Analyzing Medicare’s 2027 proposed physician payment rule

Digital Debut

Analyzing Medicare’s 2027 proposed physician payment rule

Facility-based specialists in line for more cuts

By Alex Taira

On July 14, the Centers for Medicare & Medicaid Services released proposed 2027 updates to payments and policies under the Medicare Physician Fee Schedule. Updates to the physician payment system typically do not directly affect surgery centers, but the policies can have significant effects on the clinicians who work in ASCs. ASCA submits comments on the physician payment rule every year, following recommendations and comments from the clinician specialty organizations that operate in surgery centers. Accordingly, ASCA will submit comments on the proposed rule by the Sept. 14 deadline.

The bottom line

Most physicians will see a lower conversion factor, but payment effects will vary widely by specialty. This means many procedural specialties could see payment reductions. However, because reimbursement depends on both the conversion factor and individual code values, the impact on any given physician will depend on the mix of services they provide. Congress could also modify or offset the proposed payment reductions before the rule takes effect, as it has done repeatedly in recent years.

The analysis

Beginning in 2026, Medicare began using separate physician payment conversion factors for clinicians who participate in qualifying alternative payment models and those who do not. For 2027, CMS proposed reducing both: -1.19% for alternative payment model participants and -1.68% for non-participants. The decrease is largely the result of the expiration of a one-year, 2.5% increase to both physician conversion factors that was included as part of the One Big Beautiful Bill Act in 2025. A decrease in the physician payment conversion factor has occurred five out of the last six years, even with Congress intervening to mitigate some of the cuts in many years. Combined with other policy changes, the proposal would reduce total allowed charges for several outpatient specialties, including ophthalmology (-2%), gastroenterology (-1%), orthopedic surgery (-4%) and dermatology (-4%).

Continue Reading Below

The proposed rule also continues refining code valuations, including indirect practice expense valuation for facility-based procedures. This follows CMS’ 2026 policy reducing indirect practice expense payments for facility-based services to half the rate for physician office services. The change was finalized despite strong opposition from ASCA and many stakeholders in the physician community. CMS also proposed significant reductions to the physician work valuation for a number of procedures performed in ASCs, most notably shoulder arthroplasty (CPT 23470, 23472), hip arthroplasty (CPT 27130) and knee arthroplasty (CPT 27447). CMS disagrees with the work values recommended by the American Medical Association RVS Update Committee, and proposes lower work values — and therefore lower reimbursement — for these procedures.

CMS is moving forward with changes to the Merit-based Incentive Payment System, which is the current iteration of the physician quality reporting system. Physicians report measures in four performance categories — quality, cost, improvement activities and promoting interoperability — and receive a positive or negative payment adjustment based on their scoring against a performance threshold. In recent years, CMS has begun implementation of a new Merit-based Incentive Payment System Value Pathways framework that coalesces measures from the performance categories into discrete groups based on clinician specialty. The agency has proposed to sunset the traditional Merit-based Incentive Payment System and require all Medicare-billing clinicians to report through the new system beginning with the 2029 performance year. Although the value pathways are intended to better reflect specialty practices, many specialty organizations have opposed their implementation.

Finally, the proposed rule refines the mandatory Ambulatory Specialty Model, slated to begin on January 1, 2027, for specialists treating heart failure or lower back pain. Clinicians subject to the mandatory model include cardiologists, anesthesiologists, pain specialists and orthopedic surgeons, with payment adjustments ranging from plus/minus 9% to plus/minus 12% over the model’s five years.

Read the 1,592-page rule to learn more. Write Alex Taira at ataira@ascassociation.org with questions.