WASHINGTON, D.C. — The Centers for Medicare & Medicaid Services on Friday finalized a sweeping 2026 Physician Fee Schedule that tightens payment accuracy, cracks down on runaway spending for skin substitutes, and expands prevention- and primary care–focused benefits — a package federal officials say will improve care for seniors while protecting taxpayers.
“The new Medicare fee schedule delivers a major win for seniors, protects hometown doctors, and safeguards American taxpayers,” Health and Human Services Secretary Robert F. Kennedy Jr. said. CMS Administrator Dr. Mehmet Oz said the rule “will improve seniors’ access to high-quality, preventive care.”
At the center of the rule is a targeted, systemwide -2.5% “efficiency adjustment” applied to selected non–time-based services — such as many surgical and interventional procedures — reflecting gains from technology and standardized workflows. Evaluation and management visits, care management, behavioral health, maternity global codes, and telehealth services are excluded.
Payment rates will rise modestly overall: CMS finalized two conversion factors required by law — $33.57 for qualifying Advanced APM participants (+3.77%) and $33.40 for others (+3.26%) — incorporating statutory updates and technical adjustments tied to work relative value changes.
CMS also moved to modernize how practice costs are set, leaning more on routinely updated hospital outpatient data to calibrate rates for certain technical services, including radiation oncology and some remote monitoring, to improve predictability and transparency.
A major spending clampdown targets wound-care “skin substitutes,” where Medicare Part B costs surged from roughly $256 million in 2019 to more than $10 billion in 2024. By paying these products as incident-to supplies rather than as biologicals, CMS projects an almost 90% reduction in outlays and an estimated $19.6 billion drop in gross fee-for-service spending in 2026, while aligning payment groups with FDA regulatory categories.
The rule broadens prevention and behavioral health integration. CMS is aligning quality reporting with a stronger focus on preventing chronic disease, adding outcomes measures, and creating optional add-on codes so primary care teams can layer collaborative psychiatric care and behavioral health integration onto advanced primary care management services. The Medicare Diabetes Prevention Program is also being updated to widen access to no-cost coaching and support for people with prediabetes.
Telehealth flexibilities are cemented. CMS will permanently allow “virtual direct supervision” via real-time audio-video for a range of services that require direct oversight, remove certain visit frequency limits, and streamline how services are added to the telehealth list. Rural Health Clinics and Federally Qualified Health Centers gain parallel billing options, including continued payment for certain telehealth visits through 2026 and adoption of new care coordination policies.
CMS also finalized a new mandatory Ambulatory Specialty Model focused on high-cost chronic conditions — launching January 2027 for five performance years — to improve outcomes and reduce avoidable hospitalizations for beneficiaries with heart failure and low back pain by rewarding earlier detection, prevention, and better care coordination among specialists and primary care.
Drug payment policies received refinements, including clarifications to manufacturer average sales price calculations, documentation expectations for bona fide service fees, and treatment of units sold at maximum fair price beginning in 2026. CMS kept the bundled payment approach for CAR T-cell and extended it to other autologous cell and gene therapies, while allowing certain manufacturer-paid preparatory services to qualify as bona fide service fees under existing standards.
For Accountable Care Organizations in the Medicare Shared Savings Program, CMS will shorten how long inexperienced ACOs can remain in a one-sided risk track (to five performance years beginning in 2027), add flexibility around the 5,000-beneficiary threshold with safeguards, rename the “health equity benchmark adjustment” as the “population adjustment,” and expand extreme and uncontrollable circumstances relief to cover cyberattacks. Survey updates will introduce a web-based mode to bolster patient response rates beginning in 2027.
“CMS is reinforcing primary care as the foundation of a better healthcare system while ensuring Medicare dollars support real value for patients,” said Chris Klomp, who leads the Center for Medicare. The final rule takes effect for services on or after Jan. 1, 2026.
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