CMS Issues Proposed Calendar Year 2027 Payment Rules: Outpatient Prospective Payment System/Ambulatory Surgical Center and Physician Fee Schedule

Executive Summary

On July 7, 2026, the Centers for Medicare & Medicaid Services (CMS) published in the Federal Register the proposed rules for calendar year (CY) 2027 Medicare Hospital Outpatient Prospective Payment System (OPPS) and the Medicare Ambulatory Surgical Center (ASC) payment systems. The proposed rule would raise OPPS and ASC payment rates by 2.4%, significantly cut 340B drug payments while accelerating the clawback of prior non-drug payment increases, implement new statutory provider-based department requirements, introduce a new “Software as a Medical Service” payment framework for algorithm-driven technologies, continue the phase-out of the Inpatient Only List with corresponding additions to the ASC Covered Procedures List, update hospital and ASC quality reporting measures and hospital price transparency requirements, and seeks comment on expanding domestic personal protective equipment and essential medicine procurement policies. Comments on the OPPS/ASC proposed rule are due August 31, 2026.

On July 16, 2026, CMS published on the Federal Register its annual 2027 Medicare Physician Fee Schedule (PFS) Proposed Rule. The proposed rule would set separate conversion factor updates for qualifying and nonqualifying Alternative Payment Model participants, make changes to the practice expense methodology, make multiple changes to the Medicare Shared Savings Program’s financial methodology, introduce mandatory quarterly 340B claims data reporting, reduce payment for office/outpatient E/M visits furnished on the same day as global surgical procedures, tighten remote physiologic and remote therapeutic monitoring requirements, advance the transition from traditional Merit-based Incentive Payment System (MIPS) reporting to MIPS Value Pathways beginning in CY 2029, implement statutory telehealth flexibility extensions and Rural Health Clinics/Federally Qualified Health Clinics payment updates, make conforming Clinical Laboratory Fee Schedule changes, update coding for chronic illness and behavioral health services, and issues several requests for information, including on primary care payment redesign. Comments on the PFS proposed rule are due September 14, 2026.

Table of Contents

I. CY 2027 Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems Proposed Rule

A. Payment Rate Updates of 2.4% for OPPS and ASC
B. 340B Drug Pricing Program
C. Provider-Based Departments
D. Software as a Medical Service (SaMS) Payment
E. Continued Phase-Out of the Inpatient Only List and Expansion of ASC Covered Procedures
F. Quality Reporting Program Updates
G. Request for Information: Hospital Price Transparency Data
H. Request for Information: Domestic Procurement of PPE and Essential Medicines

II. CY 2027 Physician Fee Schedule Proposed Rule

A. CY 2027 PFS Conversion Factor Updates
B. Practice Expense
C. Medicare Shared Savings Program: Revising the MSSP’s Financial Methodology
D. Mandatory 340B Claims Data Reporting
E. Global Surgical Packages and E/M Visit Overlap
F. Remote Physiologic Monitoring and Remote Therapeutic Monitoring
G. Quality Payment Program Reporting: Transition from MIPS to MVPs in CY 2029
H. Payment for Medicare Telehealth Services
I. RHC/FQHC Payment and Telehealth Updates
J. Clinical Laboratory Fee Schedule
K. Care for Chronic Illness and Behavioral Health Needs
L. Significant Requests for Information

I. Proposed Calendar Year 2027 Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems Rule

A. Payment Rate Updates of 2.4% for OPPS and ASC

CMS proposes increasing the payment rates for both OPPS and ASC by 2.4% for CY 2027.¹ CMS proposes to extend its “utilization of the hospital market basket update as the update factor for the ASC payment system” through CY 2027.² Hospitals that do not meet the Hospital Outpatient Quality Reporting (OQR) Program requirements “would continue to be subject to a further reduction of 2.0 percentage points to the OPD fee schedule increase factor.”³ And ASCs that do not meet the reporting requirements of the Ambulatory Surgical Center Quality Reporting (ASCQR) Program will continue to face a 2.0 percentage point reduction in “any annual increase in certain payment rates under the ASC payment system[.]”⁴ CMS “estimate[s] that total payments to OPPS providers . . . for [CY] 2027 will be approximately $110.9 billion, an increase of approximately $9.5 billion compared to estimated CY 2026 OPPS payments.”⁵ For ASCs, total estimated payments will be about $9.9 billion in CY 2027, “an increase of approximately $520 million compared to estimated CY 2026 Medicare payments.”⁶

B. 340B Drug Pricing Program

a. Accelerated Clawback of 2018-2022 Non-Drug Payment Increases (340B Remedy Offset)

Effective January 1, 2027, CMS proposes increasing the annual reduction to the OPPS conversion factor for non-drug items and services from a 0.5% reduction to a 3.0% reduction.⁷ As background, between 2018 and 2022, CMS cut the payment rate for 340B-acquired drugs from Average Sales Price (ASP) plus 6% down to ASP minus 22.5%.⁸ To comply with budget neutrality requirements, CMS simultaneously increased payments to all hospitals for non-drug items and services – a total of about $7.8 billion in redistributed funds was spent from 2018 to 2022 to offset the 340B cuts.⁹ However, after the Supreme Court invalidated U.S. Department of Health and Human Services’ (HHS) reduction in the OPPS payment rates for 340B-acquired drugs in American Hospital Association v. Becerra, 596 U.S. 724 (2022), CMS reinstated the ASP plus 6% payment rate from late 2022 through 2026.¹⁰ To preserve budget neutrality, CMS also began recouping the increased payments it had made for non-drug items and services during that period, through incremental reductions over several years.¹¹ CMS initially set a 0.5% annual reduction in the OPPS conversion factor for non-drug items and services to achieve a gradual claw back of the excess payments.¹² However, CMS now proposes to accelerate that timeframe by adopting a 3.0% reduction until a total $7.8 billion in payments have been recouped, which CMS states would occur by the end of CY 2029.¹³ Doing so, CMS argues, would more closely align with hospitals’ utilization in 2018 to 2022.¹⁴ CMS estimates this proposed policy would “reduce overall OPPS payments by $2.3 billion in CY 2027.”¹⁵

