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Calendar Year (CY) 2026 Medicare Physician Fee Schedule Final Rule (CMS-1832-F)

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Calendar Year (CY) 2026 Medicare Physician Fee Schedule Final Rule (CMS-1832-F)

On October 31, 2025, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that announces final policy changes for Medicare payments under the Physician Fee Schedule (PFS), and other Medicare Part B issues, effective on or after January 1, 2026.

The calendar year (CY) 2026 PFS final rule is one of several final rules that reflect a broader Administration-wide strategy to create a health care system that results in better quality, efficiency, empowerment, and innovation for all Medicare beneficiaries.

Background on the Physician Fee Schedule

Since 1992, Medicare payment has been made under the PFS for the services of physicians and other billing professionals. Physicians’ services paid under the PFS are furnished in a variety of settings, including physician offices, hospitals, ambulatory surgical centers (ASCs), skilled nursing facilities and other post-acute care settings, hospices, outpatient dialysis facilities, clinical laboratories, and beneficiaries’ homes. Payment is also made to several types of suppliers for technical services, most often in settings for which no institutional payment is made.

For most services furnished in a physician’s office, Medicare makes payment to physicians and other professionals at a single rate based on the full range of resources involved in furnishing the service. In contrast, PFS rates paid to physicians and other billing practitioners in facility settings, such as a hospital outpatient department (HOPD) or an ASC, reflect only the portion of the resources typically incurred by the practitioner while furnishing the service.

For many diagnostic tests and a limited number of other services under the PFS, separate payment may be made for the professional and technical components of services. The technical component is frequently billed by suppliers, like independent diagnostic testing facilities and radiation treatment centers, while the professional component is billed by the physician or practitioner.

Payments are based on the relative resources typically used to furnish the service. Relative value units (RVUs) are applied to each service for work, practice expense, and malpractice expense. These RVUs become payment rates through the application of a conversion factor. Geographic adjusters (geographic practice cost indices) are also applied to the total RVUs to account for variation in costs by geographic area. Payment rates are calculated to include an overall payment update specified by statute.

CY 2026 PFS Rate Setting and Conversion Factor

As required by statute, beginning in CY 2026, there will be two separate conversion factors: one for qualifying alternative payment model (APM) participants (QPs) and one for physicians and practitioners who are not QPs. By statute, QPs are those that meet certain thresholds for participation in an Advanced APM, which means generally that the payment model has features to ensure accountability for quality and cost of care. The update to the qualifying APM conversion factor for CY 2026 is +0.75 percent while the update to the nonqualifying APM conversion factor for CY 2026 is +0.25 percent. The changes to the PFS conversion factors for CY 2026 include these updates as required by statute, a one-year increase of +2.50 percent for CY 2026 stipulated by statute, and an estimated +0.49 percent adjustment necessary to account for finalized changes in work RVUs for some services. The final CY 2026 qualifying APM conversion factor of $33.57 represents a projected increase of $1.22 (+3.77%) from the current conversion factor of $32.35. Similarly, the final CY 2026 nonqualifying APM conversion factor of $33.40 represents a projected increase of $1.05 (+3.26%) from the current conversion factor of $32.35. Per statutory requirements, we are also finalizing updates to the geographic practice cost indices (GPCIs) and malpractice RVUs.

Efficiency Adjustment

CMS historically has relied on survey data primarily provided by the AMA Relative Value Scale Update Committee (AMA RUC) to estimate practitioner time, work intensity, and aspects of practice expense, which are often reflected in the valuation of codes paid under the PFS. Only a small portion of the total codes are considered for revaluation annually, and this process relies primarily on subjective information from surveys that have low response rates, with respondents who may have inherent conflicts of interest (since their responses are used in setting their payment rates). Research has demonstrated that the time assumptions built into the valuation of many PFS services are, as a result, very likely overinflated.[1] In order to mitigate these effects and take into account changes in medical practice, we are finalizing application of an efficiency adjustment to the work RVUs and corresponding intraservice portion of physician time for non-time-based services that we expect to accrue gains in efficiency over time. This would periodically apply to all codes except time-based codes, such as evaluation and management (E/M) services, care management services, behavioral health services, services on the Medicare telehealth list, and maternity codes with a global period of MMM.

