The 2027 Medicare Physician Fee Schedule

Contents — find your specialty

Each reader can jump to what affects them. Find your line for the CY2027 headline and the sections that matter most. Impact figures are the estimated change in total allowed charges (Table D‑B5), before the separate conversion-factor update.

*Combined impact, TOTAL (non-facility + facility) row from CMS Table D‑B5. A specialty's own services can move very differently from the average — most impacts are driven by a small number of re-valued codes. Links jump to the relevant section of this brief.

The headline is small. The mechanics are not.

On paper, CY2027 looks quiet: aggregate allowed charges are roughly flat and most specialties land within a point or two of zero. The story sits underneath. CMS proposes a second efficiency adjustment, removal of the Indirect Practice Cost Index from practice-expense pricing, a new Modifier‑25 payment cut, the replacement of G2211 with two modifiers, a mandatory specialty model, and national pricing for non-sheet skin substitutes. Each is a redistribution engine — winners and losers are specific, and effects compound with CY2026.

Two conversion factors, a smaller number, and a rebuilt PE method

Every RVU is multiplied by a conversion factor (CF) to produce a payment rate. For CY2027, the CF math is the quiet story that touches every specialty and every Medicare-indexed contract.

1. The conversion factor actually declines

Because the one-year +2.50% increase that applied only through December 31, 2026 expires, CMS starts from a lower base, applies the statutory update (+0.75% for qualifying-APM participants, +0.25% for everyone else) and a +0.53% budget-neutrality adjustment. The result is a CF below 2026 in both tracks — a straight per-service reduction that lands before any code re-valuation.

Source: CMS-1848-P, Table D‑B1 (qualifying-APM CF). The headline cut comes from the expiring one-year statutory increase. The same mechanics apply to the non-qualifying track from a $33.4009 base to $32.8409.

2. A second efficiency adjustment

CMS finalized in CY2026 an efficiency adjustment — a roughly −2.5% reduction to the intraservice work time and work RVUs of non-time-based services, refreshed every three years. CY2027 continues to reflect that adjustment as codes are re-valued, holding down work-RVU growth across most procedural and diagnostic services while time-based E/M and behavioral health are exempt.

3. Practice expense is being re-plumbed

The most consequential technical change is the proposal to remove the Indirect Practice Cost Index (IPCI) from the PE RVU calculation, phased in: only half the measured IPCI variation applies in year one, and it is fully removed thereafter. CMS pairs this with a new PE stabilization factor to soften year-over-year swings. Practically, this shifts indirect-cost weighting away from specialty-survey data and toward code-level inputs — which is why the largest CY2027 movements show up in the PE column, and why office-based (non-facility) and hospital-based (facility) settings diverge.

Winners and losers, at a glance

CMS estimates the CY2027 combined RVU impact by specialty. Behavioral health leads the gains (final year of the work update plus PE method changes); office-based procedural specialties with heavy same-day E/M billing lead the losses (Modifier‑25 plus IPCI removal plus phased code cuts).

Source: CMS-1848-P, Table D‑B5, combined impact (TOTAL row). Figures exclude the conversion-factor update, which applies on top of these RVU effects.

Gains cluster in clinical psychology (+11%) and social work (+12%), with smaller lifts for physical/occupational therapy, interventional radiology, and vascular surgery. Losses concentrate in dermatology (−9%), otolaryngology (−9%), orthopedic surgery (−7%), and hand surgery (−5%) — the specialties that most frequently pair a procedure with a same-day office visit. Most large provider specialties — cardiology, hematology/oncology, nephrology, infectious disease — sit near zero at the headline, which makes the site-of-service and drug-side effects the real drivers for them.

Four policies that reach every practice

Modifier‑25: the same-day E/M reduction

CMS proposes that when a separately identifiable office/outpatient E/M visit is furnished by the same physician (or same group) on the same day as a 0-, 10-, or 90-day global procedure, the most expensive service is paid at 100% and every other service at 50%. CMS argues the current model double-counts pre- and post-service work and practice expense. The burden falls hardest on specialties that routinely bill an E/M with Modifier‑25 alongside a minor procedure.

G2211 becomes MOD1 — and ACOs get MOD2

The E/M complexity add-on G2211 is replaced by a modifier (MOD1) set at 16% of the total RVUs of the associated E/M service. A second modifier, MOD2, pays 32% of the E/M total RVUs for services furnished within an ACO — an explicit payment premium for accountable-care delivery. Net effect is roughly neutral in aggregate but favors primary care and ACO-aligned practices.

Telehealth flexibilities extended

Consistent with the Consolidated Appropriations Act, 2026, CMS reflects extension of the major telehealth flexibilities — removed geographic restrictions, expanded originating sites, and a broader list of eligible practitioners — through December 31, 2027. The mental-health in-person requirement is delayed to January 1, 2028, and audio-only telehealth is extended to the same date. New telehealth codes (GAPC1, GAPC2, GSMAS, GSLPP, GADV1) are proposed, and teaching physicians gain flexibility to bill for resident-involved services.

A primary-care redesign RFI

CMS opened a request for information on "Redesigning Primary Care to Make America Healthy Again," including primary-care capitation and total-care capitation concepts, plus interest in new ways to support ACO cash flow. It is a signal of direction rather than a CY2027 payment change — but it frames where capitated and value-based arrangements are heading, which matters for any group negotiating risk-based commercial deals.

The same specialty, two different answers

For the first time CMS is publishing the specialty impact table with a full facility vs non-facility breakout, responding to concerns that PFS policy has been quietly driving practices to consolidate into hospitals. The split is now explicit — and it is large.

