2026 Medicare Fee Schedule: Complete Guide to Rates, Rules & Changes

Last Updated: February 18, 2026 | Effective Date: January 1, 2026 | Rule: CMS-1832-F

The 2026 Medicare Physician Fee Schedule (MPFS) is now in effect, and it brings the first real payment increase for physicians in several years.

The Centers for Medicare & Medicaid Services (CMS) published the final rule on October 31, 2025, with changes effective January 1, 2026.

This guide breaks down every key update in plain, simple language so doctors, billing staff, and patients can understand exactly what changed and why it matters.

Quick Article Summary:

• The 2026 conversion factor rose to $33.4009 for most physicians — a +3.26% increase
• A new −2.5% efficiency adjustment offsets some of the gains for procedure-heavy specialties
• Office-based payments rise ~5%, while facility-based payments drop ~7%
• Telehealth services are now permanently approved — no more provisional status
• A new mandatory model called the Ambulatory Specialty Model (ASM) begins in 2027
• Primary care and office-based specialists benefit most; surgical and facility-based specialists may see net cuts

What Is the Medicare Physician Fee Schedule?

The Medicare Physician Fee Schedule is the payment system CMS uses to pay doctors and other health care providers under Medicare Part B.

It sets the dollar amount Medicare will pay for each medical service.

Every covered service has a unique code, and each code is assigned a value based on the time, skill, and cost required to perform it.

The payment formula works like this:

Payment = (Work RVU + Practice Expense RVU + Malpractice RVU) × GPCI × Conversion Factor

What Are RVUs?

RVU stands for Relative Value Unit. There are three types:

• Work RVU (wRVU) — reflects physician time and skill
• Practice Expense RVU (PE RVU) — covers office rent, staff, and supplies
• Malpractice RVU (MP RVU) — accounts for liability insurance costs

What Is a GPCI?

A Geographic Practice Cost Index (GPCI) adjusts payment based on where the service is provided.

Doctors in high-cost cities like New York or San Francisco receive slightly higher payments than those in rural areas.

2026 Medicare Conversion Factor: The Key Number

The conversion factor is the dollar amount that turns RVU values into actual payments.

For 2026, CMS finalized two separate conversion factors for the first time — one for standard Medicare participants and one for doctors in qualifying Alternative Payment Models (APMs).

This change is important. It rewards physicians who participate in value-based care programs with a slightly higher rate.

2026 Conversion Factor Table

Why Did the Conversion Factor Increase?

Three factors drove this increase:

1. A 0.25% statutory update for non-QP physicians
2. A 0.75% statutory update for APM QP physicians
3. A 2.5% increase required by the One Big Beautiful Bill Act, passed by Congress

⚠️ Important Warning: While the headline number looks positive, the new −2.5% efficiency adjustment (explained below) will offset much of this increase for many physicians — especially procedural and facility-based specialists.

Historical Conversion Factor Trend

The trend shows years of cuts followed by one legislative correction. Many physician groups warn this is still not enough to keep up with inflation in practice costs.

5 Major Medicare Policy Changes for 2026

CMS made five landmark changes in this year’s rule. Each one affects different specialties and practice types in different ways.

Understanding these changes is critical for medical billing, practice planning, and patient access to care.

1. The New −2.5% Efficiency Adjustment

This is the most controversial change of 2026. CMS will now reduce Work RVUs by 2.5% for most non-time-based services.

The agency argues that over time, physicians become more efficient at performing certain procedures, so payments should reflect that.

What services are EXEMPT from this cut?

• Evaluation and Management (E/M) services
• Care management and chronic care services
• Behavioral health services
• Telehealth services on the CMS list
• Maternity care services
• New Category I CPT codes created for 2026

Who is hurt most? Procedural specialists — including surgeons, radiologists, and oncologists — who perform high volumes of non-time-based services.

CMS plans to recalculate this adjustment every three years, using a five-year lookback at the Medicare Economic Index productivity data.

