The Centers for Medicare and Medicaid Services finalized sweeping Medicare payment reforms it says will shift the program from volume-based “sick care” toward prevention, primary care and accountable care.
The 2027 Medicare Physician Fee Schedule rule includes a roughly 2% reduction in baseline physician payment rates with targeted increases and new payment opportunities for accountable care, primary and chronic care and behavioral health. CMS finalized steeper physician payment cuts than it had proposed in July.
An unpublished PDF version of the 2,468-page final rule can be found here.
In a press release, CMS said it is “prioritizing prevention, strengthening primary care, cracking down on duplicate billing and reinforcing fiscal stewardship across Medicare.”
The final rule modernizes physician payment structures to “reward health maintenance and coordinated primary care rather than disjointed, volume-based intervention,” CMS said.
“Medicare should reward clinicians for keeping people healthy,” HHS Secretary Robert F. Kennedy, Jr. said in a statement. “Under President Trump’s leadership, we are putting prevention and primary care at the center of Medicare, closing payment loopholes, and cracking down on waste. This rule directs resources toward coordinated care that puts patients first. We are changing what Medicare pays for to change what our health system delivers.”
Under the final rule, CMS will officially sunset the traditional Merit-based Incentive Payment System (MIPS) reporting option beginning with the CY 2031 performance period. Clinicians will have through CY 2030 to transition to the MIPS Value Pathways (MVPs), which already cover approximately 98% of clinicians, or Advanced Alternative Payment Models. This reflects two additional years of transition time compared to the proposed rule. The rule also finalizes three new MVPs focused on diabetes, hypertension, and hospitalists, and requires clinicians to report at least one specialty-specific “Core Measure” starting in CY 2027.
For physicians, while the proposed rule includes statutory payment increases, Medicare payment rates face an overall baseline decrease for 2027 due to the expiration of a temporary 2.5% legislative increase from the One Big Beautiful Bill Act (OBBBA) in 2026.
Under the Medicare Access and CHIP Reauthorization Act (MACRA), the CY2027 conversion factors reflect statutory updates of +0.75% for qualifying Alternative Payment Model (APM) participants and +0.25% for non-qualifying participants. The changesto the PFS conversion factors for CY 2027 include these updates as requiredby statuteand an estimated -0.12% adjustment necessary to account for proposed changes in work RVUsfor some services, according to CMS in a fact sheet.
For clinicians who don’t qualify through an advanced alternative payment model, the conversion factor drops from $33.40 to $32.63, a 2.31% reduction. For qualifying APM participants, the conversion factor drops 1.83% from $33.57 to $32.95. In the draft rule issued in July, CMS projected cuts of 1.68% and 1.19%, respectively.
CMS is also addressing what it sees as overpayment and duplicate reimbursement when multiple services are delivered during the same patient encounter. Under the final rule, when an office visit and minor procedure occur on the same day, CMS will reduce payment by 20% for the lower-cost service, reducing duplication in payment by patients and the Medicare program for clinical work already covered in the procedure’s valuation.
CMS had initially proposed paying the higher-cost service in full and reducing payment for the other service by 50%.
Physician groups were quick to criticize CMS’ payment changes in the final rule.
“Notwithstanding modest policy improvements to enhance value-based care through MSSP, MGMA is disappointed by CMS’s decision to finalize several destabilizing policies in the 2027 Medicare Physician Fee Schedule,” Anders Gilberg, senior vice president of government affairs at the Medical Group Management Association, said in a statement.
“Conversion factor cuts of 1.83% for qualifying APM participants and 2.31% for all other clinicians further degrade an already fragile payment system and amplify severe financial challenges caused by years of inadequate Medicare reimbursement,” Gilberg said.
Compounding this ongoing reimbursement decline, CMS will cut payments by 20% when office visits billed with modifier 25 are performed on the same day as certain procedures, “interfering with physician practices’ ability to offer same-day care,” he noted.
MGMA is urging Congress to intervene by immediately fixing cuts to the conversion factor, along with changes to modifier 25. “To prevent annual disruption, Congress should prioritize comprehensive MACRA reform by passing the Patients First Act,” Gilberg said.
