CMS Proposes 2.5-Percent MD Pay Increase; Provider Associations Respond

On Monday, July 14, the federal Centers for Medicare & Medicaid Services (CMS) published its proposed rule on the base Medicare pay increase for physicians for 2026. The base pay rate for physicians reimbursed under Medicare would rise by 2.5 percent. The proposed rule would also create a mandatory payment model for congestive heart failure and for lower back pain, and would add to the agency’s existing guidelines for telehealth flexibilities. The deadline for comments will be September 12.

A press release posted to the agency’s website on Monday afternoon began thus: “The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would increase quality care for Medicare recipients while significantly reducing unnecessary spending. The calendar year (CY) 2026 Medicare Physician Fee Schedule (PFS) proposed rule would advance primary care management through new quality measures, reduce waste and unnecessary use of skin substitutes, and introduce a new payment model focused on improving care for chronic disease management. “

And it quoted Health and Human Services Secretary Robert F. Kennedy, Jr. as stating that, “For the last four years, powerful interests have targeted independent medical practices. Thanks to Dr. Oz’s decisive leadership, this rule modernizes CMS payment systems, eliminates perverse incentives, and harnesses better data to improve care for patients with chronic disease while protecting the future of hometown doctors,” he said, referring to Mehmet Oz, M.D., CMS Administrator.

And the press release quoted Oz as stating that “We are taking meaningful steps to modernize Medicare, cut waste, and improve patient care. We’re making it easier for seniors to access preventive services, incentivizing health care providers to deliver real results, and cracking down on abuse that drives up costs. This is how we protect Medicare for the next generation while helping Americans live longer, healthier lives.”

The press release went on to announce that “CMS is proposing to improve the care of chronic diseases by reducing burdens associated with the integration of behavioral health treatment into advanced primary care management. Additionally, CMS is proposing to make Americans healthier by removing ten quality measures that did not directly improve patient health outcomes and adding five new outcome measures that focus on the prevention of chronic disease, including prescreening for diabetes.

If the proposed rule is finalized, a change to the Medicare Diabetes Prevention Program will allow more people with Medicare to access coaching, peer support, and practical training in dietary change, physical activity, and behavior change strategies to delay or prevent the onset of Type 2 diabetes for people with prediabetes, at no cost to the beneficiary.

CMS is also issuing a Request for Information (RFI) to gather recommendations on improving wellness, prevention, and chronic disease management. This includes input on nutrition counseling and physical activity.”

Further, the press release noted, “CMS is proposing the new Ambulatory Specialty Model (ASM), a mandatory payment model focused on specialty care for beneficiaries with heart failure and low back pain – significant areas of Medicare spending. The model aims to enhance the quality of care and reduce low-value care by improving upstream chronic disease management. Participants will be held accountable for their performance, generating savings. The proposed ASM, one of the newest CMS Innovation Center models, aims to improve beneficiary and provider engagement, incentivize preventive care, and increase financial accountability for specialists. ASM rewards specialists who detect signs of worsening chronic conditions early, enhance patients’ function, reduce avoidable hospitalizations, and use technology that allows them to communicate and share data electronically with patients and their primary care providers. If finalized, the model will begin in January 2027 and run for five performance years through December 2031.”

And, the agency noted, “CMS is proposing to reduce payment differentials for physicians across settings of care by leveraging hospital data to calculate more accurate payment rates for certain services and better accounting for increased efficiencies in procedures and tests. CMS is also signaling an interest in moving away from using low-response rate surveys of practitioners to value services, towards preferentially using empiric information instead. To ensure that Medicare recognizes innovations in medical care, CMS is also proposing to make some COVID-era flexibilities permanent, and to simplify the process for making services available by telehealth. CMS is also proposing to broaden its payment policies for digital mental health treatment devices to make more options available to patients.  Beginning in 2026, there will be two separate conversion factors for Qualifying APM Participants (QPs) and non-QP clinicians. 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 PFS 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, a one-year increase of +2.50 percent for CY 2026 stipulated by statute, and an estimated 0.55 percent adjustment necessary to account for proposed changes in work RVUs. Thus, the CY 2026 qualifying APM conversion factor represents a projected increase of $1.24 (3.83%) from the current conversion factor of $32.35, for a total of $33.59. Similarly, the CY 2026 nonqualifying APM conversion factor represents a projected increase of $1.17 (3.62%) from the current conversion factor of $32.35, for a total of $33.42.”

