CMS Releases CY 2026 Medicare Physician Fee Schedule Final Rule

The Centers for Medicare & Medicaid Services (CMS) on Oct. 31, 2025, released the calendar year (CY) 2026 Medicare Physician Fee Schedule (PFS) Final Rule, which includes policies related to Medicare physician payment and the Quality Payment Program (QPP). These policies take effect on Jan. 1, 2026, unless otherwise noted. Despite significant stakeholder feedback, CMS largely finalized its proposals with only modest adjustments to key payment reforms.

More information about the 2026 Medicare PFS Final Rule is available at the following resources:

• Final Rule
• Press Release
• Fact Sheet
• Medicare Shared Savings Program Fact Sheet
• Final Rule Addenda and Other Supporting Documents

Key Takeaways

Conversion Factor Updates. CMS finalized separate CY 2026 conversion factors (CFs) for Alternative Payment Model (APM) Qualifying Participants (QPs) and non-QP clinicians.

The CFs are:

• $33.5675 for QPs (3.77 percent increase)
• $33.4009 for non-QPs (3.26 percent increase)

These separate CFs reflect statutory updates under the One Big Beautiful Bill Act (OBBB) H.R.1, a one-year 2.5 percent payment increase and a 0.49 percent budget neutrality adjustment (slightly lower than the proposed 0.55 percent). Most of this difference stems from modifications to the new efficiency adjustment policy.

Efficiency Adjustment. CMS finalized a new "efficiency adjustment," reducing work relative value units (RVUs) and corresponding intraservice time by 2.5 percent for most non-time-based services. Time-based codes are excluded. This adjustment reflects expected productivity gains from workflow improvements and technology adoption. CMS noted that had it used more recent U.S. Bureau of Labor Statistics (BLS) data, the adjustment would have been 3.6 percent, but the agency finalized the lower figure to take an incremental approach.

Site of Service Payment Differential. CMS finalized changes to the methodology for allocating indirect practice expense (PE) RVUs based on the site of service. For services furnished in facility settings, CMS will reduce the portion of indirect PE RVUs tied to work RVUs to half the amount used for non-facility services. Although the change is budget neutral overall, it redistributes payments, resulting in increased compensation for office-based specialties while reducing payments for hospital-based specialties. Maternity services with an MMM global period are exempt.

Telehealth. CMS finalized several telehealth updates, including:

• increasing the originating site facility fee to $31.85 for CY 2026 (up from $31.01 in CY 2025)
• adding five new services to the Medicare Telehealth Services List
• removing frequency limits for subsequent inpatient, nursing facility and critical care visits
• allowing real-time audio/video communications to meet "direct supervision" requirements

Drugs and Biologicals Under Part B. CMS maintained standard refund thresholds for discarded drug amounts, clarified Average Sales Price (ASP) reporting for drugs sold at a Maximum Fair Price (MFP), defined "bundled arrangements," upheld current definitions of bona fide service fees (BFSFs) while requiring new certification letters, and confirmed that tissue procurement costs for autologous cell-based therapies must be included in ASP and product payment calculations starting in 2026.

Skin Substitutes. CMS finalized its policy to treat skin substitutes as incident-to supplies rather than biologicals, effective Jan. 1, 2026. Products will be grouped according to their U.S. Food and Drug Administration (FDA) regulatory pathway but reimbursed at a single blended rate of $127.28 per cm².

Ambulatory Specialty Model (ASM). CMS finalized plans to launch the new mandatory ASM in January 2027. The five-year model targets heart failure and low back pain care and will hold specialists accountable for quality, cost, care coordination and electronic health records (EHR) use. Payment adjustments will begin in 2029, ranging from -9 percent to +9 percent, scaling up to ±12 percent by 2033.

Key Payment Updates

PFS CF. Beginning in 2026, there will be two separate conversion factors for qualifying APM (QPs) and one for non-qualifying APM (non-QPs) participants. The update to the qualifying APM conversion factor (which applies to PFS payments for QPs) for CY 2026 is 0.75 percent, while the update to the nonqualifying APM conversion factor (which applies to Medicare Physician Fee Schedule (MPFS) payments for all other clinicians) for CY 2026 is 0.25 percent.