To determine this efficiency adjustment, we are finalizing our proposal to use the Medicare Economic Index (MEI) productivity adjustment percentage. The MEI productivity adjustment is calculated by the CMS Office of the Actuary (OACT) each year, and we are finalizing a look-back period of five years, which would result in a final efficiency adjustment of -2.5% for CY 2026. In response to public comments, we are finalizing an updated list of HCPCS codes that will be exempt from the efficiency adjustment. We are also finalizing that, going forward, CMS may give preference to empiric studies of time to incorporate into service valuation, compared to survey data, and solicit comment on the types of empiric data that CMS should consider. CMS expects that moving away from survey data would lead to more accurate valuation of services over time and help address some of the distortions that have occurred in the PFS historically.

These changes address concerns about distorted payment values that have existed for years. The Medicare Payment Advisory Commission, the Government Accountability Office, and researchers across the political spectrum have called out long-standing overvaluation of certain procedures and undervaluation of time-intensive services like primary care. Left unaddressed, these gaps compound over time, especially as digital tools and automation accelerate efficiency gains in some specialties.

Practice Expense

The practice expense (PE) methodology currently relies primarily on the AMA’s Physician Practice Information (PPI) Survey data from 2008 that measures specialty-specific practice costs. In 2024, the AMA conducted updated survey efforts and submitted data to CMS in early 2025 for consideration in CY 2026 PFS rate setting. Due to several limitations with the data, as described in the CY 2026 PFS proposed rule, we did not propose, and are not finalizing, to implement the PE/HR data or cost shares from the AMA’s PPI and Clinician Practice Information (CPI) Survey data for 2026 rate setting. Specifically, our concerns focused on small sample sizes and sampling variation, low response rates and representativeness, potential measurement error, and incomplete data submission. We modeled estimated payment impacts of the data’s implementation, which we included in the proposed rule for public comment and potential consideration in future rulemaking.

While we did not propose to incorporate the PPI and CPI Survey data into PFS rate setting for CY 2026, we are finalizing significant updates to our PE methodology to better reflect current clinical practice. Specifically, we are finalizing to recognize greater indirect costs for practitioners in office-based settings compared to facility settings. The original allocation methodologies assumed physicians maintained separate practice locations even if they furnished some care in hospitals. Since the methodologies were established decades ago, there has been a steady decline in the number of physicians working in private practice, with a corresponding rise in physician employment by hospitals and health systems. Therefore, we believe that the allocation of indirect costs for PE RVUs in the facility setting at the same rate as the non-facility setting may no longer reflect contemporary clinical practice.

We are also finalizing to utilize data from auditable, routinely updated hospital data (i.e., from the Medicare Hospital Outpatient Prospective Payment System (OPPS)) to set relative rates and inform our costs assumptions for some technical services paid under PFS. For CY 2026, we are finalizing to use this data in setting rates for radiation treatment services, and for some remote monitoring services. This approach promotes price transparency across settings, offers more predictable rate setting outcomes, and limits the influence of limited survey data.

Telehealth Services under the PFS

For CY 2026, we are finalizing to streamline the process for adding services to the Medicare Telehealth Services List. We are simplifying our review process by removing the distinction between provisional and permanent services and limiting our review on whether the service can be furnished using an interactive, two-way audio-video telecommunications system.

We are finalizing to permanently remove frequency limitations for subsequent inpatient visits, subsequent nursing facility visits, and critical care consultations.

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CMS to Lower Drug Costs and Improve Care by Extending Deadline for GENEROUS Model Application

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CMS to Lower Drug Costs and Improve Care by Extending Deadline for GENEROUS Model Application

The Centers for Medicare & Medicaid Services (CMS) is extending the application deadline for prescription drug manufacturers to apply to the GENErating cost Reductions fOr U.S. Medicaid (GENEROUS) Model—a landmark Innovation Center initiative designed to lower drug spending in Medicaid, improve quality of care and health outcomes by increasing access to critical medications, and strengthen the Medicaid program overall. The extension from March 31, 2026, to April 30, 2026, will provide interested drug manufacturers more opportunity to join the model.

“Based on feedback from drug manufacturers, CMS has decided to give interested companies additional time to apply for the GENEROUS Model,” said CMS Administrator Dr. Mehmet Oz. “We are committed to partnering with states and manufacturers to drive down drug prices and ensure that the most vulnerable Americans have access to life-saving medications.”