b. Significantly Reduced Payment Rate for 340B-Acquired Drugs

For CY 2027, CMS proposes paying for drugs acquired through the 340B Program at a rate 33.4% below the ASP, rather than the current OPPS rate of 6% above the ASP.¹⁶ In American Hospital Association (2022), the Supreme Court struck down an earlier attempt by CMS to reduce those same payments, concluding “that, absent a survey of hospitals’ acquisition costs, HHS may not vary the reimbursement rates for 340B hospitals.”¹⁷ Because HHS had not conducted a survey of acquisition costs when setting the 2018 and 2019 reimbursement rates at issue in that case, the Court found that the agency acted unlawfully in reducing the rates only for 340B hospitals.¹⁸ In the CY 2027 proposed rule, the agency is again seeking to reduce payments for 340B-acquired drugs,¹⁹ but now, the agency asserts it has conducted the required drug acquisition cost survey.²⁰ Based on CMS’s analysis of data from the OPPS Drug Acquisition Cost Survey conducted between July 1, 2024 and June 30, 2025, the agency notes an “immediately evident” gap between the Medicare payment and acquisition cost for 340B-acquired drugs: CMS states this “indicates average acquisition costs that are 37.2 percent lower than the general OPPS payment rate (ASP plus six percent).”²¹ The stated intention behind the proposed policy is to “more appropriately align payment with acquisition costs.”²² To that end, CMS proposes applying the reduced rate to 340B-acquired drugs by 340B hospitals, but not to non-340B drugs acquired by 340B hospitals.²³ CMS proposes that the reduced payment rate of ASP minus 33.4% would apply “to all separately payable drugs, biologicals, biosimilars and radiopharmaceuticals acquired under the 340B Program.”²⁴ The agency would also apply this reduced payment rate in nonexcepted off-campus provider-based departments (PBDs) to avoid incentivizing hospitals to provide 340B-acquired drugs through nonexcepted off-campus PBDs.²⁵ Rural sole community hospitals, children’s hospitals, and PPS-exempt cancer hospitals would be exempt from this payment reduction and continue receiving the rate of ASP plus 6%.²⁶ As a result of this proposed policy, CMS anticipates a $4.85 billion reduction in OPPS drug payments.²⁷ To maintain budget neutrality, the agency proposes to redistribute an offsetting amount, which would “increase the conversion factor for OPPS non-drug items and services by 8.44 percent for CY 2027.”²⁸

C. Provider-Based Departments

a. Implementing New Provider-Based Requirements

As covered in the June 2026 Hospital and Health Systems Reimbursement Check Newsletter, the Consolidated Appropriations Act of 2026 (CAA, 2026) enacted new requirements for off-campus outpatient provider-based departments to receive Medicare reimbursement, including (i) obtaining and billing under a separate National Provider Identifier (NPI); and (ii) mandatory submission of a provider-based status attestation certifying compliance with the provider-based requirements in 42 C.F.R. § 413.65.²⁹ The statute required that the agency promulgate rules “to establish a process for each provider with an off-campus outpatient department to submit an initial and subsequent attestation,” and governing compliance review by the agency.³⁰ The CY 2027 OPPS/ASC proposed rule sets forth CMS’s plan to implement the statute.

CMS proposes that “main providers, prior to submitting an attestation, must obtain an NPI for each provider-based department and update Provider Enrollment, Chain, and Ownership System (PECOS).”³¹ CMS proposes codifying the mandatory attestation timeline: starting January 1, 2028, providers must submit an initial attestation within the prior two years and a subsequent attestation within a period “not to exceed 5 years thereafter” (although the precise interval has yet to be determined).³² Practically, this means hospitals with off-campus outpatient departments must submit their initial attestations between January 1, 2026, and December 31, 2027, or risk losing Medicare reimbursement for services furnished by an off-campus outpatient department of a provider starting January 1, 2028.³³ The requirement would be satisfied by submitting the initial attestation; providers need not have received their provider-based status determination by January 1, 2028.³⁴ For providers that received determinations of provider-based status before January 1, 2026, CMS is weighing an alternative option where “the authorized official [would] attest with a letter to CMS with evidence of CMS determination attached affirming its continued compliance with §413.65.”³⁵ CMS requests feedback on ways to streamline the attestation documentation requirements for hospitals with multiple off-campus outpatient departments.³⁶

Next, under CMS’s proposed plan, providers would submit “a standardized attestation form” (draft version available here) through a centralized electronic system, “which would replace the current Medicare Administrative Contractor (MAC)-specific templates and ensure consistency across MACs.”³⁷ These forms would undergo “automated validation” and a “risk-based screening” by CMS and its contractors, including MACs, to identify submitted attestations requiring supporting documentation.³⁸ Providers would be given a period of no more than 60 days to provide supporting documentation.³⁹ Generally, CMS expects a reduction in required documentation, and not all documentation would be required in the initial attestation.⁴⁰ CMS offers guidelines about the information that providers “must be prepared to demonstrate” for each provider-based requirement.⁴¹ For example, to evidence financial integration, CMS proposes that providers must be prepared to demonstrate that “the department does not maintain a separate general ledger or trial balance independent of the main provider.”⁴² For the location requirement, CMS expects the attestation system will have “the ability to measure the distance requirement.”⁴³ If not, or if the distance exceeds 35 miles, CMS proposes providers would be required to submit supporting documentation.⁴⁴ At the “extended review stage”—which CMS can initiate “at any time”⁴⁵—CMS and its contractors would select “a subset of attestations” for more extensive review (e.g., remote audits, site visits, or data analysis).⁴⁶ CMS and its contractors could request supporting documentation at any stage of the process.⁴⁷ If the attestation is determined compliant with the provider-based requirements at § 413.65, an approval notice would be issued; if the provider fails to submit requested information or cannot attest to all requirements, a denial would be issued with an option to appeal.⁴⁸ CMS proposes that “[u]ntil the standardized form and centralized electronic system are finalized, providers may continue to submit attestations in accordance with existing §413.65(b)(3)(ii) in satisfaction of section 6225 of the CAA, 2026 to their servicing MAC.”⁴⁹

With attestations required, CMS anticipates the number of attestations each year to rise from 250 to 16,488.⁵⁰ At the same time, with the implementation of a standardized form and the centralized electronic system, CMS expects the time required for providers to submit an attestation to shrink “by 25 to 75 percent.”⁵¹

b. Expanding Site-Neutral Payments for Certain Imaging Services at Excepted Off-Campus PBDs