The change to the PFS conversion factors for CY 2026 includes these updates as required by statute (Section 71202 of the OBBB, H.R.1), a one-year increase of 2.5 percent for CY 2026 and an estimated 0.49 budget neutrality adjustment. The 0.49 percent positive budget neutrality adjustment is slightly lower than the proposed 0.55 percent adjustment. Accordingly, the final CFs are $33.5675 and $33.4009 (0.06 percent lower than the proposed CFs of $33.5875 and $33.4209). Most of this difference in budget neutrality is due to modifications CMS made to the efficiency adjustment policy.

Anesthesia CF. The anesthesia qualifying APM CF will be 20.600 and the anesthesia non-APM CF will be 20.498.

Key Policy Updates

Efficiency Adjustment. CMS finalized a new "efficiency adjustment" that reduces work RVUs and associated intraservice physician time by 2.5 percent for most non-time-based services. Time-based services are excluded. This adjustment reflects anticipated productivity gains resulting from improvements in clinician experience, workflows and technology. Specifically, CMS believes that non-time-based codes, such as those describing procedures, radiology services and diagnostic tests, should reflect increased efficiency as these services are performed more frequently, professionals gain experience, technology advances and operational processes improve.

To calculate the adjustment, CMS finalized its proposal to add the last five years of the Medicare Economic Index productivity adjustment, resulting in a 2.5 percent reduction. In the final rule, CMS modified the list of codes to which the efficiency adjustment will apply. As in the proposed rule, CMS excluded time-based codes (including evaluation and management, care management and behavioral health services), services on the CMS telehealth list and maternity care codes with an MMM global period.

However, CMS finalized an additional exemption in the final rule, most notably for new CY 2026 services and other time-based services not previously captured, such as time-based drug administration, physical medicine and rehabilitation, therapy services and remote therapeutic monitoring services. With these changes, the efficiency adjustment will apply to approximately 7,700 codes (down from nearly 9,000 codes as proposed).

CMS indicated that if more recent BLS data had been used, the CY 2026 efficiency adjustment would have been 3.6 percent rather than 2.5 percent. The agency chose to finalize the lower 2.5 percent reduction to adopt a more measured, incremental approach. As a result, future recalculations under CMS's three-year update policy – which occurs in CY 2029 – could produce a higher adjustment.

Site of Service Payment Differential

The agency finalized a significant proposal to revise the methodology for allocating indirect PE RVUs based on site of service. Under the current PFS methodology, the same amount of indirect PE per work RVU is allocated to both facility- and non-facility-furnished services. This approach is based on a long-standing assumption (dating back to the original development of the PE methodology) that most physicians operated office-based practices even if they also provided care in hospital settings. As a result, a baseline level of office overhead was effectively built into facility-based payment rates, even for physicians who did not maintain separate office practices and therefore did not incur those expenses.

CMS is now finalizing a major change to how facility-based physician services are valued. The agency believes that the original assumption no longer reflects today's practice environment.

Accordingly, for services furnished in the facility setting, the portion of indirect PE RVUs linked to work RVUs will be reduced to half or 50 percent of the amount applied to non-facility services. This change will increase PE RVUs for specialties that primarily deliver care in non-facility settings (e.g. physician offices) and decrease PE RVUs for those that predominantly practice in facility settings (e.g. hospitals). The change is budget-neutral and does not affect the overall conversion factor, as it simply redistributes PE RVUs between settings.

As a result, this policy will drive a significant redistribution of payments across sites of care. As shown in the impact analysis at the end of the rule (Table D-B7, pages 1738-1741), there are substantial differences in payment depending on where services are performed, even among providers within the same specialty.

CMS received extensive feedback on this proposal. Although many commenters urged the agency to phase in the change, CMS declined, explaining that a transition would delay efforts to address long-standing site-of-service payment disparities and would continue existing distortions between facility and non-facility rates. CMS also declined recommendations to implement a smaller reduction. However, the agency excluded maternity services with an MMM global period to prevent unintended effects on maternity care and indicated it will continue evaluating the indirect PE methodology and consider additional refinements in future rulemaking.