State Medicaid programs that choose to participate in the GENEROUS Model, announced in November 2025, will be able to purchase drugs included in the pilot program at prices aligned with those paid in select other countries, allowing state Medicaid programs to benefit from fairer, more competitive pricing. This will be an important tool in meeting President Trump’s Executive Order to lower drug prices for American patients.

“The GENEROUS Model aims to tackle the rising drug costs facing Americans,” said CMS Innovation Center Director Abe Sutton. “Extending this deadline will allow for small and midsize manufacturers to participate and lower costs to the Medicaid program, providing more flexibility for state budgets and ensure that people who depend on Medicaid continue to access the care they need.”

Next steps in the GENEROUS Model include:

- CMS will hold meetings with interested manufacturers about their potential participation in the model. Interested manufacturers that wish to schedule a meeting should contact generousmodel@cms.hhs.gov starting March 2 with the subject line “Small/midsize manufacturer meeting request.” CMS will schedule these meetings beginning April 1, 2026.

- CMS will host a manufacturer town hall to discuss the operational and methodological details of the model in Spring 2026.

The final deadline for manufacturer participation in the GENEROUS Model remains June 30, 2026.

Additional information on the GENEROUS Model is available on the model webpage, including the Request for Applications for drug manufacturers.

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New CMS Proposals Strengthen Medicare, Unleash Innovation and Promote Competition to Provide Kidney Patients with Better Value and Results

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New CMS Proposals Strengthen Medicare, Unleash Innovation and Promote Competition to Provide Kidney Patients with Better Value and Results

Executive order aims to drive innovation in End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) and ESRD Quality Incentive Program (QIP), and modernize payment for Durable Medical Equipment (DME)

Today, the Trump Administration through the Centers for Medicare & Medicaid Services (CMS) proposed changes to the Medicare payment rules for Durable Medical Equipment Prosthetics, Orthotics, and Supplies (DMEPOS), End-Stage Renal Disease (ESRD) Prospective Payment System (PPS), and the ESRD Quality Incentive Program (QIP). Following President Trump’s recent Executive Order on Advancing American Kidney Health, the changes proposed in the rule would strengthen Medicare by improving kidney care and promoting competition in DME by modernizing the way CMS pays for care, reducing regulatory barriers for new treatments and streamlining processes.

“When President Trump signed the historic Executive Order on kidney care earlier this month, he showed that this Administration is committed to improving the lives of patients with kidney disease. Under his leadership, we are eliminating regulatory barriers to unleash innovation that will improve health outcomes and quality of life for patients with chronic disease,” said CMS Administrator Seema Verma. “The changes we are proposing in this rule will also modernize outdated government policies to facilitate greater competition in the DME market, ensure accurate Medicare payments to protect taxpayers and advance innovation across our healthcare system so patients can receive the treatment options that work best for them.”

Currently, there are more than 430,000 Medicare Fee for-Service beneficiaries with ESRD and they typically spend 12 hours a week attached to a dialysis machine. Many beneficiaries with ESRD suffer from poor health outcomes, such as higher hospitalization and mortality rates, often the result of underlying disease complications and multiple co-morbidities.

In 2016, Medicare spent $35.4 billion to cover people with ESRD, representing more than 7.2 percent in Medicare spending. On average, Medicare spends seven times more on beneficiaries with ESRD than the average beneficiary. In order to ensure that ESRD patients receive the best possible care and to ensure that we are maximizing use of taxpayer dollars, changes need to be made.

This proposed rule announced today includes proposals to better recognize costs for new therapies under the ESRD prospective payment system (PPS) that will spur more innovation in kidney care. CMS is proposing that certain new and innovative equipment and supplies used to care for an ESRD patient would qualify for an add-on payment adjustment. This proposed change would create incentives for ESRD facilities to provide the latest therapies that will improve health outcomes.

In this rule, CMS is proposing refinements to eligibility for the transitional drug add-on payment adjustment (TDAPA) under the ESRD PPS to better target the additional payment to innovative renal dialysis drugs and biological products based on the Food and Drug Administration’s (FDA’s) New Drug Application Classifications. CMS is also proposing to exclude generic drugs from TDAPA eligibility so that research can be targeted to new and innovative drugs for patients with ESRD.