The agency is overhauling the office/outpatient evaluation and management visit complexity add-on code, HCPCS code G2211. CMS is transitioning HCPCS code G2211 from a flat add-on payment to a modifier that would increase the payment of the associated E/M code by16%. That would maintain an equal percentage increase across all levels of E/M codes, CMS said.
The agency also finalized a new modifier that would offset the costs incurred bypractitioners inaccountable care organizations (ACOs) whenproviding longitudinal care and care coordination. The modifier would only be available for practitionersparticipatinginaShared Savings Program ACO orparticipant providers ina Long-termEnhanced ACO Design (LEAD)ModelACO and would increase payment of the associated E/M visit by 32%, CMS said.
The final 2027 PFS rule also establishes new 340B reporting requirements. Covered entities will have to report certain Medicare Part D claims involving drugs purchased through the 340B Drug Pricing Program to the Medicare Part D Claims Data 340B Repository beginning with claims with a date of service on or after Jan.1, 2027. The deadline for the first quarterly submission is delayed until Sept. 30, 2027.
Remote patient monitoring policy changes
In the final rule, CMS tightened remote patient monitoring and remote therapeutic monitoring requirements but backed off an immediate restriction on contractors.
Beginning in 2027, as CMS outlined in the proposed rule, RTM services can only be furnished to established patients, and providers must provide a separately reportable initiating visit before billing for RPM or RTM services. CMS initially proposed only allowing payment for RPM or RTM services when performed by clinical staff employed by the practice and not when those services are delivered by third-party vendors. The agency provided a two-year reprieve on that requirement as it goes into effect Jan. 1, 2029, “giving practices that rely on contractors two additional years to adapt,” CMS said.
Health tech companies, providers and lawmakers pushed back on the proposal to restrict third-party vendors, urging CMS to reconsider the proposed changes to preserve patients’ access to these tech-enabled services. Many rural, small, and independent practices, as well as both urban and rural health systems, rely on specialized clinical and technology partners to make remote monitoring services available to their patients.
Changes to value-based care programs
CMS finalized changes to the Medicare Shared Savings Program, the nation’s largest value-based payment program, to “accelerate accountable care service delivery, further CMS’ goal of aligning spending and value in Original Medicare, and support achieving other related strategic objectives,” the agency said in a fact sheet.
The overhaul to the MSSP program aims to make ACO participation more financially attractive, encourage organizations to take on risk, expand beneficiary participation and ease some quality-reporting requirements.
The agency says the changes are projected to grow the program by adding up to 1 million assigned beneficiaries in an average year and produce $5.5 billion in net federal savings over 10 years. CMS also projects the changes will generate an overall increase in shared savings net of losses to ACOs by $1.1 billion over a decade.
The final rule changes the Shared Savings Program’s benchmarking and financial methodology to balance incentives between Level E of the BASIC track and the ENHANCED track. The shared savings rate for Level E of the BASIC track increases 50% to 60% and reduce the maximum weight used in calculating the positive regional adjustment for lower-spending ACOs participating under the ENHANCED track from 50% to 35%.
The agency is increasing the prior savings adjustment’s scaling factor from 50% to 75%, allowing more of an ACO’s previous savings to be reflected in future benchmarks.
Under the final rule, CMS will risk-adjust the 5% cap on benchmark increases, potentially allowing ACOs that care for sicker, higher-cost patients to receive larger upward adjustments.
Data shows that patients aligned with an ACO are less likely to experience uncontrolled diabetes or hypertension and are more likely to receive recommended preventive care, according to CMS. In performance year 2024, 75% of the 476 participating ACOs earned shared savings totaling $4.1 billion, while generating net savings for the Medicare Trust Funds of approximately $2.5 billion compared to projected spending benchmarks.
Under the final 2027 PFS rule, approved ACOs may reduce or eliminate Part B cost-sharing for many items and services for assigned beneficiaries, directly lowering out-of-pocket costs for essential care. That change goes into effect April 1, 2027.
The rule also increases shared savings rates for eligible ACOs, provides new incentives for first-time participants and sets more predictable spending targets. And, the rule simplifies electronic health record reporting requirements, streamlines patient notice mandates, and removes outdated administrative hurdles.