CMS proposes to apply the Physician Fee Schedule equivalent rate for imaging without contrast services (e.g., x-rays, ultrasounds, CT scans, MRIs, etc.) to excepted off-campus provider-based departments.⁵² This proposal represents the latest expansion of CMS’s site-neutral payment approach for outpatient services delivered at off-campus PBDs.⁵³ In CY 2019, CMS applied site-neutral rates to clinic visits in excepted off-campus PBDs,⁵⁴ and in CY 2026, CMS lowered payment for drug administration services at excepted off-campus outpatient departments to the lower rate applied to newer, non-excepted sites.⁵⁵ Because CMS “continue[s] to be concerned that beneficiaries are being driven into higher cost settings of care because of financial incentives[,]”⁵⁶ the agency now plans to apply the PFS-equivalent payment rate to the Healthcare Common Procedure Coding System (HCPCS) codes assigned to specific imaging without contrast Ambulatory Payment Classifications (APCs) when furnished at an excepted off-campus PBD.⁵⁷ Non-excepted PBDs already receive the PFS-equivalent payment rate for these APCs.⁵⁸ CMS anticipates $260 million in savings in CY 2027 as a result of this change ($190 million saved for Medicare, and $70 million saved in beneficiary coinsurance).⁵⁹

D. Software as a Medical Service (SaMS) Payment

In recent years, there have been rapid developments in the use of software-based technologies with novel functionalities, including artificial intelligence (AI), to support clinical decision-making in the outpatient and physician office settings. In previous rulemaking, CMS referred to these algorithm-driven services as Software as a Service (SaaS); however, because that term is commonly used for general cloud-based computing service models outside of healthcare, CMS now proposes to change the terminology to Software as a Medical Service (SaMS) to avoid confusion.⁶⁰

CMS acknowledges that it has been evaluating how to develop a comprehensive and consistent approach to SaMS payment for years, attempting to keep up with the evolving nature of these technologies. One issue CMS faces is that Medicare Part B payment systems are primarily designed to pay for services relying on material resources, rather than technologies whose value is driven by proprietary algorithms and scalable, non-material costs.⁶¹ This creates difficulties in establishing appropriate valuation methodologies.⁶² While CMS continues to gather data to better address payment challenges in this area, CMS is proposing an interim payment policy due to the growing need. This includes a proposal to designate 36 HCPCS codes as SaMS services and reassign 21 codes currently paid separately under clinical APCs to New Technology APCs, maintaining approximate CY 2026 payment rate continuity.⁶³ To distinguish SaMS technologies from other services assigned to New Technology APCs, CMS proposes to create a new status indicator “O1” (Software as a Medical Service, Paid under OPPS; separate APC payment) and assign all designated SaMS services to that indicator.⁶⁴

In addition, in an effort to promote stability and predictability in payments, CMS proposes to reassign 10 HCPCS codes describing SaMS analyses performed on laboratory tests from the Clinical Laboratory Fee Schedule (CLFS) to New Technology APCs under the OPPS.⁶⁵ CMS takes the position that because these secondary algorithmic analyses do not require performance by a CLIA-certified laboratory, they should not be treated as clinical diagnostic laboratory tests (CDLTs) for Medicare payment purposes but instead constitute “other diagnostic tests” under section 1861(s)(3) of the Act.⁶⁶

CMS intends for CY 2027 to be a transitional period as it works toward developing a more comprehensive and appropriate payment methodology for SaMS.⁶⁷ As such, CMS requests public comment on these proposals.

E. Continued Phase-Out of the Inpatient Only List and Expansion of ASC Covered Procedures

CMS continues to shift procedures out of the inpatient-only setting – proposing to remove 637 services from the Inpatient Only (IPO) list and adding 618 to the ASC Covered Procedures List (CPL) for CY 2027.⁶⁸ In 2000, the IPO list was created to help delineate which services would be excluded from OPPS payment due to the invasive nature of the procedure, a patient’s condition, or safety considerations requiring inpatient care.⁶⁹ CMS is phasing out the IPO list over three years, to be completed by January 1, 2029.⁷⁰ Of the currently remaining 1,438 services on the IPO list, CMS proposes removing 637 from several clinical families, including auditory, digestive, and endocrine, among others (the full list is available for download here).⁷¹ In the press release, CMS explains that “[t]his proposal would allow for these services to be paid by Medicare in the hospital outpatient setting when determined to be clinically appropriate, giving physicians greater flexibility in determining the most appropriate site of service.”⁷² Medicare will make a facility payment to ASCs only for the surgical procedures on the ASC CPL.⁷³ Of the 637 procedures proposed to be removed from the IPO list, CMS intends to add 618 to the ASC CPL (the full list is available for download here).⁷⁴

F. Quality Reporting Program Updates

CMS proposes to remove the Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients measure from the Hospital Outpatient Quality Reporting Program and the ASC Quality Reporting Program, beginning with the CY 2027 reporting period/CY 2029 payment determination.⁷⁵ The Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy measure will be retained in both programs as the more patient-outcome-focused measure.⁷⁶ The colonoscopy measure was designed to address the possibility that patients were undergoing colonoscopies too frequently, increasing patients’ exposure to harm; however, CMS notes that the measure assesses documentation of follow-up intervals rather than actual patient outcomes, a more informative metric.⁷⁷

CMS is also issuing a Request for Information (RFI) on including an Advance Care Planning eCQM in the Hospital OQR Program, which would measure the proportion of adult patients with hospitalizations who have an advance care planning document in the electronic health record (EHR) or documentation of an advance care planning discussion.⁷⁸ CMS seeks input on including this measure and other measure concepts related to advance care planning for the hospital outpatient setting.⁷⁹ CMS also proposes to continue applying a 2.0 percentage point reduction to the OPD fee schedule increase factor for hospitals that fail to meet Hospital OQR Program requirements for CY 2027.⁸⁰

G. Request for Information: Hospital Price Transparency Data

Since January 1, 2021, hospitals have been required to provide clear, accessible pricing information online through (1) a comprehensive machine-readable file (MRF) and (2) a consumer-friendly display.⁸¹ Executive Order 14221, “Making America Healthy Again by Empowering Patients with Clear, Accurate, and Actionable Healthcare Pricing Information,” requires CMS to continue promoting universal access to clear and accurate healthcare prices.⁸² In the CY 2026 OPPS/ASC final rule, CMS finalized changes requiring hospitals to publish actual dollar-based pricing data and to attest that their MRFs are true, accurate, and complete.⁸³ Those changes went into effect on January 1, 2026, with enforcement starting April 1, 2026.⁸⁴