CMS is proposing a rule to establish methodologies to modernize the pricing of new Durable Medical Equipment Prosthetics, Orthotics, and Supplies (DMEPOS) items and services. The proposed rule would provide greater transparency for innovators regarding how CMS determines if new items and services are comparable to older items and services for Medicare pricing purposes. The proposed rule also promotes competition and innovation in DMEPOS by setting Medicare payment for new items based on commercial pricing data.

Greater transparency as to how CMS establishes fee schedule amounts for new technology, a gap-filling methodology that recognizes the cost differences between new and older items, and potentially using additional sources of market-based pricing to establish such gap-filled fee schedule amounts should foster improvements and innovations in DMEPOS technology and ensure more competitive prices. This proposed approach to pricing affords greater flexibility to the agency to make sure we are paying for new DMEPOS items and services that are reflective of the market and private sector innovation. Modernizing our payment methodology helps to ensure taxpayers are getting the best deal.

As part of our Patients Over Paperwork initiative, CMS is proposing changes in scoring certain measures in the ESRD Quality Incentive Program (QIP) to streamline our policies and encourage the submission of complete and accurate data. These changes are responsive to stakeholder concerns, and will allow facilities to spend less time reviewing policies and more time providing high quality care.

For a fact sheet on the CY 2020 proposed rule (CMS-1713-P), please visit: https://www.cms.gov/newsroom/fact-sheets/end-stage-renal-disease-esrd-and-durable-medical-equipment-prosthetics-orthotics-and-supplies-dmepos.

To view the proposed rule, please visit: https://www.federalregister.gov/documents/2019/08/06/2019-16369/medicare-program-end-stage-renal-disease-prospective-payment-system-payment-for-renal-dialysis.

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Trump Administration Prioritizes Affordability by Announcing Major Crackdown on Health Care Fraud

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Trump Administration Prioritizes Affordability by Announcing Major Crackdown on Health Care Fraud

Initiative Seeks Input on Strengthening Program Integrity to CRUSH Fraud

Today at the White House, Vice President J.D. Vance, Secretary of Health and Human Services (HHS) Robert F. Kennedy, Jr., and Administrator of the Centers for Medicare & Medicaid Services (CMS) Dr. Mehmet Oz announced new steps to crack down on fraud in Medicare and Medicaid to protect patients and taxpayers and improve affordability. The actions include deferring $259.5 million of quarterly federal Medicaid funding in Minnesota to prevent payment of questionable claims while further investigation is completed; a nationwide moratorium on Medicare enrollment for certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) suppliers; and a nationwide call to action for Americans to support fraud prevention, including stakeholder input on how CMS can continue to expand and strengthen its efforts. Together, these steps reflect a coordinated, data-driven strategy to prevent fraud before it occurs, hold bad actors accountable, and protect taxpayer dollars.

“For decades, Medicare fraud has drained billions from American taxpayers—that ends now,” said Secretary Kennedy. “We are replacing the old ‘pay and chase’ model with a real-time ‘detect and deploy’ strategy, using advanced AI tools to identify fraud instantly and stop improper payments before they go out the door.”

“CMS is done trying to catch fraudsters with their hands in the cookie jar—instead, we’re padlocking the jar and letting them starve,” said Administrator Oz. “This proactive approach will help us crush fraud, protect taxpayer dollars, and make sure the vulnerable Americans who depend on our programs get the care they need.”

Minnesota: $259.5 Million Federal Medicaid Funding Deferred

Medicaid is funded jointly by states and the federal government. CMS is required to ensure Medicaid funds are spent lawfully and that states maintain effective systems to detect, prevent, and recover improper payments. When those obligations are not met, CMS has the authority and responsibility to withhold, defer, or disallow federal funds. In January 2026, CMS notified Minnesota of its intent to withhold federal funds until it was satisfied with the state’s corrective action plan to address its program integrity shortcomings. CMS also notified Minnesota of its intent to conduct a review focused on program integrity to ensure federal funds were not going toward questionable claims.

CMS’ review of Minnesota’s Medicaid spending for the fourth quarter in FY 2025 resulted in a deferral of $259,505,491 in federal matching funds. This includes state expenditures of $243.8 million for unsupported or potentially fraudulent Medicaid claims and $15.4 million related to claims involving individuals lacking a satisfactory immigration status. The agency utilized both traditional financial management approaches and new program integrity oversight strategies to identify unusually high spending and rapid growth in certain service areas, including:

- Personal care services;

- Home and community-based services; and

- Other practitioner services.

