Medicare’s proposed 2027 physician fee schedule includes a payment cut for the fifth consecutive year, increasing financial strain on independent practices.
The Centers for Medicare & Medicaid Services published the rule in July. It reduces the conversion factor by 1.68% for physicians not in alternative payment models and by 1.19% for those participating in them. Public comments will be accepted until September 14.
Budget neutrality forces trade-offs between specialties
Budget neutrality rules require that payment increases for some specialties be balanced by reductions elsewhere. Anders Gilberg, senior vice president of government affairs at the Medical Group Management Association, described the situation as a zero-sum scenario where specialties compete for limited funds.
Gilberg criticized the agency’s use of two-decade-old data to support changes in the valuation process. While CMS has indicated plans to move away from the American Medical Association’s current system, no replacement has been proposed.
MIPS phaseout adds new reporting requirements
The rule also starts phasing out the Merit-based Incentive Payment System, introducing MIPS Value Pathways in its place. Gilberg called the new system more demanding, with stricter reporting rules that could disadvantage small and rural practices.
A separate change would alter how modifier 25 is applied, potentially lowering payments when an office visit and procedure happen on the same day. Gilberg warned this could have broad effects if implemented.
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The combined impact of these adjustments may drive more independent practices toward consolidation. Repeated short-term fixes from Congress, such as the 2.5% payment increase set to expire at the end of December, have only postponed the issue.
Bills like the Patients First Act aim to reform Medicare’s payment structure, but Gilberg said meaningful change requires sustained advocacy.
It’s uncertain whether CMS will adjust the rule before finalizing it. Gilberg noted the agency has rarely revised proposals under the current administration, even after public feedback.
The proposed cuts arrive as practices deal with rising expenses and staffing shortages. For those relying heavily on the fee schedule, the 1.68% cut could determine whether they remain operational.
When Congress returns in September, the lame-duck session may decide if another temporary solution is approved or if the cuts proceed as planned.