2. Facility vs. Office Payment Changes (Practice Expense Overhaul)

CMS overhauled how it calculates indirect practice expense (PE) costs depending on where a service is performed.

Before 2026, indirect PE costs were split equally between facility and office settings.

Now, facility-based services receive half the indirect PE allocation compared to office-based services.

Bottom line impact:

This change significantly rewards physicians who see patients in their own offices — such as primary care doctors, rheumatologists, and allergists — while penalizing those who work primarily in hospitals or ambulatory surgery centers (ASCs).

3. Telehealth Is Now Permanently Approved

This is one of the most positive updates in the 2026 rule for both providers and patients. CMS has permanently approved all services currently on the Medicare Telehealth Services List, removing the old “provisional” vs. “permanent” distinction.

Key telehealth changes in 2026:

• All telehealth services are now permanent — reviewed only to confirm they work via audio-video
• No more frequency limits for subsequent inpatient, nursing facility, and critical care telehealth visits
• Virtual direct supervision is permanently allowed for services requiring direct supervision
• Teaching physicians can permanently supervise residents via telehealth in all training locations
• Cardiac rehabilitation services are now permanently on the telehealth list

This is a major win for rural and underserved communities where access to in-person specialty care remains limited.

4. CMS Rejected the AMA’s New Practice Expense Survey Data

The current Practice Expense methodology is based on the AMA’s Physician Practice Information Survey (PPIS) data from 2008 — data that is now nearly 18 years old.

In 2024, the AMA conducted a full new survey and submitted updated data to CMS in early 2025.

CMS declined to use the new data, citing:

• Small sample sizes
• Low physician response rates
• Potential measurement errors
• Incomplete data submission

Physician groups are deeply frustrated. They argue the outdated 2008 data drastically underestimates what it actually costs to run a medical practice today, especially after years of inflation in rent, wages, and supplies.

5. The New Ambulatory Specialty Model (ASM)

CMS finalized a mandatory new payment model called the Ambulatory Specialty Model (ASM).

It targets two high-cost, high-volume conditions: heart failure and low back pain. Specialists who commonly treat these conditions will be automatically enrolled.

How the ASM works:

• Begins testing in 2027
• Applies to physicians treating low back pain or heart failure in outpatient settings
• CMS will assess individual physicians on cost and quality measures
• Results in positive, neutral, or negative payment adjustments to future Medicare Part B claims
• Geographic areas (core-based statistical areas) will be announced by December

This model is mandatory — meaning eligible physicians cannot opt out.

2026 Specialty-Level Payment Impacts

The payment changes in 2026 are not equal across all specialties.

The combination of the conversion factor increase, the −2.5% efficiency adjustment, and the facility vs. office PE change creates winners and losers depending on where and how physicians practice.

Here is the full breakdown based on CMS Table D-B7 of the Final Rule:

Sources: CMS Table D-B7, AMA, ASCO, ACC, ASH

⚠️ 81% of infectious disease physicians face cuts of 5% or more under the 2026 rule — making it one of the hardest-hit specialties this year.

Quality Payment Program (QPP) Updates for 2026

The Quality Payment Program (QPP) is the framework that ties physician payments to performance.

It includes two pathways: MIPS and APMs. CMS made several important updates to both tracks for 2026.

Understanding these changes is essential for physicians who want to maximize their Medicare reimbursement and avoid penalties.

MIPS Updates for 2026

MIPS — the Merit-Based Incentive Payment System — evaluates physician performance across four categories.

For 2026, CMS is keeping the performance threshold steady at 75 points, meaning physicians need to hit that score to avoid payment penalties.

2026 MIPS Category Weights:

Other MIPS changes for 2026:

• 190 total quality measures finalized for 2026
• 30 existing measures were modified
• 10 measures were removed
• 5 new quality measures added (including 2 electronic clinical quality measures)
• Performance threshold of 75 points maintained through 2028 performance period

MIPS Value Pathways (MVPs)

MVPs are a newer, streamlined way to participate in MIPS by focusing on a specific specialty area.

