CMS Issues CY 2027 Medicare Physician Fee Schedule Final Rule

On November 4, 2026, the Centers for Medicare and Medicaid Services (CMS) released the calendar year (CY) 2027 Medicare Physician Fee Schedule (PFS) final rule reducing the PFS conversion factor from $33.5675 to $32.9548 for qualifying alternative payment model (APM) participants and from $33.4009 to $32.6286 for nonqualifying APM participants. Many of the final policies – including the reduction when an office or outpatient visit is furnished on the same day as certain procedures, practice expense (PE) methodology revisions, evaluation and management (EM) complexity add-on restructuring, Medicare Shared Savings Program (MSSP) reforms and mandatory 340B repository reporting – will have meaningful operational and financial implications.

The final rule also responds to several far-reaching Requests for Information (RFIs) that signal potential future reforms to physician payment, primary care, diagnostic interoperability, and the Current Procedural Terminology (CPT) coding and valuation process, although no new policies were adopted on these topics.

The final rule is effective January 1, 2027. Given the breadth of the finalized policies and the numerous RFIs, stakeholders should carefully evaluate both the immediate payment impacts and the broader policy direction reflected throughout the rule.

More on the final rule can be found in the accompanying press release, fact sheet and addenda, along with fact sheets specific to the MSSP and Quality Payment Program (QPP).

Key Takeaways

• Physician payment will decline overall. Expiration of the temporary 2.5 percent statutory payment increase, combined with a minus 0.12 percent budget neutrality adjustment, results in conversion factor reductions of 1.83 percent for qualifying APM participants and 2.31 percent for other clinicians, despite modest statutory payment updates.
• CMS finalized the most significant PE methodology revisions in years. The final rule phases out reliance on outdated specialty-level survey data, revises indirect PE allocation and introduces a stabilization adjustment intended to reduce annual payment volatility while redistributing payments across specialties.
• CMS continues prioritizing longitudinal primary care. The agency finalized replacing Healthcare Common Procedure Coding System (HCPCS) Code G2211 with a percentage-based modifier (B1) that increases payment for qualifying office/outpatient and home or residence EM visits by 16 percent, with an enhanced 32 percent modifier (B2) for eligible MSSP and Long-Term Enhanced ACO Design (LEAD) Model Accountable Care organizations (ACO) clinicians.
• CMS scaled back its same-day care payment reduction proposal. CMS finalized a 20 percent (rather than the proposed 50 percent) reduction for separately identifiable EM visits billed with Modifier -25 on the same day as a zero-day global procedure.
• CMS finalized meaningful changes to the MSSP. Key policies include increasing the BASIC Track Level E sharing rate from 50 percent to 60 percent, allowing eligible ACOs to reduce or waive Part B cost-sharing for assigned beneficiaries, simplifying Certified Electronic Health Record Technology (CEHRT) requirements and revising benchmarking methodologies.
• CMS finalized significant QPP changes, including transitioning away from traditional Merit-based Incentive Payment System (MIPS) reporting beginning with the 2031 performance year and continuing to emphasize MIPS Value Pathways (MVPs) as the primary quality reporting framework.
• The rule includes numerous RFIs that could shape future rulemaking. CMS sought comment on redesigning primary care payment, alternatives to the CPT coding and Specialty Society Resource-Based Relative Value Scale Update Committee (RUC) valuation process, reducing duplicate laboratory and imaging testing through improved interoperability, specialty participation in MSSP, community-based palliative care and Alzheimer's disease prevention and will consider the comments in future rulemaking.

Final CY 2027 Conversion Factors

Although the U.S. Congress provided physicians with a temporary 2.5 percent statutory payment increase for CY 2026, that increase expires at the end of the year. As a result, physicians will experience a net payment reduction in CY 2027 despite statutory payment updates. The final rule is likely to renew congressional discussions regarding long-term physician payment reform, particularly as Medicare physician payment updates continue to lag projected increases in the Medicare Economic Index (MEI).

For a deeper dive into the potential for lawmakers to take up Medicare physician payment reform during the lame duck and in the 120th Congress, read a special commentary, A Physician's Perspective on Medicare Physician Payment Reform, by Holland & Knight Senior Policy Advisor Larry Bucshon, M.D.

PFS Conversion Factor – Qualifying APM Participants: CMS finalized a CY 2027 conversion factor of $32.9548, representing a 1.83 percent reduction from CY 2026 after accounting for the expiration of the temporary 2.5 percent statutory payment increase. The final conversion factor reflects a 0.75 percent statutory update for qualifying Advanced APM participants and minus 0.12 percent budget neutrality adjustment.