Radiation oncology is up +5% in the office but −1% in the facility. Nurse practitioners are flat in the office but +6% in the facility. Otolaryngology loses −10% in the office versus −3% in the facility. These divergences are the practical output of the IPCI removal and PE stabilization — and they change the economics of where a service should be performed.

Source: CMS-1848-P, Table D‑B5 non-facility and facility rows. Positive = office setting favored; the gap is the consolidation signal.

Segment deep-dive 1: Oncology & infusion centers

For hematology/oncology, radiation oncology, and office-infusion practices (rheumatology, infectious disease, GI biologics), the PFS headline is near-zero — but the drug side, skin substitutes, and 340B reporting are where the margin pressure lives.

Source: CMS-1848-P, Table D‑B5. Allowed charges are large in these specialties, so even 1–2% RVU moves are material — and drug economics sit on top.

Radiation oncology (+3% overall)

The gain is entirely a non-facility story (+5% office, −1% facility). Freestanding centers benefit from PE re-weighting; hospital outpatient-affiliated centers do not. On a $1.5B base, the site delta is a genuine strategic variable for network and site-of-care decisions.

Office-infused biologics

Rheumatology (−1%) and infectious disease (0%) are dominated by the economics of infused/injected drugs. Any tightening of ASP-based payment, rebate treatment, or 340B reporting reaches these practices directly.

Skin substitutes — a real change

CMS proposes to nationally price non-sheet-form skin substitutes at the same per-cm² rates as sheet-form products, replacing contractor pricing. For wound-care and some infusion/outpatient settings this is a direct, and often downward, reset of a historically high-margin category.

Hematology/oncology (0% overall)

RVUs are flat, so the action is in Part B drugs. Buy-and-bill spreads face pressure from discarded-drug refunds and inflation-rebate mechanics rather than from the fee schedule itself.

Segment deep-dive 2: Hospitals & health systems

For systems with employed physicians and facility-based groups, the CY2027 rule is less about a single number and more about three moving parts: the facility/non-facility split, the accountable-care rules, and a new mandatory specialty model that lands on cardiology first.

Employed-physician RVUs and the facility split

Systems that compensate physicians on wRVUs should note that work-RVU changes are modest this year — the redistribution is concentrated in practice expense, where the facility setting generally fares differently than the office. Cardiology, the single largest PFS specialty at $6.5B in allowed charges, is +1% overall but flat in the facility. Model compensation and productivity targets against the code-level changes, not the specialty headline.

The Ambulatory Specialty Model (ASM) is mandatory — and starts in 2027

ASM is a mandatory Innovation Center model with five performance years beginning January 1, 2027, adjusting payment for eligible specialists managing heart failure and low back pain based on cost, quality, care coordination, and interoperability. Performance-based payment adjustments hit two years after each performance year. CY2027 proposes technical refinements — a rural scoring adjustment, revised low-back-pain measures, exceptions for TIN changes, and alignment with MIPS Promoting Interoperability.

Segment deep-dive 3: Critical access hospitals & rural providers

Rural and critical-access organizations are shaped less by RVU tweaks and more by structural provisions: clinic billing rules, lab-payment cuts that were nearly deferred, a new rural pathway into accountable care, telehealth continuity, and a coverage-eligibility change.

RHC & FQHC billing

CMS proposes to recognize Diabetes Self-Management Training (DSMT) and Medical Nutrition Therapy (MNT) as stand-alone billable visits in Rural Health Clinics — closing a gap where these were bundled and effectively unpaid. Uptake is expected to be gradual as clinics adjust staffing, but it is a modest revenue opportunity for rural primary care.

A rural on-ramp to ACOs

Replacing the Area Deprivation Index with a rural criterion in advance investment payments directly targets the under-representation of rural TINs in the Shared Savings Program (14.5% vs 20% of non-ACO TINs). Combined with the $250K up-front payment, it lowers the cost of forming a rural ACO.

Telehealth continuity

The extension of geographic and originating-site flexibilities through 2027 (and audio-only through Jan 2028) is disproportionately valuable to rural access, where telehealth substitutes for scarce in-person specialty capacity.

Clinical Lab Fee Schedule (CLFS)

Under the CAA, 2026, CLFS payment cuts are capped: 0.0% for 2026 and no more than 15% per year for 2027–2029. Data reporting resumes on a three-year cycle from May 2026. Independent and hospital-outreach labs — which draw ~83% of Medicare revenue from the CLFS — get partial protection but still face a downward reset.

Segment deep-dive 4: ASCs & proceduralists

Procedural specialties — GI, urology, ophthalmology, ENT, orthopedics, dermatology, and the ASCs that host them — carry the concentrated downside of CY2027. The Modifier‑25 reduction and global-surgery scrutiny are the through-line.

Modifier‑25 is the defining issue

The proposal to pay the lesser same-day service at 50% directly targets the procedure-plus-office-visit pattern that defines these specialties. The estimated combined hits — ENT −9%, dermatology −9%, podiatry −4%, hand surgery −5%, orthopedic surgery −7% — are among the steepest in the rule, and they compound with the conversion-factor decline.

How a Medicare cut becomes a commercial cut

Medicare is not just a payer — it is the benchmark the rest of the market is priced against. Because so many commercial and Medicare Advantage contracts are written as a percentage of the Medicare fee schedule, the CY2027 RVU re-weighting and conversion-factor decline flow downstream automatically, frequently without triggering a renegotiation.

The comment window is leverage

This is a proposed rule. Comments are due September 14, 2026 (file code CMS-1848-P, docket CMS-2026-2377), with policies effective January 1, 2027. Specialty societies and large systems will comment on Modifier‑25, the IPCI removal, and skin-substitute pricing. Well-evidenced comments — especially with practice-level data — genuinely shape final policy, and the window doubles as a planning deadline for 2027 contracting.