• 6 new MVPs were added for the 2026 performance period
• All 21 existing MVPs were modified
• Subgroup reporting is now mandatory starting in 2026
• Clinicians must define their subgroups at the time of registration — this is a new administrative requirement

APM Qualifying Thresholds for 2026

To qualify as an APM Qualifying Participant (QP) and receive the higher $33.5675 conversion factor, a physician must meet both of these thresholds:

• 75% of Medicare Part B payments must flow through the APM
• 50% of Medicare beneficiaries must be seen through the APM

These thresholds remain unchanged from 2025.

Other Important 2026 Medicare Policy Updates

Beyond the five major changes, CMS also finalized several other policies that affect specific types of providers and services.

These updates may seem smaller, but they carry significant financial and operational implications for the providers they affect. Here is a clear summary of each.

Skin Substitute Payment Policy

For services performed in outpatient settings, CMS finalized a new flat rate for skin substitutes:

• $127.28 per square centimeter starting January 1, 2026
• Applies to outpatient facility settings only
• Replaces the previous methodology

340B Drug Pricing Program

CMS made two significant changes to how 340B drugs are handled:

• A new claims-based methodology will remove 340B drug units when calculating Medicare drug inflation rebates
• A 340B claims data repository will be created, allowing 340B providers to voluntarily submit claims data

Rural Health Clinics (RHCs) & FQHCs

Rural and federally qualified health centers (FQHCs) received key protections:

• New telehealth rules ensure 24/7/365 resident access to medical services in their residence
• The waiver allowing FQHCs and RHCs to bill for telehealth services is extended through 2026

California-Specific GPCI Update

The final rule includes a California-specific update to fee schedule areas under Section 220(h) of the Protecting Access to Medicare Act.

CMS also reviewed the list of occupation codes used in the Work GPCI calculation, which could affect payment amounts in certain California markets.

How Medicare Fee Schedule Compares to Medicaid

Medicare and Medicaid are two separate government health programs with their own fee schedules and payment rules.

Medicare is a federal program for people 65 and older, while Medicaid is a joint federal-state program for low-income individuals and families.

If you are a provider billing both Medicare and Medicaid patients, it’s important to understand how the Medicaid Fee Schedule 2026 affects your reimbursement differently than Medicare.

Medicaid rates are set at the state level and vary widely by state and service type.

For patients trying to understand their Medicaid eligibility alongside Medicare coverage, you should also review the medicaid income limits by state in 2026 to see if you qualify for dual coverage — sometimes called “dual eligibility” — which can significantly reduce your out-of-pocket costs.

Key Concerns From Physician Organizations

The medical community has raised serious alarms about the long-term impact of these policies.

Major organizations including the AMA, ASCO, ACC, and ASH have all issued statements expressing concern about the 2026 rule’s real-world effects on physician practices and patient access to care.

Major concerns include:

• The AMA warns that the efficiency adjustment and practice expense changes make it harder for independent practices to remain financially viable
• Increasing consolidation in health care could reduce physician competition and limit patient choice
• 81% of infectious disease physicians face cuts of 5% or more
• The failure to adopt updated 2025 PE survey data means practice costs remain severely undervalued
• Long-term financial instability in the Medicare physician payment system threatens patient access, especially in underserved communities

The AMA is specifically concerned that continued payment pressure will push more independent physicians into hospital employment — shifting care to more expensive facility settings, which ironically increases total Medicare spending.

Official Government Sources

Always verify information from official sources. Here are the authoritative references for the 2026 Medicare Physician Fee Schedule:

Frequently Asked Questions (FAQs)

This article is for informational purposes only. Always consult official CMS publications and a qualified health care billing professional for specific guidance. Last updated: February 18, 2026.