PFS Conversion Factor – Nonqualifying APM Participants: CMS finalized a CY 2027 conversion factor of $32.6286, representing a 2.31 percent reduction from CY 2026. The final rate reflects the expiration of the temporary 2.5 percent statutory payment increase, a 0.25 percent statutory update and the same minus 0.12 percent budget neutrality adjustment.

Anesthesia Conversion Factors: CMS finalized an anesthesia conversion factor of $20.3068 for qualifying APM participants and $20.1056 for nonqualifying participants. This reflects the same budget neutrality and update adjustments applied to the PFS conversion factor, plus an anesthesia-specific PE and Malpractice adjustment of 0.41 percent.

Medicare Telehealth Originating Site Facility Fee: CMS finalized increasing the originating site facility fee for HCPCS code Q3014 to $32.68 for CY 2027, reflecting the final 2.6 percent MEI update.

Modernizing PE Payment

One of the most significant policies in the rule is CMS' effort to modernize how PE relative value units (RVUs) are calculated. The agency argues that portions of the current methodology continue to rely on specialty-level survey data that is nearly two decades old and no longer accurately reflects contemporary physician practice.

CMS finalized as proposed three major changes beginning in CY 2027:

• revising indirect PE allocation to better align indirect costs with work RVUs and clinical labor inputs
• phasing out the Indirect Practice Cost Index over a two-year transition because it continues to anchor PE values to outdated specialty survey data
• creating a new PE stabilization adjustment that limits annual increases or decreases in PE RVUs to ~5 percent for most existing services (excluding new, revised or revalued codes)

CMS will also continue updating direct PE inputs through invoice-based pricing, revise specialty assignments for selected HCPCS codes, equalize facility and non-facility PE payments for nursing facility EM visits, and publish imputed professional and technical component RVUs to improve transparency.

Although framed as a technical methodology update, the PE policy represents one of CMS' most consequential physician payment reforms in recent years. Because PE accounts for a substantial share of payment for many procedural services, changes to the methodology will continue redistributing Medicare reimbursement across specialties well beyond CY 2027.

Telehealth

CMS finalized several changes intended to continue expanding access to telehealth services following enactment of the Consolidated Appropriations Act, 2026 (CAA 2026), which continued the geographic and originating site requirement waivers for telehealth visits through CY 2027. Although many of the telehealth flexibilities are extensions required by statute, CMS continues to demonstrate strong support for maintaining broader access to virtual care while refining payment and documentation policies.

Key final policies include:

• adding six new HCPCS G-codes to the Medicare Telehealth Services List
• creating informational modifiers to implement recently extended statutory telehealth flexibilities; note the modifiers do not have payment implications
• updating descriptors for telehealth critical care consultation services
• modifying teaching physician virtual presence requirements to allow teaching physicians to bill for services involving residents when either the teaching physician or resident is in the same physical location as the beneficiary
• increasing the telehealth originating site facility fee to $32.68 for CY 2027
• conforming regulations to the statutory extension of audio-only telehealth flexibilities and delay of in-person visit requirements for telehealth mental health services through January 1, 2028

Payment Reduction for Modifier-25 Services

CMS finalized a lower-than-proposed payment reduction when a separately identifiable office/outpatient EM visit is billed with Modifier -25 by the same physician (or a practitioner of the same specialty in the same group practice) and limited the reduction to zero-day global surgical codes, rather than applying the reduction when zero-, 10- and 90-day global procedures as proposed. The highest-paid service will be paid at 100 percent and all other same-day procedures or EM visits at 80 percent rather than the 50 percent proposed. CMS stated "[we] believe that a 20 percent reduction in payment is both responsive to commenters and strikes a balance between paying more accurately for services performed on the same day and the real-world impact of this policy."

Key details of the final policy include:

• The policy applies only to zero-day global procedures. CMS did not finalize extending it to 10-day or 90-day globals, as originally proposed, citing difficulty quantifying overlap across a multiday period.
• CMS also narrowed the "same physician" standard to same specialty within the same group practice, so same-day visits with a different specialist in a multispecialty practice won't trigger the reduction.
• On the EM side, it's limited to specific office/outpatient codes – 99202-99205 and 99211-99215 – and does not extend to inpatient, ED or critical care EM visits.
• CMS declined to create a formal exception process for cases involving a clinically distinct, separately identifiable visit, instead pointing to the existing potentially misvalued code nomination process and its own claims-monitoring tools to watch for scheduling abuse.
• One open item: intravitreal eye injections (CPT 67028). CMS did not finalize anything here – it only sought comment on the clinical standard of care and said it would consider the input for future rulemaking.
• CMS noted it has a number of data analysis tools to monitor for potentially problematic utilization patterns, which may be useful in the future, if necessary, for monitoring for this practice, including distinct claims editing to identify problematic utilization patterns, comparative billing reports to identify to providers their outlier status and medical review capabilities to determine if the patterns are problematic and indicative of waste or abuse.