In this proposed rule:

1. Machine-Readable File Enhancements. CMS seeks feedback on further enhancements to increase the utility and comparability of MRF data, including (1) reporting of outlier contract provisions, stop-loss contract clauses, rate-tiering arrangements where payors categorize hospitals based on cost and quality, and carve-out provisions that separate high-cost specialized services from standard bundled rates; (2) standardization of free text fields that currently contain unstructured narrative information; and (3) standardization of payor and plan naming across hospitals’ MRFs.⁸⁵
2. Consumer-Friendly Display. CMS also seeks feedback on potential changes to the consumer-friendly display requirements, including (1) whether to revisit the number and types of CMS-specified shoppable services; (2) whether to remove the current policy allowing price estimator tools; and (3) whether hospitals should present ancillary items and bundled services in a more standardized format.⁸⁶

H. Request for Information: Domestic Procurement of PPE and Essential Medicines

CMS currently has a payment policy under the Inpatient Prospective Payment System (IPPS) and OPPS for the additional resource costs that hospitals face in procuring domestic NIOSH-approved surgical N95 filtering facepiece respirators (FFRs).⁸⁷ CMS is now soliciting comment on approaches to expand this policy under the IPPS to include other forms of domestic personal protective equipment (PPE) and certain essential medicines.⁸⁸ CMS is considering expanding eligible PPE beyond surgical N95s to include all domestic NIOSH-approved FFRs that demonstrate compliance with American Society for Testing and Materials standards, domestic medical gloves and gowns that meet certain requirements, and certain drugs classified as essential medicines by the Advanced Regenerative Manufacturing Institute.⁸⁹

Manufacturers of potentially eligible domestic PPE and essential medicines would attest that their products meet the domestic definitions,⁹⁰ and HHS would create an annual public file of eligible products.⁹¹ CMS is considering two payment approaches: a claims-based approach, under which the claims processing system would automatically calculate and pay the separate IPPS payment, and a cost-report-based approach, under which hospitals would aggregate information on their cost reports, with reconciliation at cost report settlement and biweekly interim payments available.⁹² CMS is also considering making this payment non-budget neutral and establishing a maximum annual aggregate payment limit, as well as sunsetting the existing surgical N95 FFRs OPPS policy while exploring alternative outpatient approaches.⁹³

II. CY 2027 Physician Fee Schedule Proposed Rule

A. CY 2027 PFS Conversion Factor Updates

A conversion factor (CF) is the dollar amount that CMS multiplies against the total relative value units (RVUs) assigned to a physician service to translate those relative value units into a dollar payment amount. CMS proposes two CFs for the PFS: one CF for items and services furnished by qualifying Alternative Payment Model (APM) participants (QPs) and a separate CF for items and services furnished by clinicians who are not QPs.⁹⁴ The CY 2027 update to the qualifying APM CF is 0.75 percent, while the update to the nonqualifying APM CF is 0.25 percent.⁹⁵ CMS also proposes to remove the 2.50 percent statutory payment increase that applied only to services furnished during CY 2026 before applying the CY 2027 budget neutrality and statutory update adjustments.⁹⁶

CMS estimates that the CY 2027 qualifying APM CF would be 33.1693 and that the CY 2027 nonqualifying APM CF would be 32.8409.⁹⁷ Each estimate reflects a 0.53 percent positive budget neutrality adjustment, with the qualifying APM CF also reflecting the 0.75 percent statutory update and the nonqualifying APM CF reflecting the 0.25 percent statutory update.⁹⁸ CMS also estimates an anesthesia qualifying APM CF of 20.4165 and an anesthesia nonqualifying APM CF of 20.2143, reflecting the same overall PFS adjustments as well as anesthesia-specific practice expense and malpractice adjustments.⁹⁹ CMS is also publishing impact information that breaks out certain specialty impacts by facility and non-facility setting because some proposed policies are expected to have differential effects depending on the site of service.¹⁰⁰

B. Practice Expense

CMS proposes several significant refinements to the practice expense (PE) methodology for CY 2027, including changes to the indirect PE allocator, a phase-out of the indirect practice cost index (IPCI), and a new PE stabilization adjustment.¹⁰¹

First, CMS proposes to revise Step 8 of the PE methodology so that indirect PE would be allocated based on the sum of work RVUs and clinical labor PE RVUs for all services, except codes with 010- and 090-day global periods.¹⁰² CMS explains that, under longstanding policy, both work RVUs and clinical labor PE RVUs are used for certain global services with professional and technical components, while other services use a different formulation.¹⁰³ CMS states that this approach inadvertently advantages services that can be reported using technical, professional, and global components, and CMS proposes to use the same allocation methodology for all PFS services other than 010- and 090-day global period codes.¹⁰⁴

Second, CMS proposes to remove Steps 12 through 17 of the current PE methodology, which rely on the IPCI, over a two-year transition period.¹⁰⁵ CMS states that the IPCI relies on specialty-level PE/hour survey data that have become increasingly dated, limited to small and selective samples, and insufficiently transparent.¹⁰⁶ CMS proposes that, in the first year of the transition, only half of the measured variation in the IPCI would be applied to the indirect allocator, and that, in the second year, the IPCI would no longer be applied.¹⁰⁷ Under the proposed policy, the total PE RVU before the final PE RVU calculation would be the sum of direct cost PE RVUs and indirect cost PE RVUs.¹⁰⁸

Third, CMS proposes a new PE stabilization adjustment that would generally cap annual increases or decreases in PE RVUs at five percent, subject to statutory RVU reductions.¹⁰⁹ CMS states that the adjustment is intended to mitigate volatility that could otherwise result from removing the IPCI, which historically had a stabilizing effect because it was rooted in static PE/hour data.¹¹⁰ CMS proposes that the stabilization adjustment would not apply to new and revised codes, newly nationally priced codes, or revalued codes.¹¹¹

