In the CY 2026 Physician Fee Schedule final rule, CMS finalized the Ambulatory Specialty Model (ASM), a new mandatory alternative payment model (APM) under the CMS Innovation Center. The model is designed to hold individual specialist clinicians accountable for the quality and cost of care furnished to Medicare beneficiaries with two high-cost, high-prevalence conditions: heart failure and low back pain.

ASM will begin on January 1, 2027, and span seven years. It includes five performance years (2027–2031), followed by two additional years for data submission, payment reconciliation, and application of performance-based payment adjustments, concluding in 2033. Payment adjustments will be applied two years after each performance year, aligning with the timing structure used under MIPS.

ASM represents one of the clearest signals yet that CMS is moving beyond voluntary, entity-level demonstrations toward mandatory, clinician-specific accountability. The seven-year runway reflects CMMI’s increasing preference for long-duration models designed to drive durable practice transformation rather than short-term experimentation. For specialists accustomed to annual MIPS adjustments, ASM introduces a more sustained and structurally embedded performance framework.

Model Purpose and Policy Rationale

ASM reflects CMS’s shift toward condition-specific, specialist-focused accountability in Medicare fee-for-service. Historically, specialists have been tangentially involved in broader APMs such as ACOs or primary care–oriented models. ASM seeks to close that gap by directly aligning specialist payment with performance on cost, quality, care coordination, and health information exchange

The model builds on lessons from MIPS and the MIPS Value Pathways (MVP) framework but introduces a more targeted design. Rather than allowing clinicians to select measures, ASM requires reporting on a fixed set of condition- and specialty-specific measures. Performance is assessed against peers treating the same condition, enabling more clinically meaningful comparisons and reducing cross-specialty distortion.

By focusing on heart failure and low back pain—two conditions with substantial variation in treatment patterns and Medicare spending—CMS aims to test whether a peer-comparison, condition-based accountability model is intended to reduce fragmented, duplicative, or low-value services, such as unnecessary imaging, procedures, or hospitalizations, while strengthening care coordination and preventive management. If successful, ASM could serve as a template for expanding condition-specific accountability models across additional specialties and chronic conditions in future years.

BROADER TRAJECTORY: ASM signals CMS’s evolution from broad population-based accountability (e.g., ACOs) toward vertical, condition-driven accountability within fee-for-service Medicare. Rather than relying solely on entity-level shared savings, CMS is increasingly targeting high-variation clinical domains directly. This approach aligns with a broader federal emphasis on reducing unwarranted variation and improving chronic disease management without fully transitioning to global capitation.

For providers, this shift means that specialty practices can no longer rely on indirect participation through hospital systems or ACO infrastructure. Direct attribution and peer comparison raise the stakes for specialty-level clinical standardization, data infrastructure, and cost awareness.

Mandatory Participation and Clinician Eligibility

Participation in ASM is mandatory for eligible clinicians practicing in selected geographic areas. In December 2025, CMS published the list of participating geographic regions, selected through stratified random sampling of Core-Based Statistical Areas (CBSAs) and metropolitan divisions to ensure variation across:

• Per-beneficiary Medicare spending (high vs. low),
• Episode-based cost measure (EBCM) volume (low, high, very high), and
• Metropolitan division status.

Following this announcement, CMS also published the initial participant list, identifying individual clinicians assigned to ASM cohorts based on their service ZIP code.

The selected participants meet the following criteria:

• Bill under the Medicare Physician Fee Schedule (PFS),
• Practice in one of the targeted specialties (e.g., cardiology for heart failure; orthopedic surgery, neurosurgery, anesthesiology, pain management, or physical medicine and rehabilitation for low back pain),
• Meet a minimum threshold of at least 20 attributed episodes for the applicable condition based on MIPS episode-based cost measures, and
• Practice in a selected geographic area.

CMS finalized participation at the individual clinician (TIN/NPI) level, rather than the group level to promote competition, transparency, and fairness—particularly for small or independent practices. It also allows CMS to better identify variation and low-value care patterns.

MIPS-eligible clinicians participating in ASM will be exempt from MIPS reporting and payment adjustments for any year in which they are subject to ASM.

IMPACT ON PROVIDERS: The decision to anchor participation at the individual clinician level is particularly consequential. While CMS frames this as enhancing fairness and comparability, it also bypasses traditional organizational buffers. Large health systems cannot fully insulate employed physicians from performance risk. Likewise, independent specialists may face volatility without the infrastructure of larger entities.

Over time, clinician-level accountability may accelerate consolidation pressures. Data analytics, care coordination staff, and performance management infrastructure become increasingly essential in managing episode-based cost accountability.

Performance Assessment Framework

ASM evaluates clinicians across four performance categories:

1. Quality
2. Cost
3. Improvement Activities
4. Promoting Interoperability

Quality and cost are the primary determinants of the final score. The quality category includes a fixed set of condition-specific measures, including patient-reported outcome measures (PROMs) to assess functional status and symptom improvement. Cost performance is assessed using episode-based cost measures that capture total Medicare Part A and B spending associated with a clinical episode, adjusted for patient risk.

Improvement Activities and Promoting Interoperability function primarily as score modifiers. Rather than driving the bulk of scoring, these categories can result in negative adjustments for non-reporting or poor performance, reinforcing expectations around care coordination and certified EHR technology (CEHRT) use while limiting undue administrative burden.