CMS projects this reduction will have the largest negative impacts on dermatology, otolaryngology and podiatry, although the overall impact is slightly lower due to the decrease in payment reduction from 50 to 20 percent and application to zero-day global surgical services rather than all procedures. Specifically, CMS estimates the "impacts to specialties will be reduced by around 1 percent by limiting this policy to only 0-day global services, rather than 0-, 10-, and 90-day global services as proposed."

Global Surgery Data Collection

CMS also finalized pausing additional post-operative visit data collection required under the Medicare Access and CHIP Reauthorization Act. Commenters generally supported the pause and opposed expanding CPT Code 99024 reporting. CMS will consider comments on alternative approaches to global surgery valuation in future rulemaking.

EM Services Complexity Add-On

Instead of paying HCPCS Code G2211 as a separate add-on code, CMS finalized converting the code into modifier B1, which increases payment for the underlying office/outpatient or home or residence EM service by 16 percent. CMS also finalized modifier B2, available to clinicians participating in MSSP ACOs, ACO Primary Care Flex and LEAD ACOs, that increases payment for qualifying EM visits by 32 percent in recognition of the additional resources associated with longitudinal, accountable care. B2 may be billed for all beneficiaries the ACO clinician treats, regardless of assignment to the ACO.

Rather than increasing payment for G2211, CMS has fundamentally redesigned how longitudinal care is recognized under the PFS. The percentage-based modifier maintains a consistent payment increase across all EM levels while further aligning Medicare payment with the agency's broader emphasis on comprehensive, continuous primary care.

Evaluation of Specific and Potentially Misvalued Codes

CMS finalized work RVU and direct PE updates for more than 50 code families, generally accepting recommendations from the American Medical Association/RUC while adopting lower work RVUs in certain instances where CMS believes surveyed physician time has declined or services have shifted from inpatient to outpatient settings. Notable policies include increasing payment for tobacco cessation counseling and behavioral health collaborative care management and establishing national payment for several previously contractor-priced services. CMS did not finalize its proposed bundled maternity care G-codes but may revisit them in future rulemaking.

CMS also identifies several services as potentially misvalued, including ultrasonic wound assessment, selected legacy "Harvard-valued" surgical procedures that have not been comprehensively reviewed in more than two decades and several additional procedural services for future evaluation. The agency also solicits comment on several codes without formally designating them as potentially misvalued.

CMS continues its multiyear effort to improve valuation accuracy by reassessing older services, incorporating updated clinical practice patterns and identifying services that may warrant future revaluation. Though many of the finalized changes are technical, they could have meaningful reimbursement implications for affected specialties.

Other Notable Service and Payment Changes

In response to extensive comments warning of access barriers, CMS abandoned its proposed deeper cuts to joint replacement codes and finalized the RUC-recommended work RVUs for total shoulder arthroplasty, shoulder hemiarthroplasty, total hip and total knee arthroplasty, which still represent reductions from current values. CMS also finalized higher payment for psychiatric collaborative care management based on Level 4 EM valuation, with conforming increases to the APCM behavioral health add-on codes. CMS also finalized a new add-on code for diagnosing and treating suspected vaccine adverse effects (HCPCS G0576), national pricing for health and well-being coaching (CPT 0591T–0593T) without frequency limits, and new shared medical appointment coding and payment (HCPCS G0686 and add-on G0687). Each of these new codes was added to the Medicare Telehealth Services List.

Remote Physiologic Monitoring (RPM) and Remote Therapeutic Monitoring (RTM)

In response to significant stakeholder concerns, CMS finalized a two-year delay to certain RPM/RTM billing requirements while still finalizing other reforms that start in CY 2027.

RPM is the remote monitoring of parameters such as weight, blood pressure and pulse oximetry to monitor a patient's condition and inform their management. RTM is the monitoring of adherence to at home therapeutic interventions. Both RPM and RTM include three components: education and setup, device supply and treatment management.

In response to two Office of Inspector General reports identifying potential fraud, waste and abuse in the provision of these services, CMS had proposed several billing changes including prohibiting third-party vendors or clinical staff outside of a provider's practice from providing RPM or RTM services starting next year. Based on comments from stakeholders, the agency delayed this policy until January 1, 2029, "to provide additional time for practices to adapt to this aspect of the policy."