CMS also seeks comment on whether and how indirect PE costs vary for physicians and other professionals based on their practice setting, employment model, and relationship with hospitals or health systems.¹¹² CMS further asks whether the 50 percent indirect PE allocation for facility services is accurate for hospital-employed physicians or could be lower, including potentially 0 percent, and whether a new HCPCS modifier for employed physicians would be a reasonable way to identify and reduce facility PE for services performed in the facility setting.¹¹³

Finally, CMS is releasing a public use file that displays, for certain services not currently billable with technical component/professional component modifiers, RVU amounts reflecting the relative resources involved in furnishing the professional and technical aspects of the services.¹¹⁴ CMS states that the file is intended to improve transparency regarding how PFS payments may be conceptually divided between physician professional and technical components, particularly to illuminate differences between technical aspects of PFS services and facility fees across settings of care.¹¹⁵

C. Medicare Shared Savings Program: Revising the MSSP’s Financial Methodology

CMS proposes multiple changes to the Medicare Shared Savings Program (MSSP), including proposals to update the financial methodology.¹¹⁶ As background on the MSSP, participating Accountable Care Organizations (ACOs) may qualify for shared savings payments (or losses) based on quality and cost savings.¹¹⁷ The MSSP offers ACOs two tracks: the BASIC track, with five ascending levels of risk (A to E), or the ENHANCED track, the latter of which carries the highest potential for risks and rewards.¹¹⁸ CMS advances six proposed modifications to the MSSP’s benchmarking and financial methodology, with the stated intention “to encourage new and sustained participation by ACOs in the program.”¹¹⁹

1. Increasing the sharing rate for BASIC track Level E. CMS believes “ACOs may be taking on additional risk more quickly than they otherwise would because the ENHANCED track offers a 50 percent increase in savings compared to BASIC track Level E,” which might result in program termination.¹²⁰ To ameliorate this issue, CMS seeks to increase the sharing rate for BASIC track Level E from 50% to 60% for agreement periods beginning January 1, 2027.¹²¹ CMS reasons that “[c]losing the gap in the sharing rates between BASIC track Level E and the ENHANCED track would likely increase savings for the Trust Funds, while striking a better balance among incentivizing robust participation in the Shared Savings Program[.]”¹²²
2. Reducing ENHANCED track’s regional adjustment weight for lower-spending ACOs. In the MSSP, the regional adjustment refers to the comparison of an ACO’s historical benchmark against spending in its region (e.g., if an ACO spent less than the regional average, the adjustment would be positive).¹²³ CMS has found that ACOs in the ENHANCED track have seen “substantially larger positive regional adjustments” when compared to those in the BASIC track.¹²⁴ This leads CMS to question whether the higher gross savings performance by the ENHANCED track actually “reflect[s] genuine cost reduction.”¹²⁵ As another measure to “rebalance financial incentives across tracks[,]” effective for agreement periods starting January 1, 2027, CMS proposes reducing the positive regional adjustment weight from 50% to 35% for lower-than-regional-average spending ACOs participating in agreement periods under the ENHANCED track.¹²⁶
3. Increasing the prior savings adjustment’s scaling factor. At the start of a new agreement period, CMS must reset the ACO’s benchmark.¹²⁷ In this process, the savings that an ACO generated in a prior agreement period may reduce its new benchmark due to the lowered historical spending.¹²⁸ The agency “believe[s] the current methodology may not provide sufficient incentives for ACOs to continue participation in future agreement periods[.]”¹²⁹ Because the prior savings adjustment helps “strengthen incentives and mitigate impacts from ACOs’ past performance on future agreement periods,”¹³⁰ CMS proposes increasing the prior savings adjustment scaling factor from 50% to 75% for agreement periods starting January 1, 2027.¹³¹
4. Risk adjusting the 5% cap on upward benchmark adjustments. Currently, the upward adjustments (i.e., positive regional adjustment, prior savings adjustment, and population adjustment) are each subject to a 5% cap of national per capita Original Medicare expenditures for the assignable beneficiary population.¹³² Based on feedback from ACOs, CMS proposes risk adjusting the five percent cap on the upward adjustments, reflecting the fact that care for medically complex patients involves higher costs.¹³³
5. Introducing a new growth adjustment to incentivize new ACO participation. CMS proposes a new “growth adjustment” to the historical benchmark, applicable for agreement periods starting January 1, 2027.¹³⁴ CMS’ goal with this new upward adjustment would be to “reward ACOs for recruiting ACO professionals inexperienced with value-based care arrangements who are also serving beneficiaries new to value-based care.”¹³⁵ CMS estimates this proposal will result in a net increase in spending by $1.67 billion over 10 years.¹³⁶ CMS notes it has observed increased participation correlates with increased quality improvements and increased savings.¹³⁷
6. Reforming the ACPT component. CMS proposes updates to the historical benchmark using a “three-way blend” of national and regional growth rates as well as the Accountable Care Prospective Trend (ACPT), “a variant of the modified United States Per Capita Cost (USPCC)” set prospectively at the start of an agreement period.¹³⁸ CMS proposes changing the timing of the calculation of the ACPT – it would occur on a performance year basis, rather than an agreement-period basis.¹³⁹ CMS reasons that a performance year-specific modified USPCC annualized growth rate would improve consistency.¹⁴⁰ In addition, CMS proposes prospective (from 2027) and retroactive (2024-2026) guardrails limiting how far predicted growth can deviate from actual growth.¹⁴¹

Beyond financial methodology updates, among other MSSP changes, CMS proposes revising beneficiary assignment methodology¹⁴² to address the issue of “lemon dropping” by ACOs.¹⁴³ Separately, CMS proposes allowing ACOs to reduce or eliminate Part B cost sharing, with exceptions,¹⁴⁴ in order to improve beneficiary engagement with ACOs.¹⁴⁵ Finally, in addition to comments on the proposals, CMS requests information about “potential future policy developments” in MSSP, specifically about a new quality measurement, specialty care engagement, and primary care-focused capitated payment arrangements.¹⁴⁶