Practice Cost Data. The final rule stated that CMS will not use the new American Medical Association (AMA) Physician Practice Information (PPI)/Clinician Practice Information survey data due to low response rates and quality concerns. Instead, it will continue using older PPI survey data. CMS also finalized the proposal not to implement PE per hour data or cost shares from the AMA's survey data, and maintained current data and cost shares for CY 2026 MPFS rate setting.

Potentially Misvalued Services Under the PFS. CMS finalized its proposal not to designate any of the 11 nominated codes as potentially misvalued at this time. The agency confirmed that work RVUs or direct PE inputs for these codes will remain unchanged in CY 2026. While acknowledging that the submissions were detailed, CMS emphasized that they lack adequate documentation, sufficient specialty consensus and compelling justification for the proposed resource adjustments.

Geographic Practice Cost Indices (GPCIs). CMS finalized its proposal to update GPCIs using refreshed wage, rent and insurance data to better reflect local cost differences (see Addenda D and E or the Interim Report for the CY 2026 Update of GPCIs and malpractice [MP] RVUs for the Medicare PFS).

Expanded Billing for the Complex Patient Evaluation and Management (E/M) Add-On Code G2211. In the CY 2024 PFS Final Rule, CMS finalized the change in status for the office and outpatient (O/O) E/M visit complexity add-on code, Healthcare Common Procedure Coding System (HCPCS) code G2211, by assigning it an "active" status indicator, thereby making it separately payable. This add-on code is billed in conjunction with standard O/O E/M visit codes and is intended to recognize the additional work involved in establishing and maintaining a longitudinal relationship with patients.

Under the original policy, payment for G2211 was not permitted for home or residence visits. However, stakeholders urged CMS to either create a separate complexity add-on code for home-based E/M services or expand G2211 to apply to visits in settings such as nursing facilities, assisted living facilities and beneficiaries' homes.

Acknowledging that home and residence visits often involve the development of a long-term care plan, regular follow-up and additional effort to build trust and continuity of care, CMS finalized its proposal to allow HCPCS code G2211 to be billed as an add-on to home or residence E/M visit codes.

Policies to Improve Care for Chronic Illness and Behavioral Health Needs. CMS will expand Medicare reimbursement for Digital Mental Health Therapeutic (DMHT) devices that meet FDA criteria, including those billed under HCPCS codes G0552-G0554. While patients must have a diagnosed mental health condition, the billing practitioner does not need to be the clinician who made the diagnosis. CMS continues to review and request additional comments on coding and payment policies for devices for ADHD, fibromyalgia, gastrointestinal issues and sleep disturbances, and proposed to expand HCPCS codes G0552-G0554 to apply to DMHT devices classified in 21 CFR 882.5803. CMS finalized a revision to HCPCS code G0019 to update the description of Community Health Integration (CHI) services, emphasizing the person-centered, community-based support provided by trained personnel under clinician supervision. The revisions clarify covered activities, such as assessment, care coordination, health education and patient advocacy, to better address social and environmental factors affecting diagnosis and treatment.

Telehealth

Payment for Medicare Telehealth Services. CMS finalized the increase of the originating site facility fee for telehealth services, $31.85 for CY 2026 (up from $31.01 in CY 2025).

Changes to the Medicare Telehealth Services List Review Process. The agency finalized its proposal to streamline the Medicare Telehealth Services List review process by simplifying the existing five-step evaluation. In response to stakeholder feedback that the current process is overly complex and requires clinical evidence that can be difficult to produce, CMS is eliminating Steps 4 and 5, which involved comparing proposed services to those already permanently approved and evaluating whether the telehealth version provides the same clinical benefit as in-person care. CMS concluded that these steps are unnecessary, as patients and providers are best positioned to determine the appropriateness of telehealth delivery.

CMS will retain Steps 1 through 3, which involve confirming that the service is separately payable under the PFS, meets the statutory requirements under Section 1834(m) of the Social Security Act (SSA) – including provider eligibility, geographic and site limitations, and technology standards – and can be effectively delivered via interactive telecommunications without compromising quality or clinical benefit.

Additionally, CMS finalized the elimination of the "permanent" and "provisional" service designations. Going forward, all services on the list will be considered permanent, though CMS will retain authority to remove services as appropriate.