Though the vendor ban was delayed, CMS did finalize for 2027 that RPM/RTM services can be furnished only to established patients and that practitioners reporting RPM/RTM services must furnish a separately reportable initiating visit in association with the onset of those services. This aligns with existing Medicare requirements for care management services, which require an initiating visit before certain services can be billed. CMS argues that the initiating visit would allow the provider to assess the patient's needs and clinical appropriateness for monitoring services and provide an opportunity for the practitioner to obtain consent. Patients enrolled in remote monitoring before January 1, 2027, are exempt from the initiating visit requirement.

CMS also did not finalize proposals to bundle the RPM/RTM CPT codes and create four new HCPCS G-codes to describe remote monitoring services but said it "may consider these comments for future rulemaking." CMS will continue to use the existing CPT codes in 2027.

Skin Substitute Payment Policy

CMS did not revisit the national payment methodology for skin substitutes that it finalized in the CY 2026 PFS final rule. As a result, the final rule largely maintains the existing payment framework established last year.

The principal policy change extends the national payment methodology to non-sheet skin substitute products that are currently priced by Medicare Administrative Contractors (MACs). CMS finalized paying these products on a per square centimeter basis at the same $127.14 per square centimeter rate established for sheet-form products.

CMS also finalized a technical revision to the Medicare Part B Drug Inflation Rebate Program that narrows the existing exclusion for skin substitutes. Skin substitute products licensed as biological products under Section 351 of the Public Health Service Act will be treated as Part B rebatable drugs and, therefore, become subject to Medicare inflation rebate requirements and beneficiary coinsurance adjustments. CMS notes, however, that no currently marketed skin substitute products are licensed under Section 351, meaning the policy has no immediate practical impact on currently available products.

Comprehensive Outpatient Rehabilitation Facility (CORF) Services and KX Modifier and Medical Review Thresholds

CMS finalized technical corrections to CORF regulations that were left unaligned following CY 2008 rulemaking, with no substantive policy effect. The agency also finalized increasing the CY 2027 KX modifier threshold, which is the per-beneficiary amount above which therapy providers must attest that outpatient physical therapy, speech-language pathology and occupational therapy services remain reasonable and medically necessary, from $2,480 to $2,540, reflecting the final 2.6 percent MEI update. The targeted medical review threshold, which is used to flag clinicians for medical review based on billing patterns, claims denial rates and other risk factors, remains unchanged at $3,000 for CY 2027.

Advance Care Planning

CMS finalized two new HCPCS G-codes – G0572 and G0573 – to separately recognize clinical staff time furnished incident to a physician or other qualified healthcare professional's advance care planning services. Existing CPT Codes 99497 and 99498 are reserved for time personally spent by the billing practitioner, and the G-codes and CPT codes may be reported together when each time threshold is met. CMS will also permit practitioner time to be counted with clinical staff time to meet the G-code time threshold and finalized adding G0572 and G0573 to the Medicare Telehealth Services List.

Drugs and Biological Products Paid Under Medicare Part B: Discarded Drugs

CMS received one application for CY 2027 requesting an increased discarded drug applicable percentage, submitted by the manufacturer of Leukine (HCPCS Code J2820) seeking 72 percent. CMS is denying the application. Claims data from 2018 through 2025 show discarded percentages ranging from only 1.1 to 4.9, well below the 10 percent threshold required to qualify. The applicant's justification relied on projected low-dose adjuvant use in cancer vaccine trials, but no U.S. Food and Drug Administration-approved labeling currently supports that use. The manufacturer may reapply in a future cycle if additional supporting data becomes available.

Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs)

CMS finalized several changes intended to improve access to preventive services.

Key policies include:

• recognizing Diabetes Self-Management Training and Medical Nutrition Therapy as stand-alone billable visits for RHCs
• increasing the FQHC Prospective Payment System base rate by 2.6 percent, to $213.12
• conforming regulations to the telehealth and mental health in-person visit flexibilities extended through December 31, 2027, by the CAA 2026
• making several technical regulatory corrections

Clinical Laboratory Fee Schedule (CLFS): CAA 2026

Under Section 1834A of the Social Security Act (the Act), CLFS payment for each clinical diagnostic laboratory test (CDLT) equals the weighted median of private payer rates, arrayed and weighted by volume. These rates are not subject to geographic, budget neutrality or annual update adjustments. Advanced diagnostic laboratory tests are paid at actual list charge for an initial three-quarter period before transitioning to the weighted median methodology, with annual (rather than triennial) rate updates.

Since 2019, Congress has repeatedly extended CDLT data reporting periods and revised the phase-in of CLFS payment reductions. The most recent prior extension – Section 221 of the Continuing Appropriations and Extensions Act, 2025 – set a data reporting period of January 1 through March 31, 2025.