D. Mandatory 340B Claims Data Reporting

In the CY 2026 PFS final rule, CMS established a 340B repository for voluntary data submissions about Part D 340B claims.¹⁴⁷ CMS intends to operationalize the 340B repository to launch by this fall.¹⁴⁸ CMS now proposes requiring providers and suppliers that are covered entities (as defined at 42 C.F.R. § 10.3) to submit Part D 340B data on a quarterly basis to the repository starting January 1, 2027.¹⁴⁹ The proposed regulation § 428.203(c) specifies the data elements, including dates of service and prescription of service reference number.¹⁵⁰ If finalized, CMS asserts the agency would reserve the right to revoke a currently enrolled provider or supplier’s Medicare enrollment and any provider or supplier agreements for failure to comply with the proposed requirement to maintain and provide access to documentation at proposed § 424.516(f)(4), using the agency’s existing power at § 424.535(a)(10).¹⁵¹

E. Global Surgical Packages and E/M Visit Overlap

CMS provides a lengthy discussion of global surgical packages, including a request for information on payment transparency and potential future adjustments to global packages, and a concrete proposal to reduce payment when certain separately identifiable office/outpatient E/M visits are furnished on the same day as global-period procedures.¹⁵²

CMS explains that global surgical packages aggregate payment for pre-operative, intra-operative, and post-operative services furnished during defined 0-, 10-, and 90-day global periods, including services by physicians, clinical staff, and associated practice expenses.¹⁵³ CMS states that this bundled structure obscures how the components of care are individually valued and limits CMS’s ability to disaggregate those components for purposes of the new professional/technical component public use file.¹⁵⁴ CMS seeks comment on how to address this problem.¹⁵⁵ CMS also seeks comment on approaches to “right-size” payments for global packages over time so that they remain aligned with current clinical practice and resource costs, can be updated using empirical data, and do not obscure information needed to assess payment differences across settings.¹⁵⁶

Separately, CMS proposes to reduce payment when a separately identifiable office/outpatient E/M visit is furnished by the same physician, or by a physician in the same group practice, on the same day as a 0-, 10-, or 90-day global procedure.¹⁵⁷ Under the proposal, the highest paid service, whether the procedure or the E/M visit, would be paid at 100 percent, and all other applicable procedures or E/M visits would be paid at 50 percent.¹⁵⁸ CMS states that the 50 percent adjustment aligns with its CY 2019 proposal and with the longstanding surgical multiple procedure payment reduction policy, but CMS invites comment on whether a different adjustment, such as 25 percent, would be more appropriate.¹⁵⁹ CMS frames the proposal as addressing likely overlap and duplication between E/M resources already reflected in the global surgical package and additional E/M services billed using modifier 25 as significant and separately identifiable.¹⁶⁰ CMS seeks comment on whether the policy should apply to other E/M visits, such as inpatient E/M visits.¹⁶¹

F. Remote Physiologic Monitoring and Remote Therapeutic Monitoring

CMS proposes significant refinements to remote physiologic monitoring (RPM) and remote therapeutic monitoring (RTM) policies for CY 2027, responding to recent Office of the Inspector General (OIG) reports that some practices did not have a prior relationship with patients for whom they billed remote monitoring services.¹⁶² Among the key proposals, CMS would: (1) require that RTM services be furnished only to established patients; (2) mandate a separately reportable initiating visit before the onset of RPM or RTM services; and (3) stipulate that RPM and RTM services be provided exclusively by clinical staff who are direct employees of the billing practitioner’s practice—effectively prohibiting outsourcing to third-party companies, which CMS believes will enhance oversight and ensure adequate supervision.¹⁶³ CMS reasons that outsourcing can “fragment care” and “detract from longitudinal, patient-centered care.”¹⁶⁴

CMS also proposes to revise practice expense valuations for several RPM and RTM codes. This revision is based on limited pricing data for devices used in these services and the recognition that these devices may be overvalued, prompting a reassessment of their valuation.¹⁶⁵ In addition, CMS solicits comment on consolidating the existing 17 remote monitoring codes into four new HCPCS G-codes (GRPM1, GRPM2, GRTM1, and GRTM2) that would bundle setup, device supply, data transmission, and treatment management into single monthly codes.¹⁶⁶ CMS reasons that consolidation could reduce administrative burden and address OIG findings that approximately 43 percent of enrollees did not receive all three components of remote patient monitoring.¹⁶⁷

G. Quality Payment Program Reporting: Transition from MIPS to MVPs in CY 2029

CMS proposes several changes to the Quality Payment Program (QPP), including the sunset of Merit-based Incentive Payment System (MIPS) Reporting in the CY 2029 performance period.¹⁶⁸ Launched in 2017, the QPP, a value-based payment program, offers clinicians two participation tracks: (i) MIPS Reporting, or (ii) Advanced Alternative Payment Models.¹⁶⁹ For clinicians on the MIPS track, payment adjustments result from performance in the categories of cost, quality, improvement activities, and Promoting Interoperability.¹⁷⁰ Currently, there are three reporting options: (1) traditional MIPS, (2) the APM Performance Pathway, or (3) MIPS Value Pathways (MVPs).¹⁷¹ The MVPs offer narrower subsets of measures for a specific condition or specialty, as opposed to the “large inventory of measures” from which clinicians choose in traditional MIPS.¹⁷²

While CMS has signaled interest in sunsetting traditional MIPS since at least 2021,¹⁷³ the agency now proposes that this phase-out occur in the CY 2029 performance period.¹⁷⁴ CMS believes this transition “mark[s] the next phase in Medicare’s transition toward value-based care.”¹⁷⁵ Under the proposal, any clinicians not participating in the APM Performance Pathway reporting option would be required to report through a selected MVP for MIPS.¹⁷⁶ CMS believes that this transition will “better reflect clinicians’ scope of care”¹⁷⁷ and “will move MIPS away from a fragmented reporting approach toward a more meaningful, specialty-aligned framework.”¹⁷⁸ In the proposed rule, CMS acknowledges that clinicians may not currently have an applicable MVP available or applicable measures in the inventory, but intends to develop alternatives to reporting MVPs by CY 2029.¹⁷⁹

In addition to the MIPS to MVP transition, among other changes to the QPP, CMS is proposing the following:

