed new MVPs focus on the following areas: diagnostic radiology, interventional radiology, neuropsychology, pathology, podiatry, and vascular surgery.
    • The MVP program remains voluntary to provide time for MIPS eligible clinicians to familiarize themselves with MVPs and begin preparing their practices for participation. In last year’s rule, CMS sought comment on (but did not propose) the 2029 performance period as the potential timeline for completing the transition to MVPs (and sunsetting traditional MIPS). This year, CMS does not propose a timeline but proposes policies aimed at facilitating the transition to MVP reporting.

If you are part of the Medicare Shared Savings Program, we did not include the changes to it in the interest of article length. Please review the changes to this program if you participate. To help you (and everyone else) out, here are some summaries:

• The CMS Press Release,
• Fact Sheet for the Proposal,
• Fact Sheet for Shared Savings, and
• The Display Copy of the Rule