Additions to the Medicare Telehealth Services List. CMS finalized several additions to the Medicare Telehealth Services List: CPT 90849 (Multiple-Family Group Psychotherapy), HCPCS G0473 (Group Behavioral Counseling for Obesity), HCPCS G0545 (Infectious Disease Add-On), and CPT 92622 and 92623 (Auditory Osseointegrated Sound Processor Diagnostic Analysis and Programming). Many of these services were initially added on a temporary basis during the COVID-19 Public Health Emergency (PHE) and later retained provisionally. CMS received a request to add CPT codes 90937, 90945 and 90947 to the Medicare Telehealth Services List but maintained its position that these services do not meet Step 3 of the Medicare telehealth review process. CMS officials stated that they "are not persuaded that all service elements could be furnished via telehealth, since we did not receive this information." Further, CMS noted the agency will consider additional information provided in future rulemaking.

Extended Telehealth Flexibilities, Including Frequency Limitation Suspensions and Direct Supervision Requirements. CMS finalized several updates to the frequency limitations on Medicare telehealth subsequent care services in inpatient and nursing facility settings, as well as critical care consultations. Historically, these services were subject to strict frequency limitations when delivered via telehealth. For example, subsequent hospital care was limited to once every three days, and follow-up visits in nursing facilities were allowed only once every 14 days. These restrictions were temporarily waived during the COVID-19 Public Health Emergency (PHE) to ensure continued access to care, and the suspension remained in effect through CY 2025. CMS is making this change permanent by removing the frequency limitations for subsequent inpatient visits, subsequent nursing facility visits and critical care consultations.

CMS also concluded that for services requiring direct physician supervision, the physician or practitioner does not need to be physically present. Instead, real-time audio/video communication is permitted as long as the physician or practitioner is "immediately available." Specifically, CMS finalized, beginning Jan. 1, 2026, making virtual supervision permanent for most incident-to services under Section 410.26. Exceptions include higher-risk surgeries with global surgery indicators 010 or 090, which would still require in-person supervision. Lower-risk services, such as CPT 99211, would remain eligible for virtual supervision.

CMS will also allow Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs) to use audio/video communications to meet direct supervision requirements for their applicable services and supplies.

Return to Pre-PHE Teaching Physician Policy. In the fiscal year (FY) 2026 final rule, CMS finalized a permanent policy allowing teaching physicians to maintain a virtual presence during services involving residents, but only in specific clinical scenarios – namely, three-way telehealth visits where the teaching physician, resident and patient are in separate locations. CMS will continue to permit teaching physicians to be present for the key portion of a Medicare telehealth service through real-time audio/video communication across all residency training settings. Documentation in the medical record must clearly indicate whether the teaching physician was physically present or participating virtually and also specify which portion of the service was performed under virtual supervision.

Drugs and Biological Products Paid Under Medicare Part B

Refunds with Respect to Discarded Amounts. The Infrastructure Investment and Jobs Act (IIJA) of 2021 requires manufacturers to provide refunds to CMS for certain discarded amounts from single-dose container drugs beginning Jan. 1, 2023. For CY 2026, CMS received two applications requesting increases to the applicable percentage.

One manufacturer resubmitted a request to raise the applicable percentage to 72 percent, citing potential use in cancer vaccine adjuvant trials that could result in higher discard rates. However, CMS reviewed claims data showing discard rates between 1.2 percent and 3.8 percent, and finalized its proposal to maintain the standard 10 percent applicable percentage, concluding that the evidence did not demonstrate unique circumstances.

Another manufacturer requested an increase from 35 percent to 45 percent, arguing that variations in kidney volume and administration routes contribute to higher drug loss. CMS finalized its proposal to retain the 35 percent rate, explaining that such patient-specific factors do not constitute unique circumstances since "manufacturers can optimize the availability of products for these circumstances to minimize discarded amounts."