Section 6226 of CAA 2026 superseded that extension, establishing a new data reporting period of May 1 through July 31, 2026 (based on a data collection period of January 1 through June 30, 2025). The law set the CY 2026 applicable payment reduction at zero percent – meaning CLFS rates cannot decrease relative to CY 2025 – and extended the phase-in of reductions through CY 2029, capping annual reductions at 15 percent for CYs 2027 through 2029.

CMS finalized, as proposed, conforming revisions to 42 C.F.R. Part 414, Subpart G: updated definitions of "data collection period" and "data reporting period" at Section 414.502, revised Section 414.504(a)(1) reflecting that data reporting is required every three years beginning May 1, 2026, and revised Section 414.507(d) codifying the zero percent CY 2026 cap and the 15 percent CY 2027-2029 cap.

CMS also finalized, as proposed, a technical correction restoring incomplete regulatory text at Section 414.523(a)(1)(v), which currently contains only a partial introductory clause due to a drafting error in the CY 2023 PFS final rule. The correction fully codifies the statutory $2 increase to the specimen collection fee for specimens collected from Medicare beneficiaries in a skilled nursing facility or on behalf of a home health agency (HHA), consistent with Section 1834A(b)(5) of the Act.

Ambulatory Specialty Model (ASM)

The Ambulatory Specialty Model (ASM) is a mandatory CMS Innovation Center model beginning in 2027 that holds selected physician specialists accountable for the quality and cost of longitudinal care for heart failure and low back pain. The heart failure cohort includes cardiologists, while the low back pain cohort includes anesthesiology, pain management, interventional pain management, neurosurgery, orthopedic surgery, and physical medicine and rehabilitation. Participants are selected at the Tax Identification (TIN)/National Provider Identifier (NPI) level based on specialty, historical condition-specific episode volume, Medicare PFS billing and practice in a selected mandatory geographic area. View a list of participants.

In the rule, CMS largely refines rather than redesigns ASM. Key changes include clarifying exceptions when participants change TINs or, in certain circumstances, specialty designation, along with adding an administrative claims-based low back pain imaging quality measure, replacing the low back pain patient-reported outcome measure with a functional-status outcome process measure, revising quality benchmarking and scoring, and providing a scoring incentive for voluntary patient-reported outcome data. CMS is also allowing Improvement Activities data to be submitted at the individual or group level, aligning Promoting Interoperability requirements more closely with MIPS, establishing a measure-suppression policy and adding a rural scoring adjustment for participants practicing in rural areas. CMS also clarifies the model's financial and operational rules, including the application of future Medicare Part B payment adjustments, performance reports and the Collaborative Care Arrangement.

Although largely operational, these policies continue CMS' effort to refine the Innovation Center's mandatory specialty-focused payment model before implementation. Any physicians and healthcare professionals who may qualify for the mandatory Ambulatory Specialty Model can confirm participation status for performance year 2027 by reviewing the participation list and accessing participation information through the ASM Participant Portal.

Limiting Medicare Coverage of Certain Individuals

Limiting Coverage Under Medicare Part A and Part B: CMS finalized its proposal to limit Medicare Part A and Part B eligibility, effective July 4, 2025, to U.S. citizens, U.S. nationals and a newly defined "eligible noncitizen" category covering lawful permanent residents (LPRs), certain Compact of Free Association migrants and Cuban-Haitian Entrants. CMS added this definition at 42 C.F.R. 400.200 and revised the premium-free/premium Part A, Part B enrollment and Part B Immunosuppressive Drug benefit regulations accordingly. The broader "lawfully present" standard for Title II benefits is unchanged, and LPRs remain subject to the existing five-year continuous residency requirement. CMS rejected commenters' request to retain the prior, broader lawful-presence standard, citing lack of statutory authority under Section 1899C of the Act.

Enrollment Pathway for Individuals Who Gain or Regain Eligibility: CMS finalized, with modification, a special enrollment period (SEP) for individuals newly eligible under the revised noncitizen requirements or regaining eligibility after an immigration status change. The SEP begins the month sufficient documentation is submitted to the U.S. Social Security Administration and now runs 12 months (up from the proposed six), regardless of missed standard enrollment periods. Premium Part A/B coverage starts prospectively the month after enrollment, with up to six months of retroactive coverage available (subject to premium payment); premium-free Part A may also be granted retroactively up to six months. No late enrollment penalty applies to SEP enrollees.

Limiting Coverage Under Part C, Part D and Cost Plans: CMS finalized, as proposed, conforming changes to Medicare Advantage, Part D and cost plan regulations (42 C.F.R. Parts 417, 422 and 423), making citizenship or eligible-noncitizen status a condition of enrollment and disenrolling those who don't qualify. The MA/Part D SEP for newly eligible individuals was modified to begin upon notice of Part A entitlement or Part B enrollment, running two additional calendar months.

