Overview of 2026 Payment Increases
The Centers for Medicare and Medicaid Services (CMS) released its final physician fee schedule for 2026 on Friday night, marking a significant milestone for healthcare providers across the nation. The rule introduces a 3.77% payment increase for qualifying providers participating in advanced alternative payment models (APMs), while other healthcare providers will receive a 3.26% reimbursement boost.
This positive adjustment represents one of the most substantial Medicare physician pay increases in recent years, directly impacting how millions of healthcare providers deliver care to Medicare beneficiaries. The payment update affects primary care physicians, specialists, and facility-based providers differently based on their practice settings and payment model participation.
Legislative Background and Payment Adjustments
One Big Beautiful Bill Impact
The majority of the positive payment adjustment stems from President Donald Trump’s One Big Beautiful Bill, enacted on July 4, 2025, which contributes 2.5% to the overall increase. This legislation has provided the foundation for the most significant portion of physician reimbursement growth in the 2026 fee schedule.
MACRA and Budget Neutrality
The remaining payment increases derive from statutory updates in the Medicare Access and CHIP Reauthorization Act (MACRA) and a 0.49% positive budget neutrality adjustment implemented by CMS. Importantly, the agency emphasizes that the final rule maintains budget neutrality, meaning it neither increases nor decreases overall Medicare spending while redistributing payments to support priority healthcare services.
For 2026, CMS implemented a new requirement to create separate payment rates for qualifying providers in advanced APMs versus traditional fee-for-service providers, reflecting the administration’s commitment to value-based care models.
Shift Toward Preventive Care Model
RFK Jr.’s Healthcare Vision
Trump’s CMS leadership emphasizes reducing unnecessary healthcare spending while improving payment accuracy. The rule strongly promotes shifting healthcare incentives from reactive, expensive hospitalizations to proactive prevention and wellness initiatives.
Health and Human Services Secretary Robert F. Kennedy Jr. has championed this approach, stating: “The new Medicare fee schedule delivers a major win for seniors, protects hometown doctors, and safeguards American taxpayers. It realigns doctor incentives and helps move our country from a sick-care system to a true health care system.”
The administration’s focus extends to understanding and reducing chronic disease rates through improved nutrition, physical activity, healthy lifestyles, reduced medication over-reliance, and enhanced environmental and food safety standards.
Payment Policy Changes Affecting Physicians
Work RVU Modifications
Despite the positive topline payment increase, CMS has implemented changes to work relative value units (RVUs) that will affect various medical services differently. These modifications decrease payment for certain procedures, meaning physicians performing these services won’t experience the full benefit of the positive conversion factor adjustment.
Indirect Practice Expense Adjustments
CMS finalized changes to how indirect practice expenses are calculated, which reduces reimbursement for facility-based physicians’ administrative costs. Many hospital-based physicians argue this change is inequitable, as they maintain similar administrative overhead to independent providers but receive lower compensation.
The payment policies particularly benefit primary care providers in outpatient office settings, who will receive the full advantage of the increased payment rates without the offsetting reductions affecting procedure-heavy specialties.
Skin Substitute Payment Reform
To control spending on skin substitutes, CMS lowered the payment rate to a single averaged rate of $127.28 for both hospital outpatient departments and physician practices. Future rules will establish separate rates for the three FDA-recognized product categories.
Primary Care and Chronic Disease Management
Behavioral Health Integration
CMS created optional add-on codes for integrating behavioral health services into the advanced primary care model introduced in 2025. This expansion recognizes the critical connection between mental and physical health in managing chronic conditions effectively.
Ambulatory Specialty Model
The agency finalized a new mandatory Ambulatory Specialty Model focusing on specialty care for beneficiaries with heart failure and chronic low back pain. CMS projects this model will promote higher quality care, emphasize prevention, and reduce unnecessary procedures and hospitalizations.
Digital Health and Telehealth Expansion
ADHD Treatment and Digital Therapeutics
In a significant win for digital health innovation, CMS will provide payment for treating attention deficit/hyperactivity disorder (ADHD) through digital mental health treatment, commonly known as prescription digital therapeutics. This policy acknowledges the growing evidence supporting technology-based interventions for mental health conditions.
Virtual Diabetes Prevention Program
CMS finalized changes allowing virtual-only providers to receive payment for the Medicare Diabetes Prevention Program, expanding access to this evidence-based intervention for preventing type 2 diabetes among at-risk beneficiaries.
Telehealth Policy Modernization
Virtual Supervision Guidelines
The rule permanently allows supervising physicians to be available virtually, modernizing supervision requirements to reflect contemporary practice patterns. This flexibility supports rural access and efficient use of physician time while maintaining quality oversight.
Teaching Physician Flexibility
CMS permanently allows teaching physicians to supervise residents virtually during three-way telehealth visits involving the patient, resident, and supervising clinician. This policy applies to both rural and urban teaching environments, though virtual supervision isn’t permitted when residents and patients interact in-person at the same location.
The agency also permanently removed frequency limitations on telehealth for subsequent inpatient visits, nursing facility visits, and critical care consultations, expanding access to specialist expertise.
Going forward, CMS modernized its telehealth service addition process by focusing solely on whether services can be furnished through interactive, two-way, audio-video visits.
Key Takeaways for Healthcare Providers
The 2026 Medicare physician fee schedule represents a significant policy shift toward preventive care, chronic disease management, and digital health integration. Primary care and outpatient providers stand to benefit most from the payment increases, while procedure-heavy specialties and facility-based physicians may see more modest gains due to RVU and practice expense adjustments.
Healthcare providers should evaluate their practice patterns, payment model participation, and telehealth capabilities to maximize reimbursement under the new rule. The emphasis on preventive care and value-based models signals CMS’s long-term direction for Medicare reimbursement policy.
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