ASP: Price Concessions and Bona Fide Service Fees (BFSFs)

Currently, manufacturers must deduct price concessions such as volume discounts, prompt-pay discounts, cash discounts, free goods contingent on purchase requirements, chargebacks and rebates from ASP calculations. BFSFs, however, are not treated as price concessions and therefore are not deducted from ASP if they meet a four-part test: The fee must reflect fair market value (FMV) for a bona fide service actually performed on behalf of the manufacturer, be a service the manufacturer would otherwise perform itself, and not be passed on to clients or customers. CMS finalized the BFSF definition in 2007 but has not previously issued detailed guidance on FMV methodologies or the time frame for reassessing FMV determinations.

In this rule, CMS finalized the addition of a definition for "bundled arrangement" at Section 414.802, requiring manufacturers to allocate discounts proportionally across all products included in bundled sales arrangements (consistent with Medicaid's approach). This clarification outlines how manufacturers must "unbundle" both contingent and non-contingent discounts and allocate them proportionally based on the total dollar value of all products in the bundle. CMS also solicited comments on alternative allocation methods for complex bundled arrangements and on how to address discounts that span multiple time periods under value-based purchasing arrangements.

CMS did not finalize revisions to the BFSF definition that would have: 1) specified a required FMV determination methodology and reassessment period, or 2) clarified what constitutes sufficient evidence that a fee is not passed on to an affiliate, client or customer. However, effective January 2026, manufacturers will be required to submit certification letters from BFSF recipients confirming that the fees are not passed through to affiliates, clients or customers.

CMS also provided examples of payments that should be considered price concessions rather than BFSFs, including payments to distributors for credit card processing fees that allow purchasers to avoid additional charges, payments for tissue procurement used in manufacturing processes, certain data-sharing fees that exceed FMV (or are required for legal compliance) and distribution service fees that exceed FMV.

ASP: Units Sold at MFP. CMS clarified that units of selected drugs sold at MFP under the Medicare Drug Price Negotiation Program must be included in ASP calculations effective Jan. 1, 2026, since these sales do not fall under statutory exemptions and are expressly included in best price determinations.

Autologous Cell-Based Immunotherapy and Gene Therapy Payment. CMS finalized that preparatory procedures for tissue procurement required for manufacturing autologous cell-based immunotherapies and gene therapies should be included in the product's payment rather than paid separately. This extends existing CAR-T cell therapy policies to all autologous cell-based therapies, reflecting that tissue procurement is "an integral part of the manufacturing process" and a key component of cost of goods sold. Beginning Jan. 1, 2026, manufacturers must include any tissue procurement costs in ASP calculations, and such payments cannot be classified as BFSFs.

Medicare Prescription Drug Inflation Rebate Program

Part B Drug Rebates: Single-Source Drugs and Biological Products. CMS finalized updates to the inflation rebate program to ensure rebate calculations remain accurate even in cases where certain data are unavailable or where ASP or wholesale acquisition cost (WAC) values are negative. These refinements aim to improve consistency and integrity in how inflation-based rebates are assessed under Medicare Part B.

Part D Drug Rebates: Certain Drugs and Biologicals. CMS finalized a claims-based methodology for excluding 340B units from inflation rebate calculations, incorporating several modifications to its original proposal. Specifically, CMS adopted the Prescriber-Pharmacy Methodology, which identifies Prescription Drug Event (PDE) records as potentially 340B-eligible when:

1. The prescriber's National Provider Identifier (NPI) is associated with a 340B-covered entity, and
2. The pharmacy's NPI corresponds to a contract pharmacy for that same covered entity.

To enhance accuracy, CMS will draw from multiple data sources when applying this approach. The agency declined to adopt the alternative Beneficiary-Pharmacy Methodology, citing its complexity, lower accuracy and lack of meaningful improvement over the Prescriber-Pharmacy model.

Additionally, CMS will establish a voluntary 340B data repository to collect information on 340B units directly from covered entities, with a testing phase set to begin in 2026.

Quality Payment Program

Merit-Based Incentive Payment System (MIPS) Performance Measurement Proposals. CMS finalized several updates to measure and activity inventories, as well as scoring methodologies, affecting various MIPS reporting pathways.