• Adopting three new MVPs. CMS proposes adding three new MVPs for Diabetic Disease, Hypertension, and Hospitalist.¹⁸⁰
• Requiring a New MIPS Core Measure Designation. Currently, clinicians must report six quality measures in traditional MIPS (and four in MVPs)¹⁸¹ – one of which must be either an outcome measure or a high-priority measure.¹⁸² The proposed rule would remove the submission requirement of the outcome measure (or, if unavailable, a high-priority measure),¹⁸³ replacing it with a MIPS core measure.¹⁸⁴ CMS reasons that this transition would improve standardization of data and comparability.¹⁸⁵ The MIPS core measure designation would apply to quality measures in both traditional MIPS and MVPs.¹⁸⁶ Clinicians reporting through traditional MIPS would choose from the “complete inventory” of the proposed MIPS core measures, whereas clinicians reporting through an MVP would select from a shorter, pre-selected list of MIPS core measures within the MVP and “reflective of the care that is central to the clinical focus” of the MVP.¹⁸⁷
• Restricting QP Status to Participating TINs. The other QPP track, Advanced APMs, offers incentives (e.g., exemptions from MIPS reporting and financial incentives) if clinicians meet certain thresholds.¹⁸⁸ Currently, CMS assigns QP status to a clinician’s National Provider Identifier (NPI), meaning that if a clinician maintains relationships across APM Entities with various Taxpayer Identification Numbers (TINs), that QP status would apply to all of the clinician’s TIN/NPI relationships.¹⁸⁹ This means that even an entity not participating with Advanced APMs would receive benefits of the QP status of the clinician.¹⁹⁰ CMS proposes instead assigning QP status at the TIN/NPI level, a measure CMS intends “to prevent an increasing windfall for TINs that do not participate in Advanced APMs,” and prevent waste and abuse.¹⁹¹

H. Payment for Medicare Telehealth Services

Section 6209 of the Consolidated Appropriations Act, 2026 (CAA, 2026) extended several Medicare telehealth flexibilities that were originally adopted during the COVID-19 public health emergency.¹⁹² Specifically, Congress extended the removal of geographic restrictions, the expansion of originating sites, and the expansion of eligible practitioners through December 31, 2027; extended the availability of audio-only telehealth services through January 1, 2028; and delayed the in-person visit requirements for mental health telehealth services through January 1, 2028.¹⁹³ In this proposed rule, CMS proposes conforming regulatory changes to implement these statutory extensions and advances several additional telehealth policy proposals.¹⁹⁴

Among the additional proposals, CMS proposes:

• Adding new HCPCS G-codes to the Medicare Telehealth Services List. CMS proposes adding codes for advance care planning (GACP1, GACP2), group-based medical sessions (GSMAS), pediatric speech-language pathology (GSLPP), and vaccine adverse effect evaluation (GADV1) to the list of services payable when furnished via telehealth.¹⁹⁵
• Establishing new telehealth modifiers. As required by section 6209(g) of the CAA, 2026, CMS proposes creating modifiers (BB and BC) for telehealth services furnished through a virtual telehealth platform by a physician or practitioner that contracts with or has a payment arrangement with the platform entity, effective January 1, 2027.¹⁹⁶
• Revising critical care telehealth consultation codes. CMS proposes revised code descriptors for G0508 and G0509, replacing the previous “initial” and “subsequent” framework with time-based increments, specifically, G0508 for the first 30 to 74 minutes and G0509 for each additional 30 minutes. This change is intended to clarify billing procedures following the permanent removal of frequency limitations in the CY 2026 PFS final rule.¹⁹⁷
• Modifying the teaching physician virtual presence policy. CMS proposes to allow teaching physicians to bill for services involving residents when either the teaching physician or the resident is in the same physical location as the beneficiary rather than requiring all three parties to be in different locations.¹⁹⁸
• Updating the telehealth originating site facility fee. CMS proposes a CY 2027 payment amount of $32.65 for HCPCS code Q3014, reflecting a 2.5 percent increase in the Medicare Economic Index, a change driven by historical data through the second quarter of 2026.¹⁹⁹

I. RHC/FQHC Payment and Telehealth Updates

CMS proposes several updates to payment and telehealth policies for Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs).²⁰⁰ RHCs are generally paid an all-inclusive rate (AIR) for medically necessary services furnished on the same day, subject to a statutory upper payment limit, while FQHCs are paid under the FQHC Prospective Payment System (PPS) based on the lesser of the PPS rate or actual charges.²⁰¹ RHCs and FQHCs are also separately paid for non-face-to-face care coordination services, including chronic care management, remote physiologic monitoring, and remote therapeutic monitoring, based on the PFS national non-facility payment rate.²⁰²

Among the key proposals for CY 2027, CMS proposes:

• Updating the FQHC PPS base rate. CMS proposes to update the FQHC PPS base rate by the percentage increase in the productivity-adjusted FQHC market basket, estimated at 2.5 percent, resulting in a proposed CY 2027 FQHC PPS base rate of $212.91.²⁰³
• Conforming telehealth regulatory text to the CAA, 2026. CMS proposes changes at §§ 405.2463(b)(3) and 405.2469(d) to reflect the CAA, 2026’s extension of the abeyance of in-person mental health visit requirements for RHCs and FQHCs through December 31, 2027, and the extension of authority to pay for non-behavioral health telecommunication technology services through the same date.²⁰⁴
• Recognizing DSMT and MNT as stand-alone billable RHC visits. CMS proposes to recognize Diabetes Self-Management Training (DSMT) and Medical Nutrition Therapy (MNT) services as stand-alone billable visits under the RHC benefit, aligning RHC payment policies with those of FQHCs and physician offices.²⁰⁵ CMS cites data showing that FQHC utilization of DSMT and MNT is approximately 22 and 28 times higher than RHC utilization on a per-beneficiary basis; CMS attributes this disparity in part to structural payment barriers.²⁰⁶
• Technical regulatory corrections. CMS proposes corrections to regulatory references at § 405.2464(b)(1) and (2), a revision to § 405.2464(g) to replace the term “an encounter” with “services” for consistency with section 1834(m)(8) of the Act, and a revision to § 405.2469(d) to align the description of permissible audio-only telecommunications modalities with the language used in § 405.2463.²⁰⁷

J. Clinical Laboratory Fee Schedule

CMS proposes conforming regulatory changes to the Clinical Laboratory Fee Schedule (CLFS) data reporting and payment reduction rules to reflect section 6226 of the CAA, 2026.²⁰⁸ CMS proposes to revise 42 C.F.R. § 414.502 to define the data collection period as the period from January 1 through June 30 and to define the data reporting period for non-advanced diagnostic laboratory test (ADLT) clinical diagnostic laboratory tests (CDLT) as the period from May 1 through July 31.²⁰⁹

