What to Expect in the 2027 Medicare PFS Final Rule
The final rule is expected to address several critical policies that will affect physician pay in CY 2027.
Stakeholders are awaiting the release of the CY 2027 Medicare Physician Fee Schedule (PFS) Final Rule, expected by month-end. The Centers for Medicare and Medicaid Services (CMS) released the CY 2026 PFS Final Rule on Friday, October 31, 2025, and the CY 2025 PFS Final Rule on Friday, November 1, 2024. While there is no guarantee, CMS could release the CY 2027 Medicare PFS on Friday, October 30. CMS often releases final rules on Friday to limit market volatility. This gives stakeholders and Wall Street investors the entire weekend to review the rule before trading opens on Monday morning.
CMS will finalize several significant policies affecting Medicare physician payment in 2027. As you await the final rule, below is a reminder of some of these policies.
CY 2027 Medicare CF: The CY 2027 Medicare PFS proposed reductions to the annual Medicare Conversion Factor (CF) update are 1.19% for qualifying Alternative Payment Model (APM) participants ($33.17) and 1.68% for non-qualifying participants ($32.84). These reductions largely reflect the expiration of a 1-year (+)2.5% increase approved by Congress for 2026. Stakeholders are urging Congress to pass legislation to avert this payment cut. The main policy under consideration would link Medicare’s doctor pay rates to a medical inflation measure, providing doctors with guaranteed pay boosts, as hospitals and other parts of the health care system have long received. The measure under consideration, called the Patients First Act, would establish a permanent annual payment hike linked to the Medicare Economic Index (MEI), minus 1%.
Modifier 25 Proposal: The Centers for Medicare and Medicaid Services (CMS) proposed a 50% payment reduction for same-day evaluation and management (E/M) visits and procedures billed together using Modifier 25. This proposal applies to 0, 10, and 90-day global services. CMS also sought comments on whether a 25% reduction would be more appropriate. Under current policy, CMS pays both services at 100% when appropriate documentation is provided. Commentators generally opposed this highly controversial proposal. Multiple analyses have identified Dermatology as the specialty most significantly affected by this policy.
In comments, stakeholders argued that it would have a dangerous financial impact, that the policy rests on flawed assumptions, and that the current rate-setting process includes safeguards to prevent duplication of work or practice expenses. Stakeholders also worry that if CMS finalizes it, private payors could adopt it. If CMS finalizes it, stakeholders could appeal to Congress to reverse the policy. Some observers speculate that CMS could finalize a modified version of the proposal (e.g., a 25% reduction or application to a more limited set of codes).
Practice Expense (PE) Proposal: CMS proposed the most significant PE methodology revisions in years. The proposal would phase out reliance on outdated specialty-level survey data, revise indirect PE allocation, and introduce a stabilization adjustment to reduce annual payment volatility while redistributing payments across specialties. Notably, the policy would reduce reliance on data historically provided by the American Medical Association (AMA). While many agree that more current data is needed, many physician societies opposed the proposal. Other stakeholder groups urged CMS to delay the policy until more granular data was available. There were exceptions, and certain policy groups, such as Arnold Ventures and the American Action Forum, expressed support for the policy in their public comments.
E/M visit complexity add-on (HCPCS code G2211): Code G2211 provides additional payment to reflect the extra work associated with an E/M code when caring for more complex patients. CMS proposed deleting the standalone add-on and replacing it with a percentage-based, two-digit modifier system. Instead of adding a fixed flat-rate amount (approximately $16.37) to a qualifying E/M service claim, the new policy establishes a percentage premium tied directly to the base E/M code: a 16% increase for most organizations and an enhanced 32% increase for clinicians participating in qualifying Accountable Care Organizations (ACOs). This proposal was generally supported by primary care and value-based care organizations. Non-primary care physician groups were less supportive. These groups raised concerns that transitioning to a percentage-based modifier without assigned RVUs would remove physicians’ ability to receive RVU credit for this work under RVU-based productivity models, and that CMS has not provided sufficient data, analysis, or methodology to demonstrate the appropriateness of the higher increase for ACOs.
Other Proposals: CMS also proposed restrictions on Remote Patient Monitoring (RPM/RTM). CMS proposed tightening RPM and RTM rules by limiting services to established patients, mandating face-to-face initiating visits, and requiring that clinical staff be directly employed in-house by the billing practitioner. The agency also proposed an aggressive timeline to sunset traditional Merit-based Incentive Payment System (MIPS) reporting by 2029 and to transition to mandatory MIPS Value Pathways (MVPs).
The rule also included several requests for information (RFIs). The RFIs addressed future approaches to advanced primary care reimbursement and the agency’s reliance on the CPT Editorial Panel and the AMA RVS Update Committee (RUC). RFIs are data-gathering tools that inform future policymaking. The agency may not announce a new proposed policy, but it may signal how it plans to proceed.
This email highlights some of the major proposed policies, but it does not include many other proposals.
I will keep you informed as the final rule is released.
For more information and questions, please contact:
Sheila Madhani
Madhani Healthcare Consulting
Email: smadhani@madhani-health.com
Tel: (202) 679-2977