The 2026 Medicare Physician Fee Schedule (MPFS) included a one-year, 2.5% positive update for 2026 Medicare payment. It was better than nothing, but still does not come close to adjusting for inflation. (Physician payments are among the few sectors of medicine that do not adjust with inflation.) However, there was a “practice efficiency cut” that reduced physicians’ payment by 2.5% on the work relative value unit (RVU) for about 7,700 services, including surgical procedures, biopsies, diagnostic imaging interpretation, and interventional pain management such as epidural injections. The work portion represents approximately 50% of the RVU, which would equate to approximately a 1.25% reduction of impacted services. (See the list here: CY_2026_Codes_Subject_to_Efficiency_Adjustment.xlsx)
The Centers for Medicare & Medicaid Services (CMS) justified these cuts by arguing that these codes were “very likely overinflated”. The CMS argument for the work RVU cut is that the Medicare physician fee schedule has not accounted for “efficiency gains” achieved through physician experience and technological advancements. In other words, surely, we have just gotten faster and better at procedures so that they don’t represent as much “work.” The calculations around physician payment are incredibly complex. Some “conversion factors” may have gone up, but the devil is in the details for specific codes.
Additionally, CMS implemented a 50% indirect practice expense cut affecting numerous services performed in facilities such as hospitals and ambulatory surgical centers. Therefore, physicians working in Hospital Based Outpatient Departments (HOPD) will be impacted by the indirect practice expense adjustment as well as the practice efficiency cut. The American Medical Association (AMA) estimates physician payment for services performed in a facility will decrease overall by 7%. The overall impact on practice revenue is dependent in part on payer mix.
Because CMS set up both adjustments to apply for the next three years, they’ll be in effect until the end of 2028, unless they are addressed through legislation or through regulatory means, such as a reversal of those policies in the next Medicare physician fee schedule. Physicians who read about the 2.5% positive update may be expecting a small increase in revenue, but that might not be the case based on the complex details of practice expense adjustments.
Dr. Fife is a world renowned wound care physician dedicated to improving patient outcomes through quality driven care. Please visit my blog at CarolineFifeMD.com and my Youtube channel at https://www.youtube.com/c/carolinefifemd/videos
The opinions, comments, and content expressed or implied in my statements are solely my own and do not necessarily reflect the position or views of Intellicure or any of the boards on which I serve.