The CAA, 2026 also amended the CLFS payment reduction phase-in rules.²¹⁰ For CY 2026, CMS proposes to revise 42 C.F.R. § 414.507(d) so that payment may not be reduced by more than 0.0 percent compared to CY 2025, and, for CYs 2027-29, payment may not be reduced by more than 15 percent compared to the preceding year.²¹¹ CMS states that CY 2018-26 payment rates for non-ADLT CDLTs are based on information collected in 2016, but CY 2027-29 rates will be based on applicable information collected in 2025 and 2026.²¹²

K. Care for Chronic Illness and Behavioral Health Needs

CMS proposes updates to the valuation and coding of certain behavioral health services and introduces a new payment mechanism for shared medical appointments, citing the Trump Administration Executive Order establishing the “Make America Healthy Again” Commission and the agency’s focus on the prevention and management of chronic disease.²¹³ CMS notes that chronic disease remains a significant public health concern, with three in four American adults having at least one chronic condition, and that many preventable chronic diseases are caused by a short list of risk behaviors, including smoking, poor nutrition, physical inactivity, and excessive alcohol use.²¹⁴

Among the proposals, CMS proposes:

• Increasing work RVU valuations for smoking and tobacco cessation counseling and SBIRT services. CMS proposes applying an upward adjustment of 19.1 percent to the work RVUs for smoking and tobacco use cessation services (CPT codes 99406 and 99407) and screening, brief intervention, and referral to treatment (SBIRT) services (HCPCS codes G2011, G0396, and G0397).²¹⁵ CMS is aligning this adjustment with the increase finalized for time-based psychotherapy codes in the CY 2024 PFS final rule, highlighting that smoking and tobacco cessation services were last valued in 2008 and HCPCS code G2011 was last valued in 2019.²¹⁶ CMS proposes to apply the full 19.1 percent adjustment in CY 2027, the final year of the psychotherapy code phase-in, rather than initiating a new multi-year transition period.²¹⁷
• Creating new coding and payment for shared medical appointments. CMS proposes to establish HCPCS code GSMAS to provide dedicated coding and payment for shared medical appointments (SMAs), which are voluntary, group-based sessions where multiple patients with a common chronic condition receive medical care together in a setting that integrates group education, counseling, peer support, and individualized clinical assessment.²¹⁸ CMS states that there is currently no CPT or HCPCS code specifically designated for SMAs so practitioners typically bill using existing E/M codes.²¹⁹ CMS proposes that SMAs be structured as 60-minute sessions for up to 10 beneficiaries, targeting conditions that can be modified through lifestyle changes, such as diabetes mellitus, obesity, hypertension, and hyperlipidemia. These sessions would be available both in person and via telehealth.²²⁰ To participate, beneficiaries must have an existing clinical relationship with the billing practitioner, defined as a professional service within the prior 12 months, and must consent to participation and confidentiality terms.²²¹ Each session would combine E/M elements with individualized clinical care, evidence-based education, self-care discussions, and a focus on positive lifestyle changes through behavior modification.²²² In addition to seeking comments on establishing the proposed HCPCS code GSMAS, CMS also seeks comment on the proposed work RVUs, work times, and direct PE inputs.²²³

L. Significant Requests for Information

a. Primary Care Redesign to Make America Healthy Again

CMS issues a Request for Information on redesigning primary care payment under the PFS to support the HHS priority to “Make America Healthy Again.”²²⁴ CMS expresses concern about the relative undervaluation of primary care services and states it is focused on shifting U.S. health care “toward a focus of preventive rather than reactive medicine for health care rather than ‘sick care.’”²²⁵ The RFI seeks comment on three main topics: (1) reconsidering relative primary care payment within the PFS, including whether to establish distinct E/M visit categories (longitudinal care, acute care, and consultative) and whether to simplify or restructure the care management code family; (2) the payment implications of technology and AI adoption in primary care, including how to value technology-enabled services and whether AI could transform the Annual Wellness Visit; and (3) establishing prospective primary care payment (PPCP) permanently in the Shared Savings Program.²²⁶

On the third topic, CMS notes that section 1899(i)(2) of the Act authorizes partial capitation in the Shared Savings Program and is seeking feedback on eligibility criteria, service scope, care delivery requirements, and whether to offer total care capitation to qualifying ACOs.²²⁷ Additionally, CMS is considering extending these efforts in future years to develop a bundled or capitated approach, referred to as a “global period” within the broader Original Medicare program.²²⁸

b. CPT Request for Information

CMS includes an RFI on the Current Procedural Terminology (CPT) coding system and the AMA Relative Value Scale Update Committee (RUC) process, seeking input on the role of privately maintained coding and valuation structures in Medicare payment policy.²²⁹ The AMA owns and copyrights CPT, which CMS uses under a royalty-free licensing agreement.²³⁰ After the AMA introduces new CPT codes, they are assigned payment values by the AMA RUC.²³¹ CMS identifies longstanding concerns regarding federal reliance on a private organization that may have a financial interest in the CPT valuation process.²³² CMS notes that MedPAC has recommended that CMS establish a separate group of experts to make payment recommendations.²³³

The RFI asks for evidence of harms or challenges associated with the AMA’s control over the CPT system, including effects on patient care, coding innovation, and CPT licensure costs.²³⁴ CMS also asks whether CPT-4 code generation follows a process of identifying medical necessity and whether examples from other populations, sites of care, or international health systems could inform a medical necessity-based code development process.²³⁵ In addition, CMS asks what alternatives to the AMA CPT and RUC processes exist.²³⁶

c. Duplicate Laboratory Testing, Imaging, and Result Sharing and Interoperability Request for Information

CMS issues an RFI seeking feedback about the inaccessibility of diagnostic imaging and lab test results within another system’s electronic health record, which can result in duplicated tests.²³⁷ The agency “view[s] duplicate imaging and laboratory testing as one of several use cases in which the lack of clinical interoperability causes non-trivial beneficiary harm and program integrity concerns.”²³⁸ CMS requests responses from clinicians, laboratories, imaging health care providers, health systems, payers, health IT developers, and others about potential enforcement of frequency limitations and changes to payment policies, among other questions.²³⁹