“This move reflects our continued shift toward smarter, data-informed policymaking,” said Chris Klomp, Deputy Administrator and Director of the Center for Medicare at CMS. “We’re advancing technical improvements that reward high-quality, efficient care; addressing the root causes of unique health challenges; and aligning health care spending with value so that new innovations help to deliver better quality at a lower price.”

National provider associations react

National associations representing provider organizations began releasing statements on Monday evening. “The National Association of ACOs (NAACOS) is encouraged by Centers for Medicare and Medicaid Services attention to wasteful and abusive billing practices in the proposed 2026 Medicare Physician Fee Schedule and remains ready to support development of smart regulations and policies,” a press release from the Washington, D.C.-based NAACOS began.

“We applaud CMS for proposing new payment policies to pay for skin substitutes. Unfortunately, many Accountable Care Organizations (ACOs) continue to be held financially accountable for this unnecessary spending. In our shared fight against bad actors, more must be done to hold ACOs harmless for significant, anomalous, and highly suspect billing. Our members look to partner with CMS to identify and report suspected waste, fraud, and abuse and improve policies moving forward. We also look forward to working with CMS to address critical issues that threaten the long-term sustainability of accountable care and value-based payment models. This includes the benchmark “ratchet” which penalizes ACOs for past strong performance and the quality improvement approach which forces ACOs to make significant investment in interim solutions ahead of digital quality measurement. The proposed 2026 Medicare Physician Fee Schedule stops short of addressing these issues,” the press release continued.

And, NAACOS added, “Accountable Care Organizations have demonstrated extraordinary impact over the past 15 years by routinely improving health outcomes and reducing costs. NAACOS aims to work alongside CMS to achieve our shared goal of allowing more seniors to benefit from accountable care that improves patient outcomes and reduces spending.”

Meanwhile, leaders at the Alexandria, Va.-based AMGA (American Medical Group Association) also published a press release on Wednesday evening, which began thus: “AMGA today reiterated its call for comprehensive reform of the Medicare Physician Fee Schedule (PFS), warning that last-minute congressional interventions to avert further reductions to the conversion factor (CF) are unsustainable and obscure the need for lasting structural improvements.”

Indeed, AMGA’s leaders stated that, “While recent legislative action has temporarily halted a decrease in the Medicare conversion factor for 2026, this stopgap approach only highlights the fundamental instability of the current system. Without congressional intervention, the conversion factor would have once again declined—continuing a trend that undermines the financial viability of group practices and integrated systems of care and the broader goal of high-value care.

Beginning in calendar year (CY) 2026, the Centers for Medicare & Medicaid Services (CMS) will implement two separate conversion factors as required by statute:

•            One for Qualifying Alternative Payment Model (APM) Participants (QPs), with a statutory update of +0.75 percent.

•            One for non-qualifying APM participants, with a statutory update of just +0.25 percent.

Even with the inclusion of a one-year, congressionally mandated +2.5-percent increase and technical adjustments to account for changes in relative value units (RVUs), the proposed CY 2026 conversion factors—$33.59 for QPs and $33.42 for non-QPs—barely represent a modest rebound from the current $32.35 rate. These incremental increases fail to reverse the long-term erosion in Medicare physician payment, which has not kept pace with inflation or practice cost growth,” the press release stated.

And the press release quoted Jerry Penso, M.D., AMGA’s president and CEO, as stating that “Health systems and medical groups continue to bear the brunt of an outdated and underfunded reimbursement model. Without systematic reform, Medicare's current fee-for-service framework will remain misaligned with the shift toward high-value care,” Dr. Penso said.

Therefore, the press release continued, “AMGA urges policymakers to move beyond short-term fixes and work with stakeholders to develop a predictable, stable payment system that:

•            Provides sustainable annual updates to the conversion factor that reflect inflation and practice costs;

•            Incentivizes participation in high-value care models;

•            Reduces the administrative burden associated with regulatory compliance; and

•            Aligns Medicare policy with the realities of team-based, coordinated care delivery.

•            Supports a healthcare system that emphasizes prevention and chronic care management, resulting in improved outcomes for all Americans.”

“CMS and Congress must take this opportunity to modernize the PFS and build a payment foundation that supports innovation, sustainability, and improved outcomes,” Penso added. And the press release concluded by noting that “AMGA is reviewing the rule closely and will file additional comments with CMS.”

This is a developing story. Healthcare Innovation will update its readers as new developments emerge.