On November 4th, CMS released its CY 2027 Physician Fee Schedule (PFS) final rule, updating Medicare physician payments, primary care, accountable care, telehealth and quality reporting. Most provisions take effect on January 1, 2027. While expanding payment for preventive and care-coordination services, the rule reduces the physician conversion factors beyond what it had originally proposed in July. There were some wins for clinicians in the rule in response to comments submitted. This includes a two-year delay of a policy that bans the use of third-party vendors for Remote Patient Monitoring (RPM), scaling back payment cuts for several orthopaedic procedures, and reducing the proposed payment cut when an office visit and certain procedures occur on the same day.

Physician Payments and Practice Expenses

CMS finalized larger physician payment reductions than originally proposed:

  • $32.9548 for qualifying Advanced Alternative Payment Model (APM) participants, a 1.83% decrease from 2026.
  • $32.6286 for other clinicians, a 2.31% decrease from 2026.

The July proposal projected conversion factors of $33.1693 (down 1.19%) for qualifying APM participants and $32.8409 (down 1.68%) for other clinicians. In the final rule, a proposed 0.53% budget-neutrality increase became a 0.12% reduction, resulting in larger cuts. Both versions reflect expiration of the temporary 2.5% payment increase authorized by Congress for 2026 and statutory 2027 updates of 0.75% and 0.25%, respectively. AHPA is advocating for Congress to increase the conversion factors during December’s lame duck session.

CMS largely adopted its proposed practice expense (PE) revisions: phasing out the indirect practice cost index based on older specialty expense data over 2027–2028; using physician work and clinical labor to allocate indirect PE for most services other than 10- and 90-day global procedures; and implementing a 5% annual stabilization adjustment for eligible PE relative value units. Although intended to temper volatility, the changes may redistribute payments across specialties and settings.

Office Visits

CMS is changing how it pays for office visits associated with procedures. When a separately identifiable office/outpatient evaluation and management (E/M) visit and a zero-day global procedure are billed on the same day by the same physician, or by a physician of the same specialty in the same group practice, Medicare will pay 100% for the higher-cost service and 80% for the other. CMS had originally proposed for the lower-paid service to be paid at 50% of the regular payment rate. CMS dropped its proposal to include 10- and 90-day procedures. This is one of the most material revisions from the proposal and substantially limits potential losses for surgical and outpatient procedural practices.

Primary Care

The rule replaces the G2211 visit-complexity add-on code with modifier B1, increasing the associated E/M payment by 16%. A separate B2 modifier will increase eligible E/M payments by 32% for clinicians participating in Medicare Shared Savings Program ACOs or the new Long-term Enhanced ACO Design model. The higher payment recognizes work involved in longitudinal care.

Preventive Care and Behavioral Health

CMS finalized payment pathways for health and well-being coaching under general supervision and establishes codes for shared medical appointments. The rule also updates payment for smoking-cessation services and the Psychiatric Collaborative Care Model, including higher work values.

Two new codes, G0572 and G0573, will recognize advance care planning provided by clinical staff under a practitioner’s direct supervision. Existing advance care planning codes will be reserved for time personally spent by the billing clinician. These changes support team-based approaches to patient-centered care.

Telehealth and Rural Access

The rule gives teaching physicians more flexibility to supervise telehealth visits involving residents when either the physician or resident is physically with the patient, for services on the Medicare Telehealth Services List. The telehealth originating-site facility fee rises to $32.68.

For Rural Health Clinics (RHCs), Medicare will recognize diabetes self-management training and medical nutrition therapy as separately billable preventive visits. These services must be furnished by a certified provider under the direct supervision of an RHC practitioner.

RHCs and Federally Qualified Health Centers (FQHCs) can continue billing for eligible non-behavioral telehealth visits through 2027, and the in-person requirement for behavioral health telehealth visits remains delayed through that year.

Remote Patient Monitoring: Initiating Visits and Staffing

Beginning January 1, 2027, practitioners must conduct a qualifying face-to-face initiating visit before billing for newly initiated remote physiologic monitoring (RPM) or remote therapeutic monitoring (RTM). The visit may occur in person or through permissible telehealth and must include discussion of monitoring, although it doesn’t need to be the visit’s sole purpose. Patients already receiving RPM or RTM before January 1, 2027, do not need another initiating visit simply to continue monitoring.

CMS also revised the practice-expense inputs for RPM setup and device-supply codes 99453, 99445 and 99454; qualifying reductions will be phased in over multiple years. Third-party clinical staffing may continue through December 31, 2028, provided existing ‘incident to,’ supervision and billing requirements are met, including meaningful billing-practitioner oversight.

Beginning January 1, 2029, clinical staff furnishing RPM or RTM services must be direct employees of the practitioner or practice, and use of third-party staffing will no longer qualify. The restriction strictly targets third-party vendors supplying clinical staff time. Practices can still contract with outside companies for devices, software platforms, data hosting, connectivity, cybersecurity, and technical support. While CMS finalized this policy despite significant industry pushback, the agency delayed the effective date from CY 2027 to CY 2029. CMS plans to issue further guidance before implementation.

Accountable Care and Specialty Models

The Medicare Shared Savings Program had several changes intended to encourage Accountable Care Organization (ACO) participation. CMS increased the maximum shared savings rate for BASIC track Level E from 50% to 60%, revised financial benchmarks, and created incentives for ACOs bringing additional clinicians and beneficiaries into accountable care. CMS-approved ACOs may reduce or eliminate certain Medicare Part B cost-sharing charges for beneficiaries, with CMS targeting April 1, 2027, for the first approvals. CMS also eased quality reporting and electronic health record requirements.

The mandatory Ambulatory Specialty Model begins January 1, 2027, for selected specialists treating heart failure and low back pain. It ties future Medicare payments to quality, cost and care coordination. CMS finalized technical refinements to the model ahead of its launch.

Quality Reporting, Laboratories and 340B

CMS delayed the end of traditional Merit-based Incentive Payment System (MIPS) reporting until the 2031 performance year, giving clinicians more time to adopt MIPS Value Pathways. It also added pathways addressing diabetes, hypertension and hospitalists. Beginning in CY 2027, CMS will require clinicians to report at least one designated MIPS core measure, with exceptions for small practices and clinicians with no applicable core measure.

For clinical laboratories, payment reductions based on private-payer data will be capped at 15% annually through 2029.

Separately, 340B covered entities must begin submitting specified Medicare Part D claims data for discounted drugs dispensed starting January 1, 2027. The first submission, covering the first half of 2027, will be due September 30, 2027.

Taken together, the rule expands opportunities for coordinated, preventive care while introducing new billing, reporting and reimbursement challenges. This is a good time for health systems to review potential specialty-level payment impacts, update billing processes and evaluate how the new ACO and telehealth policies will affect their patients and clinicians.

A more detailed summary of the final rule will be shared soon. In the meantime, here is the CMS fact sheet on the rule.

Topics: CMS, Payment Policy, Rural Health, Telehealth