Medicare Prescription Drug Inflation Rebate Program

CMS finalized several targeted refinements to the Medicare Part B and Part D Inflation Rebate Programs established under the Inflation Reduction Act. The agency emphasizes that these policies are intended to improve program administration and data quality and are not expected to materially affect aggregate manufacturer rebate liability.

The agency also finalized policies to:

• clarify the definition of "first marketed date" so that if ASP data is unavailable, CMS will use an alternative public source such as the National Drug Code (NDC) Directory (finalized with a technical correction)
• establish a methodology for situations in which monthly Consumer Price Index for All Urban Consumers (CPI-U) data is unavailable by using the first available CPI-U following the missing month
• narrow the existing exclusion from the definition of a Part B rebatable drug so that it applies only to certain skin substitute products

Medicare Part D Drug Rebates for Drugs with Prices Rising Faster Than Inflation

CMS finalized, as proposed, the same CPI-U gap-filling approach at Sections 428.20 and 428.202(e)(6), responding to Part D commenters consistent with its Part B responses.

CMS also finalized, as proposed, a modification to the Prescriber-Pharmacy Methodology to better capture 340B-eligible units for AIDS Drug Assistance Program (ADAP) enrollees. The current methodology under-identifies these units because ADAP patients are typically prescribed by providers unaffiliated with the ADAP, and most ADAPs access 340B pricing through a rebate model rather than registered contract pharmacies. CMS will use the Coordination of Benefits (COB) Other Health Insurance Supplemental Record file to identify ADAP enrollees and treat all of their Part D units as 340B-eligible, effective for Rebate Reports covering periods beginning October 1, 2025, and thereafter. CMS' analysis found the impact concentrated in antiretroviral medications. In response to commenters, CMS acknowledged this approach may overestimate 340B-eligible units but will exclude units already flagged under the existing methodology to avoid double counting and confirmed the COB file is updated monthly. CMS declined to adopt an all-payer rebate model, deeming it outside the scope of this rule.

Notably, CMS finalized, with modification, a requirement at Section 428.203(c) that 340B providers participate in the 340B repository, transitioning from the voluntary framework established in the CY 2026 PFS final rule. Covered entities must submit five data elements quarterly – date of service, prescription reference number, fill number, dispensing pharmacy NPI and NDC-11 – along with their 340B ID and OPAIS name, and must certify the completeness and accuracy of each submission. New Section 428.203(c)(5) specifies that certification may be made by the CEO, CFO an individual with equivalent authority or a delegated authorized representative. The required data elements, quarterly cadence and enforcement mechanism (including potential Medicare enrollment revocation for noncompliance) were finalized as proposed.

In response to commenters citing the repository's October 1, 2026, launch date and concurrent 340B Rebate Pilot, CMS delayed the first mandatory submission deadline to September 30, 2027 (covering dates of service in the first two quarters of 2027), rather than the originally proposed June 30, 2027, deadline for first quarter data alone. Subsequent deadlines are December 31, 2027 (third quarter) and March 31, 2028 (fourth quarter).

Mandatory 340B Repository Reporting

Perhaps the most significant pharmaceutical policy in the final rule is CMS' decision to transition from voluntary to mandatory reporting under the Medicare Part D 340B Repository beginning in 2027, with the first mandatory submission delayed to September 30, 2027.

Under the final rule, all 340B covered entities must submit specified Part D claim information on a quarterly basis, including:

• date of service
• prescription reference number
• fill number
• dispensing pharmacy NPI
• NDC-11
• 340B identification information

CMS intends to use the data submitted to the 340B Repository to evaluate whether 340B units can be reliably identified and ultimately excluded from future Medicare Part D inflation rebate calculations. However, CMS is not incorporating repository data into rebate calculations at this time. Instead, the agency will continue relying on the existing Prescriber-Pharmacy Methodology while assessing the completeness and reliability of the submitted data for potential future use.

Although largely technical, these policies continue CMS' efforts to strengthen implementation of the Inflation Reduction Act while improving the accuracy of inflation rebate calculations. Mandatory 340B repository reporting represents the most operationally significant policy for covered entities.

MSSP

CMS finalized one of the most significant sets of changes to the MSSP since the transition to the current participation tracks. The policies are intended to strengthen incentives for ACOs, encourage greater participation in downside risk, improve beneficiary engagement and simplify administrative requirements.