CMS is deferring those federal funds to protect taxpayer dollars while ensuring the state has the opportunity to respond and provide information and documentation during the ongoing review. Should Minnesota fail to clean up its significant program integrity vulnerabilities or demonstrate that the expenditures are allowable, CMS may defer more than $1 billion in federal funds over the next year. CMS also continues to intensely oversee Minnesota’s efforts to carry out its corrective action plan to address the underlying causes of fraud, waste, and abuse within the state.

Nationwide DMEPOS Enrollment Moratorium/Medicare Program Integrity Initiatives

CMS is taking decisive steps to prevent fraudulent Medicare billing by durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) companies. A six-month moratorium on new Medicare enrollment for certain DMEPOS suppliers builds on CMS’ stopping more than $1.5 billion in suspected fraudulent billing in this area last year. The DMEPOS supplier enrollment moratorium will allow CMS to explore additional safeguards to further mitigate longstanding instances of fraud, waste, and abuse perpetrated by certain DMEPOS companies. It applies to all applications for initial enrollment and changes in majority ownership for medical supply companies.

CMS also plans to publish information on providers/suppliers whose participation in the Medicare program has been revoked, including their National Provider Identifier and the reason for the revocation. This additional transparency will allow patients and payers, including private insurers, to understand which providers have been subject to such administrative enforcement action by the government.

Reduction of fraud, waste, and abuse drives down costs for Medicare beneficiaries. For example, CMS’ recent actions to address abusive pricing practices for skin substitutes helped lower premiums by $11 per month for Medicare beneficiaries by reducing overall Medicare Part B program spending. When CMS adjusts payment rates to better align with market prices and clinical value, it decreases unnecessary or inflated payments for high-cost products. Because Medicare Part B premiums are set to cover a portion of projected program costs, lowering spending on expensive items like certain skin substitutes directly reduces total expenditures. As a result, these savings contribute to slower premium growth and help keep out-of-pocket costs more affordable for beneficiaries while maintaining access to medically necessary treatments.

CRUSH Initiative – Request for Stakeholder Input

CMS is looking to stakeholders to provide input, based on their experience and knowledge, on additional ways the agency can tackle fraud prevention to help inform the development of a possible future rule under CMS’ Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH) initiative. The CRUSH request for information (RFI) seeks input from a broad range of stakeholders – including states, providers, suppliers, payers, technology companies, patient advocates, beneficiaries, and others – on ways to strengthen CMS’ ability to prevent, detect, and respond to fraud, waste, and abuse, and program inefficiencies in Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and the Health Insurance Marketplace. Stakeholders can provide input on both existing authorities, as well as ideas for new regulatory approaches.

The actions announced today build on CMS’ broad strategy to combat fraud, waste, and abuse through data-driven prevention and real-time enforcement. In 2025, CMS made significant progress in its fight to crush fraud, including:

- Suspending $5.7 billion in suspected fraudulent Medicare payments by leveraging advanced analytics, cross-agency coordination, and law enforcement partnerships;

- Preventing $1.5 billion in suspected fraudulent DMEPOS billing;

- Denying 122,658 Medicare claims for unnecessary items and services because they failed to satisfy Medicare’s preliminary approval checks that confirm medical necessity and other coverage requirements;

- Revoking the ability of 5,586 providers and suppliers to bill the Medicare program due to inappropriate behavior;

- Sending 372 fraud referrals encompassing $3.7 billion in billing to law enforcement for potential legal action; and

- Initiating a CMS-State Tax Fraud partnership with 28 states and the US Virgin Islands to strengthen state-federal enforcement against healthcare providers and suppliers who commit healthcare and tax fraud.

More information on the DMEPOS moratorium can be found via the Federal Register at: https://www.federalregister.gov/public-inspection/2026-03971/medicare-medicaid-and-childrens-health-insurance-programs-nationwide-temporary-moratoria-on.

Comments on the CRUSH Request for Information must be submitted by March 30, 2026, via the Federal Register at: https://www.federalregister.gov/public-inspection/2026-03968/request-for-information-comprehensive-regulations-to-uncover-suspicious-healthcare (refer to CMS-6098-NC).

More information on CMS’ fraud prevention efforts is available at: www.cms.gov/fraud.

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