Key changes include:

• a total of 190 quality measures for the 2026 performance period
• continuation of the performance threshold at 75 points through the CY 2028 performance period to promote program stability
• implementation of five new MIPS quality measures, including three designated as high priority
• removal of 10 existing MIPS quality measures
• substantive revisions to 30 MIPS quality measures
• updates to the APM Performance Pathway (APP) Plus measure set to ensure alignment with the broader MIPS quality measure inventory
• modifications to the MIPS cost measure inventory
• updates to the operational lists of care episode and patient condition groups and codes to reflect current service and diagnosis coding practices
• adoption of a two-year informational-only feedback period for new cost measures, during which they will not affect MIPS cost category scores, final scores or payment adjustments until the third year of implementation
• revisions to two population-based cost measures, including the Total Per Capita Cost (TPCC) measure
• modification of the "high priority measure" definition to remove references to health equity
• creation of a new "Advancing Health and Wellness" Improvement Activity (IA) subcategory, elimination of the "Achieving Health Equity" subcategory and addition of three new IAs
• changes to two Promoting Interoperability (PI) measures and the addition of a new optional bonus measure: Public Health Reporting Using the Trusted Exchange Framework and Common Agreement™ (TEFCA™)

MVP Proposals. CMS previously established the MIPS Value Pathways (MVP) framework as a reporting option designed to create a more streamlined and cohesive participation experience by aligning activities across the four MIPS performance categories with a specific specialty, medical condition or patient population.

For the CY 2026 performance period, CMS finalized six new MVPs:

• Diagnostic Radiology
• Interventional Radiology
• Neuropsychology
• Pathology
• Podiatry
• Vascular Surgery

In addition, CMS finalized the following updates:

• modifications to all 21 existing MVPs
• a new requirement for groups to attest to their specialty composition (e.g. whether they are single-specialty or multispecialty small practices) during the MVP registration process, rather than CMS making this determination
• allowing small multispecialty practices to report an MVP as a group (without the need to form subgroups) beginning with the CY 2026 performance period
• providing Qualified Clinical Data Registries (QCDRs) and Qualified Registries one year after a new MVP is finalized before they are required to fully support that MVP

Advanced APMs Proposals. Building on policies outlined in the CY 2025 Proposed Rule, CMS finalized a broader approach to QP determinations. The agency will now conduct both individual- and APM entity-level QP calculations. CMS also finalized, with modifications, its proposal to expand the definition of "attribution-eligible beneficiary" to include determinations made through both E/M services and Covered Professional Services. In addition, CMS finalized the removal of the current 50-clinician limit for Medical Home Model participants.

Medicare Shared Savings Program (MSSP)

CMS finalized one-sided model participation for inexperienced accountable care organizations (ACOs) that do not have prior experience with Medicare ACO initiatives that include performance-based risk. Inexperienced ACOs will be required to progress more rapidly to higher levels of risk under Level E of the BASIC or ENHANCED track. However, ACOs with fewer than 5,000 assigned beneficiaries in Benchmark Year (BY) 1, BY 2 or both are prohibited from participating in the ENHANCED track.

CMS also finalized increased flexibility for ACOs participating in the MSSP, while also prioritizing the financial integrity of the program through risk mitigation. Finalized changes include flexibility in BY beneficiary count, BASIC track requirement for ACOs with fewer than 5,000 assigned beneficiaries in BY 1, BY2 or both, capped savings and losses, and exclusion from Low Revenue ACO savings. Moreover, the "health equity benchmark adjustment" has been renamed to "population adjustment" but retains its methodology.

ACOs are required to submit a change request and update the ACO participant list outside of the annual charge request cycle when an ACO participant undergoes a change of ownership (CHOW). ACOs must also notify CMS no later than 30 days after a Skilled Nursing Facility Affiliate undergoes a CHOW. ACOs can meet performance standards either by being at or above the 40th percentile among all MIPS quality performance scores or by meeting "alternative" standards based on a sliding scale tied to outcome measures. If the new standards are not met, ACOs will be ineligible for shared savings and may be required to repay shared losses, if applicable.

Finally, CMS finalized multiple quality reporting changes, revisions to the APP Plus Quality Measure Set, implementation of a web-based survey mode to the Consumer Assessment of Healthcare Providers and Systems for MIPS survey, changes regarding ACOs' inability to meet quality performance standards, and revisions and expansion of Extreme and Uncontrollable Circumstances (EUC) Policies. CMS also stated its support for a full transition to digital quality measurement, along with extension of the electronic clinical quality measure (eCQM)/MIPS CQM reporting incentive to continue supporting ACOs transitioning to digital quality measurement. CMS finalized that the health equity adjustment applied to quality scores will be removed beginning on performance year 2026.