Strengthening Financial Incentives

CMS finalized increasing the BASIC Track Level E shared savings rate from 50 percent to 60 percent for agreement periods beginning on or after January 1, 2027, though the higher rate does not apply to existing agreement periods. CMS notes that although approximately 58 percent of ACOs currently participate in the ENHANCED track, BASIC Track Level E ACOs have generated greater net savings to the Medicare Trust Funds per dollar of gross savings. ACOs applying for a January 1, 2027, start may revise their track selection during the November 12-17, 2026, Phase 2 RFI period.

CMS also finalized several refinements to benchmarking and financial methodology, including:

• increasing the prior savings adjustment scaling factor from 50 percent to 75 percent
• risk-adjusting the 5 percent cap on upward benchmark adjustments
• creating a growth adjustment to encourage formation of new ACOs
• revising the Accountable Care Prospective Trend methodology to improve benchmark accuracy across agreement periods

Expanding Beneficiary Engagement

CMS finalized allowing eligible MSSP ACOs to reduce or eliminate Medicare Part B cost sharing for assigned beneficiaries beginning April 1, 2027, subject to CMS approval. ACOs may waive or reimburse beneficiary cost-sharing for most Part B services (excluding drugs and durable medical equipment, prosthetics, orthotics, and supplies) when tied to specified clinical goals. Participating ACOs – not Medicare – finance these incentives.

To allow ACOs to participate as quickly as possible, CMS will collect initial applications in early 2027 to approve eligible ACOs to begin eliminating or reducing Part B cost sharing for beneficiaries by the second quarter of 2027.

Simplifying Certified EHR Requirements

Recognizing continued administrative burden, CMS finalized simplifying CEHRT participation requirements beginning in 2027 by allowing ACOs to satisfy the requirement through one of three pathways: electronic clinical quality measure reporting, attestation regarding FHIR-enabled certified health IT or attestation to one of three ACO CEHRT use metrics. ACOs must publicly report the option selected.

Beneficiary Assignment

CMS also finalized modifying beneficiary assignment, beginning with the 2028 performance year, by:

• better recognizing services furnished by physicians participating in both ACO and non-ACO TINs
• allowing beneficiaries with only Part A or Part B enrollment during portions of the year to remain eligible for assignment

CMS estimates these changes could increase beneficiary assignments while reducing distortions created by physician billing arrangements.

Other MSSP Changes

CMS also finalized discontinuing the option for prepaid shared savings, modifying advance investment payments to use a flat per-beneficiary amount with a rural criterion in place of the area deprivation index, revising the definitions of ACOs experienced and inexperienced with performance-based risk, and, beginning January 1, 2027, revising the timing of standardized beneficiary notices and eliminating the beneficiary follow-up notice requirement. In addition, beginning with the 2027 performance year, the definition of primary care services used for assignment will include Screening, Brief Intervention, and Referral to Treatment services, the new vaccine adverse effects code (G0576) and new advance care planning codes (G0572 and G0573).

Changes to the Ambulance Fee Schedule (AFS)

Ambulance services have been paid under the AFS since April 1, 2002, under section 1834(l) of the Act and 42 C.F.R. part 414, subpart H. Payment is the lesser of the actual billed amount or the AFS amount, which consists of a base rate by service level, a separate mileage payment, a geographic adjustment factor (GAF) and other applicable adjustments. AFS rates are updated annually by an ambulance inflation factor (AIF).

Ambulance Extender Provisions: Section 6203 of the CAA 2026 (Pub. L. 119-75, enacted February 3, 2026) extended two temporary add-on payments through December 31, 2027. CMS finalized, as proposed, conforming regulatory changes at 42 C.F.R. 414.610(c)(1)(ii) and (c)(5)(ii) reflecting both extensions. Both provisions are self-implementing, and commenters supported the proposals as critical to preserving access to ground ambulance services.

The first extended provision is the ground ambulance payment add-on under section 1834(l)(13) of the Act, providing a 3 percent rate increase for transports originating in rural areas or rural census tracts of a metropolitan statistical area (MSA) and 2 percent increase for transports originating in non-rural areas, for services furnished before January 1, 2028. The second is the super-rural bonus under section 1834(l)(12)(A) of the Act for ground ambulance transports originating in qualifying super-rural areas, which is likewise extended through December 31, 2027.

Ground Ambulance Data Collection: CMS reiterated that it intends to address ongoing data collection requirements for the Medicare Ground Ambulance Data Collection System in next year's rulemaking cycle. The agency plans to incorporate findings from the Medicare Payment Advisory Commission's June 2026 Report to Congress when it addresses this topic in the CY 2028 PFS rule. Providers currently subject to data collection obligations should watch for that rulemaking.

