The Centers for Medicare & Medicaid Services (CMS) has published the Calendar Year (CY) 2026 Medicare Physician Fee Schedule (PFS) Final Rule, which contains crucial policy changes that will impact physician payments, telehealth services, behavioral health, and Medicare Part B payments beginning January 1, 2026. The policy changes aim to enhance payment accuracy, promote value-based care, and modernize Medicare's payment process.
In this blog, we will highlight the key updates contained in the 2026 Medicare Physician Fee Schedule Final Rule, such as payment reforms, telehealth policies, behavioral health policies, and more.
Major Payment Changes Introduced in the 2026 Medicare Physician Fee Schedule
The 2026 Final Rule introduces several payment reforms that reflect changes in healthcare delivery while encouraging greater participation in value-based care models.
Separate Conversion Factors Encourage Value-Based Care
Beginning in 2026, CMS will apply distinct conversion factors in the Physician Fee Schedule for Advanced Alternative Payment Model (APM) participants and non-APM participants. Such a move will encourage the use of the payment model based on quality and cost-effectiveness by providers.
The conversion factor will be set at $33.57 for the APM participants, and at $33.40 for the non-participants, compared to $32.35 in 2025. The conversion factors include updates on statutory payment and changes in Relative Value Units (RVUs).
|
2026 Medicare Conversion Factors |
2025 |
2026 |
Increase |
|
Qualifying APM Providers |
$32.35 |
$33.57 |
+3.77% |
|
Non-Qualifying Providers |
$32.35 |
$33.40 |
+3.26% |
Higher reimbursement rates are intended to support providers while continuing Medicare's shift toward value-driven healthcare.
New Efficiency Adjustment Improves Payment Accuracy
A final efficiency adjustment of 2.5% is provided to many non-time-based services by CMS. It was found out that there were outdated surveys used as sources for the calculations concerning the amount of work performed by physicians, which did not take into account the latest technological advancements and increased efficiency.
There are several categories of services not subject to such adjustment including evaluation and management (E/M) services, behavioral health services, care management services, telehealth services, among others.
Updated Practice Expense Methodology Reflects Modern Care
The CMS also established changes to its practice expense approach after concluding that there were major issues of reliability with the newer surveys. Rather than incorporating the survey results, CMS made adjustments to the allocation of indirect expenses between office and facility locations.
CMS will rely on regularly updated hospital outpatient data for specific technical services such as radiation therapy and selected remote monitoring services.
Expanding Access Through Telehealth and Better Care Coordination
In addition to payment changes, the 2026 Physician Fee Schedule Final Rule enhances Medicare’s investment in telehealth, behavioral health services, and coordination of care. This will help to increase patient access and give providers more flexibility in offering services.
Permanent Telehealth Flexibilities Improve Patient Access
The CMS has made it easier to add new services on the Medicare Telehealth Services List by doing away with the differentiation of provisional and permanent services. In the future, the only thing that would matter is whether the services can be provided via real-time audio/video communication.
Also, frequency limits have been permanently waived for inpatient visits, nursing facility visits, and critical care consultations. Physicians will also have the option of continuing to provide direct supervision from remote locations through audio/video communication for a wide variety of eligible services.
Greater Support for Behavioral Health and Chronic Disease Management
Given the link between physical and mental well-being, CMS has developed new add-on codes that can be used for APCM services. Codes for BHI and the CoCM have been created by CMS in order to encourage practitioners to provide more holistic treatment.
Moreover, CMS has increased Medicare reimbursement for Digital Mental Health Treatment (DMHT) devices that are used in the treatment of Attention Deficit Hyperactivity Disorder (ADHD).
New Flexibilities for Rural Healthcare Providers
There will be some policy changes that will favor RHCs and FQHCs starting from 2026. They will be able to bill for behavioral health integration services using the new APCM add-on codes and will get more consistency in Medicare policies in all healthcare settings.
CMS will also allow the use of virtual direct supervision via audio and video technology for eligible services. Also, RHCs and FQHCs will be able to continue to bill some telehealth services using HCPCS code G2025 even up to the end of 2026.
Additional Medicare Payment Reforms and Industry Impact
Changes for specialty products, prescription drug reimbursements, and provider payment policies are also contained in the last rule. Such changes have been made in order to increase transparency in the spending of Medicare funds.
Revised Payment Policy for Skin Substitute Products
There have been considerable changes introduced by CMS in the way that skin substitutes reimbursement is provided through the Part B Medicare. Instead of using the ASP approach for the payment of most products, skin substitutes will normally be reimbursed as incident-to supplies when used in conjunction with covered procedures.
In addition, CMS will classify these products according to their FDA classification status.
|
Skin Substitute Policy |
Previous Method |
2026 Final Rule |
|
Payment Method |
Average Sales Price (ASP) |
Incident-to supply payment |
|
Product Classification |
Individual billing codes |
FDA-based categories |
|
Primary Goal |
Product-specific reimbursement |
Better cost consistency and transparency |
Updated Medicare Part B Drug Payment Policies
CMS finalized a number of changes impacting the drug pricing and manufacturer reporting in Medicare Part B program. The new rule requires manufacturers to document the information more extensively with respect to Average Sales Price (ASP) calculations and bundled payments.
Moreover, CMS stated that the drugs purchased through the Medicare Maximum Fair Price program will be taken into account in ASP calculations starting from 2026.
What Healthcare Organizations Should Do Next
Since the 2026 Final Rule is wide-ranging, healthcare organizations will need to look at their own billing and reimbursement process as well as compliance processes ahead of time. Healthcare facilities also need to consider if they have the ability to take part in Advanced Alternative Payment Models and telehealth services.
Healthcare organizations that plan early will be able to accommodate the new requirements and still be able to provide quality care to their patients under the Medicare reimbursement system.
There have been many important updates brought by the CY 2026 Medicare Physician Fee Schedule Final Rule in order to transform the Medicare payment system and enhance the quality of care provided in a more efficient manner. Such areas include having different conversion factors and modified payment methods, expanded telemedicine opportunities, as well as increased behavioral health provisions.
It is recommended for all healthcare facilities, medical practitioners, and healthcare administrators to thoroughly examine the changes introduced. Proper preparation for the new payment systems and billing procedures will allow to adjust effectively without compromising the quality of care.
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