Additional Policies

Payment for Skin Substitutes. CMS has historically reimbursed skin substitutes primarily as biologicals under Section 1847A of the SSA, using ASP-based payment methodologies. Over time, escalating launch prices have driven Medicare Part B spending upward. CMS has previously expressed concerns about the sustainability of this trajectory and the need to reform current payment structures. Accordingly, effective Jan. 1, 2026, CMS is finalizing its proposal to pay separately for skin substitutes not licensed as biologicals under Section 351 of the Public Health Service Act, treating them as incident-to supplies when used during a covered application procedure under both the PFS in non-facility settings and the Outpatient Prospective Payment System (OPPS). Biologicals licensed under Section 351 will continue to be reimbursed under the ASP methodology. CMS emphasized that large payment differentials across care settings should not influence site-of-service decisions or encourage the use of higher-priced products that offer no additional clinical benefit.

CMS is also finalizing its approach to classify and pay for skin substitute products under three categories based on FDA regulatory pathways: 1) Premarket approval (PMA)-approved devices, 2) 510(k)-cleared devices (including De Novo products) and 3) self-determined 361 human cells, tissues, or cellular or tissue-based products (HCT/Ps). For CY 2026, the final payment rate is approximately $127.28 per cm², which is slightly higher than the originally proposed rate for CY 2026 of $125.38 per cm². CMS also finalized a policy to update the rates for the skin substitute categories annually through rulemaking using one or more recently available calendar quarter(s) of ASP data, when available, or, if ASP data is not available, using hospital mean unit cost data, WAC or 89.6 percent of the average wholesale price. CMS also stated that "in future notice and comment rulemaking, [CMS] intend[s] to propose using claims data to set payment rates for products in these three categories, which would likely result in payment valuations that diverge based on the updated data." The agency solicited feedback on this methodology and potential alternatives, including distinct rates by category, pooled averages or more granular subgroupings.

Additionally, CMS finalized its proposal to evaluate all complete HCPCS Level II applications for skin substitutes on the same biannual schedule used for nondrug/nonbiological items. For products entering the market under the Biologics License Application (BLA), New Drug Application (NDA) or Abbreviated New Drug Application (ANDA) pathways that may qualify as skin substitutes, CMS stated it will continue reviewing applications under the quarterly HCPCS coding cycles applicable to drugs and biologicals.

Although CMS projects this policy will generate approximately $19 billion in savings in CY 2026, it did not affect budget neutrality calculations for the final rule. To determine budget neutrality, CMS compares physician service RVUs from one year to the next (i.e., 2025 to 2026). Because skin substitute supply costs were previously reimbursed under ASP plus 6 percent and not included in PFS RVUs, CMS was unable to factor these services into the current year's budget neutrality estimates. However, CMS noted that the policy may affect future budget neutrality adjustments. Given the typical two-year data lag, utilization data from CY 2026 could inform the CY 2028 PFS budget neutrality calculations. The magnitude of this effect will depend on utilization patterns.

New Mandatory ASM. The CMS Innovation Center is moving forward with its plan to launch the new mandatory five-year ASM on Jan. 1, 2027. The model is designed to enhance quality and reduce costs by holding individual specialists – rather than organizations – accountable for performance on targeted quality, cost, care coordination and EHR use metrics. The initial focus will be on heart failure and low back pain, conditions that together represent approximately 6.2 percent of Medicare Part A and B spending.

To streamline reporting, CMS will align ASM with the MVP framework. Under ASM, Part B payments will be adjusted – positively, neutrally or negatively – based on clinician performance relative to peers within the same specialty and condition. Similar to MIPS, payment adjustments will occur two years after the performance year (e.g., performance year 2027 affecting payment year 2029).