Geographic Delineations for Ambulance Payment: CMS is finalizing, as proposed, an update to the geographic delineations used under the AFS beginning in CY 2027. The current delineations rely on 2010 Office of Management and Budget (OMB) standards and Census data and have been in place since CY 2015. The updated delineations adopt OMB Bulletin No. 23-01 (July 21, 2023), reflecting 2020 Decennial Census and American Community Survey data – consistent with the delineations CMS already adopted under the Inpatient Prospective Payment System (IPPS) wage index in the FY 2025 IPPS final rule.

CMS is also finalizing adoption of the updated Rural-Urban Commuting Area (RUCA) codes introduced July 31, 2025. These codes are required under Sections 1834(l)(9), (l)(12)(B)(iv), (l)(13)(A)(i) and (l)(14)(C) of the Act to identify rural census tracts within MSAs. Consistent with existing policy, census tracts at or above RUCA level 4.0 will continue to be designated rural. Notably, CMS declined to apply the additional HRSA guideline covering RUCA Level 2 or 3 tracts of at least 400 square miles with a population density of no more than 35 people per square mile, citing administrative infeasibility at the ZIP code level.

Maryland has the highest share of ZIP codes shifting from urban to rural (49, or 7.78 percent), while South Carolina has the highest share shifting from rural to urban (20, or 3.68 percent). Importantly, none of the current super-rural areas will lose that status under the update.

MIPS

CMS will sunset traditional MIPS reporting beginning with the 2031 performance year and transition clinicians to MVPs as the primary reporting framework. This is two years later than what CMS proposed. The agency will add three MVPs – Diabetic Disease, Hypertension and Hospitalist – for 2027 as proposed for a total of 30 MVPs and will modify every existing MVP to include MIPS core measures. Rather than reporting an outcome measure, clinicians reporting traditional MIPS and MVPs will be required to report at least one MIPS core measure. As previously finalized, CMS will maintain the existing MIPS performance threshold through the CY 2028 performance year while continuing its broader transition toward specialty-focused reporting pathways.

The agency also finalizes several changes to the Promoting Interoperability requirements, including:

• Removing the Office of the National Coordinator for Health Information Technology attestations for the CY 2026 performance period
• removing the Security Risk Analysis measure for the CY 2027 performance period
• making the Electronic Prior Authorization measure an optional bonus measure for the CY 2027 performance period and requiring it beginning in CY 2028
• creating a new Electronic Prior Authorization for Prescription Drugs measure that will become mandatory in CY 2028

The transition to mandatory MVP reporting will carry significant potential burden and compliance implications for all clinicians but especially for large, multispecialty practices because they are unable to participate in MVPs as a group. Instead, they will need to form subgroups that share a clinical focus area to report MVPs.

Advanced APM Determinations

CMS finalized its proposal to evaluate Advanced APM Qualifying Participant (QP) status at the TIN/NPI combination level rather than solely at the individual NPI level. Under the policy, APM incentive payments and the applicable PFS conversion factor updates will apply only to services furnished through a clinician's APM-participating TIN. However, CMS will extend Partial QP status to all TIN/NPI combinations for NPIs that achieve QP and Partial QP status based on individual determinations. In other words, if a clinician receives QP or partial QP status for at least one TIN/NPI combination (i.e., they participate in an Advanced APM), they will be exempt from MIPS. Though clinicians who meet QP and Partial QP status for at least one TIN/NPI combination will no longer be eligible for a higher CF update at nonparticipating TINs, they at least will not have to participate in MIPS.

CMS also codified the CAA 2026 provisions that restore lower QP and Partial QP thresholds for the 2026 QP performance period (2028 payment year), including a 50 percent QP payment amount threshold, before the thresholds rise again beginning with payment year 2029 and that extend the lump-sum APM Incentive Payment to payment year 2028. CMS noted that it lacks authority to freeze the thresholds permanently without congressional action.

RFIs

In addition to the numerous payment and policy changes included in the CY 2027 PFS final rule, CMS summarized responses to several significant RFIs issued with the proposed rule that signal areas where the agency may pursue future rulemaking. On duplicate laboratory testing and imaging, CMS described four mechanisms under consideration – billing instruction clarifications, MAC payment edits, payment integrity recoupment tools and frequency limitations – but finalized no policy and only thanked commenters, some of whom opposed denying payment for duplicate tests as clinically necessary. On the CPT RFI, commenters focused overwhelmingly on the RUC process, citing bias against cognitive services, undervaluation of primary care and conflicts of interest and recommended greater transparency, revised committee composition and an independent advisory body; CMS stated it is considering improvements to the RUC process but reiterated its sole statutory authority to set rates.

Though these RFIs do not establish new policy, they provide insight into CMS' longer-term priorities related to physician payment, primary care, interoperability, coding and care delivery.

For more information or questions on the CY 2027 Medicare PFS Final Rule, please contact the authors.

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