Medicare Fee Schedule Tweaks: Another Year, Another Update
Published Date: 11/5/2025
Rule
Summary
Starting January 1, 2026, Medicare and Medicaid are updating how doctors and clinics get paid, making sure payments match current medical practices and laws. New rules will also affect drug price rebates, savings programs, and services like diabetes prevention and ambulance rides. These changes impact healthcare providers and patients, aiming to keep care fair, affordable, and up-to-date.
Analyzed Economic Effects
6 provisions identified: 2 benefits, 0 costs, 4 mixed.
Two separate 2026 conversion factors
Starting January 1, 2026, CMS will use two separate Medicare physician fee schedule conversion factors: a qualifying APM conversion factor and a nonqualifying APM conversion factor. The 2026 qualifying APM conversion factor is projected to increase by $0.39 (1.2%) from the prior factor of $32.3465, and the 2026 nonqualifying APM conversion factor is projected to increase by $0.23 (0.7%) from $32.3465.
CY2026 RVUs and phase-in limits
CMS is establishing relative value units (RVUs) for CY 2026 to update payments under the Physician Fee Schedule. For services that are not new or revised codes, if total RVUs would otherwise fall by 20 percent or more versus the prior year, CMS phases that reduction in over 2 years and limits the first-year reduction to a maximum of 19 percent.
Drug inflation rebate rules and 340B units
The rule finalizes policies for the Medicare Prescription Drug Inflation Rebate Program: it describes identification of the payment amount benchmark quarter for Part B rebate calculations, and for Part D it finalizes a methodology to remove units for a Part D rebatable drug when a manufacturer provides a 340B Program discount for the applicable period beginning October 1, 2025, and it establishes a voluntary 340B data repository for Part D claims for testing.
Therapy assistant payment reduction (CQ/CO)
For outpatient occupational and physical therapy services provided in whole or in part by a PTA or OTA (identified by CQ/CO modifiers), CMS applies a statutory payment reduction so that payment equals 85 percent of the 80 percent Medicare fee schedule amount; this results in a volume discount factor of 88 percent (0.20 + (0.80 * 0.85) = 0.88).
Updates to Shared Savings Program rules
CMS is modifying policies for the Medicare Shared Savings Program (the ACO program) for CY 2026; the program continues to allow providers to form or participate in accountable care organizations that are accountable for quality and total cost of care for assigned Medicare fee-for-service beneficiaries.
New recognized specialty: Epileptologists
CMS incorporated utilization data for a newly recognized specialty, Epileptologists, for the CY 2026 final rule; Epileptologists were recognized effective July 1, 2024, and CMS used proxy practice-expense-per-hour values from Neurology for this specialty.
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