CMS finalized a minimum case threshold requirement but in response to stakeholder feedback, added scoring protections for clinicians who do not meet required minimum case volumes. Measures that fail to meet minimum thresholds will not unfairly penalize clinicians.

TREND ANALYSIS: The integration of PROMs reflects CMS’s growing emphasis on functional outcomes and patient-centered metrics rather than purely process-based measures. This aligns with broader federal initiatives around value-based care measurement modernization.

By elevating cost to equivalence with quality, CMS continues the transition from documentation-based performance assessment (as seen in early MIPS years) toward utilization and resource stewardship. Specialists treating chronic conditions will increasingly need visibility into downstream spending—imaging, post-acute care, hospital readmissions—even if those services are not directly furnished by them.

Payment Methodology and Financial Risk

ASM introduces a broader range of payment adjustments than MIPS, increasing both upside opportunity and downside risk. Payment adjustments will apply to all Medicare Part B payments for the clinician during the applicable payment year.

Consistent with CMMI’s statutory mandate, CMS will retain a portion of redistributed funds to ensure net Medicare savings. Payment adjustments are calculated using a performance ranking approach within condition-specific cohorts, meaning clinicians are compared against peers treating the same condition.

By applying a wider adjustment range and incorporating a peer-based scoring model, CMS intends to create stronger financial incentives for meaningful improvement in quality and cost management.

IMPACT ON PROVIDERS: The expanded adjustment range materially increases financial exposure relative to traditional MIPS participation. Because adjustments apply across all Part B revenue, not just services tied to the episode, the model magnifies performance effects.

Peer-based ranking introduces relative risk: a clinician’s performance may be objectively strong yet still yield modest gains if peers improve more rapidly. This dynamic creates competitive pressure and may accelerate benchmarking transparency within specialties.

BROADER IMPLICATION: The use of cohort ranking suggests CMS is testing scalable benchmarking frameworks that could be deployed across additional specialties. If validated, this model may serve as a prototype for future mandatory specialty APMs.

Final Rule Modifications and Guardrails

In response to stakeholder feedback, CMS finalized several refinements designed to mitigate burden and address fairness concerns:

• Scoring protections for clinicians who do not meet minimum case thresholds for required measures.
• Automatic positive scoring adjustments for (1) small practices/solo practitioners, and (2) clinicians serving socially complex populations. Clinicians may qualify for both adjustments concurrently.
• Advance notification of participation and educational resources beginning in 2026 to support operational readiness.
• Ongoing monitoring and evaluation to identify unintended consequences, including potential access barriers or consolidation pressures.

CMS also clarified that ASM does not require telehealth utilization but includes a telehealth waiver allowing geographic and originating site flexibility for services related to ASM episodes. Interoperability requirements will be proportionally weighted to reduce burden, particularly for small and rural practices.

TREND ANALYSIS: These guardrails reflect lessons learned from prior mandatory models, particularly concerning disproportionate impact on small, rural, or safety-net providers. The inclusion of automatic positive adjustments signals CMS’s awareness of political and stakeholder sensitivity surrounding mandatory participation.

Model Overlap and Coordination

Clinicians participating in ASM may continue participating in other Innovation Center models or Accountable Care Organizations, including the Medicare Shared Savings Program (MSSP). However, CMS will monitor for unintended overlap or duplicative payments.

Importantly, ASM participation and payment adjustments are tied to the individual clinician’s National Provider Identifier (NPI), not to a specific practice or health system. As a result, if a clinician changes employers or practice settings during the model period, both performance accountability and any resulting positive or negative payment adjustments will follow the clinician. This structure preserves continuity of responsibility across employment transitions but also creates implications for recruitment, contracting, and compensation design, as organizations may inherit prior performance risk when onboarding participating clinicians.

BROADER TRAJECTORY: The portability of accountability reflects CMS’s increasing focus on clinician identity rather than organizational structure. This approach supports longitudinal accountability across employment transitions and aligns with CMS’s broader data modernization efforts.

Applied Policy’s Perspective: Strategic Implications for Specialists and Health Systems

The Ambulatory Specialty Model represents more than a new payment methodology—it marks a structural shift in how CMS is holding specialists accountable for chronic condition management.

Three strategic signals emerge:

1. Mandatory specialty models are expanding. CMS is testing condition-specific frameworks that could extend to oncology, pulmonology, endocrinology, and beyond.

2. Peer-based benchmarking is replacing cross-specialty scoring. Performance transparency within specialties will intensify.

3. Chronic care management is moving upstream. Specialists are increasingly expected to influence total episode cost—not just procedural quality.

For participating clinicians, ASM introduces both risk and opportunity. Those with established care pathways, strong EHR integration, and proactive care coordination infrastructure may find competitive advantage. Those without such infrastructure may experience financial volatility.

For health systems and specialty groups, the strategic imperative is early readiness: episode analytics, referral management redesign, telehealth integration where clinically appropriate, and alignment of compensation models with condition-based performance metrics.

As CMS continues expanding mandatory, specialty-focused models, ASM signals a broader trajectory in Medicare payment reform—one that embeds accountability directly within specialty practice rather than solely at the organizational level.