In the first payment year, adjustments will range from -9 percent to +9 percent, scaling up to ±12 percent by payment year 2033. All participating clinicians will be subject to this level of risk. The model is designed so that the aggregate positive adjustments for high performers will not exceed the total negative adjustments for low performers, maintaining overall budget neutrality. CMS will allocate 85 percent of funds toward payment adjustments and retain the remaining 15 percent as savings to the Medicare program.

Medicare Diabetes Prevention Program (MDPP). CMS has finalized several MDPP changes, including testing asynchronous online delivery from 2026 to 2029, adding new definitions and flexibilities to support virtual participation, and aligning with Centers for Disease Control and Prevention (CDC) standards. Of note, the finalized proposal includes allowing weight documentation from medical records, expanding acceptable self-reporting locations and introducing a new HCPCS code (G9871) with an $18 payment rate for online sessions.

Further, CMS finalized additional updates to ensure regulatory clarity for make-up sessions offered through online delivery by revising existing requirements, which state "an MDPP supplier may offer a make-up session to an MDPP beneficiary who missed a regularly scheduled session. MDPP make-up sessions may only use in-person or distance learning delivery." CMS is also revising this language to indicate that online delivery is also an accepted delivery modality for make-up sessions by specifically stating that "an MDPP supplier may offer a make-up session to an MDPP beneficiary who missed a regularly scheduled session." CMS clarifies that MDPP make-up sessions may be used only through in-person, distance learning or online delivery.

Comment Solicitation on Software as a Service (SaaS) Payment Policy. CMS acknowledged challenges in updating its PE methodology to reflect the growing use of software-based tools in clinical care. The current PE framework, based on 2007-2008 data, does not capture costs tied to licensing, analytics or subscription models. Although CMS received updated AMA survey data, including SaaS and artificial intelligence (AI) expenses, it declined to use it for CY 2026 due to quality concerns.

Historically, CMS has treated most software expenses as indirect costs, but since CY 2022, it has begun reimbursing certain SaaS and AI applications under PFS. The agency cited ongoing challenges – cost variation, limited transparency and lack of claims data – and requested feedback on how SaaS tools should be valued, what data best capture its costs and how to account for physician work interpreting AI outputs. CMS also asked whether it should continue crosswalking to OPPS, rely on geometric mean costs or develop a new pricing framework.

CMS thanked stakeholders for their input and indicated that it may incorporate recommendations in future rulemaking.

Improving Accuracy in Global Surgery Payments. CMS pays for surgical procedures under "global surgical packages" that bundle the procedure with pre- and post-operative care during defined 0-, 10- or 90-day global periods. Of roughly 5,500 such procedures, about 4,200 include at least one post-op visit. However, studies by the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) and the RAND Corporation have shown that far fewer post-op visits occur than CMS assumes, raising concerns about overvaluation of follow-up care and undervaluation of the surgery itself.

In 2015, CMS proposed converting all 10- and 90-day global periods to 0-day packages to allow separate billing for follow-up care, but the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) blocked the change and instead required better data collection. Since then, CMS has required reporting of post-op visits using Current Procedural Terminology (CPT) code 99024 and expanded use of modifier -54 (surgical care only). Beginning Jan. 1, 2025, modifier -54 must be used whenever the surgeon will not provide follow-up care. CMS also created HCPCS code G0559 to reimburse other practitioners who deliver post-op visits.

In the CY 2026 rule, CMS evaluated methods to rebalance payment between the surgical and post-op components, noting that current assumptions are decades old and inaccurate – only about 28 percent of expected post-op visits are performed. Among three methodologies tested, CMS found that using CPT code 99024 data offers the most accurate, scalable approach. Applying this method would increase the average surgeon share of payment from 82 percent to 91 percent.

CMS received limited comments but plans to continue refining global surgical package valuations through future rulemaking, emphasizing data-driven adjustments that better reflect current surgical practice patterns.

Changes to the Regulations Associated with the Ambulance Fee Schedule. CMS finalized its proposal to codify the congressionally enacted ambulance payment add-ons, which includes Section 2203 of the Full-Year Continuing Appropriations and Extensions Act, 2025. This provision extended the Medicare ground ambulance add-on payments.

Super Rural Bonus. Originally established in 2003, this add-on provides a 22.6 percent increase to the base rate for ground ambulance services originating in "qualified rural areas."

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