On November 4, 2026, the Centers for Medicare & Medicaid Services (CMS) issued its final calendar year (CY) 2027 Physician Fee Schedule (PFS), which finalizes policies for physician payment and other outpatient services covered under Medicare Part B. CMS released a rule overview fact sheet and an official press release outlining key policies, along with a fact sheet on final policies related to the Medicare Shared Savings Program (MSSP).
Finalized policies include:
- Decreasing CY 2027 Medicare Part B physician payment rates under the PFS;
- Modifying the practice expense (PE) methodology by phasing out reliance on historical specialty-level survey data;
- Replacing G2211 with percentage-based modifiers, with enhanced payment for Accountable Care Organizations (ACO);
- Reducing payment when separately identifiable O/O E/M visits and global procedures are furnished by the same physician on the same day;
- Expanding the primary care exception to permit residents to furnish all levels of office/outpatient (O/O) Evaluation and Management (E/M) services without the teaching physician’s physical presence when clinically appropriate;
- Extending statutory Medicare telehealth flexibilities, adding new telehealth HCPCS codes and claims modifiers, and expanding teaching physician virtual presence policies;
- Tightening remote physiologic monitoring (RPM) and remote therapy monitoring (RTM) billing requirements;
- Implementing statutory changes limiting Medicare eligibility for certain noncitizens and establishing related enrollment, termination, and special enrollment period (SEP) policies;
- Updating the Medicare Part B and Part D Inflation Rebate Programs; and
- Implementing conforming updates to the Clinical Laboratory Fee Schedule (CLFS) required by the Consolidated Appropriations Act, 2026 (CAA, 2026).
In addition to the policies summarized below, CMS finalizes updates to MSSP, including changes to beneficiary assignment, financial benchmarks, beneficiary engagement, and participation policies; refinements to the Ambulatory Specialty Model (ASM), including technical, operational, and quality measurement changes; and updates to the Quality Payment Program (QPP), including changes to MIPS reporting pathways, quality measures, scoring, and Advanced Alternative Payment Model (APM) policies. These policies will be addressed in separate summaries.
This final rule is scheduled to be published in the Federal Register on November 9, 2026.
CMS Finalizes Decrease to Physician Payment Rates for 2027, Updates to Practice Expense Methodology
FINALIZED WITH MODIFICATION
Pages 1,970-1,973[1]
CMS finalizes a decrease in Medicare Part B payments to physicians and other health professionals who provide services such as office visits, surgeries, and diagnostic or therapeutic procedures. As required by section 1848(d)(1)(A) of the Social Security Act (the Act) and first implemented in CY 2026, there will be two separate conversion factors (CF) for 2027: one for items and services furnished by qualifying APM participants (QPs), and another for non-qualifying APM participants (non-QPs). For 2027, CMS finalizes a CF of $32.9548 (a 1.83 percent decrease) for QPs[2] and $32.6286 (a 2.31 percent decrease) for non-QPs.[3] Both reflect their respective CY 2026 conversion factors (excluding the temporary 2.5 percent statutory payment increase that applied only during CY 2026) multiplied by a 0.12 percent negative budget neutrality adjustment.[4],[5]
Table 1. Physician Fee Schedule CF Comparison[6]
| 2026 CF | Final 2027 CF | ||
| Qualifying APM Participant | Non-Qualifying APM Participant | Qualifying APM Participant | Non-Qualifying APM Participant |
| $33.5675 | $33.4009 | $32.9548 | $32.6286 |
| Because the temporary 2.5 percent payment increase enacted for CY 2026 expires, both groups will see lower payment rates in CY 2027 despite positive statutory updates and a positive budget neutrality adjustment. |
Updates to Practice Expense Methodology
FINALIZED AS PROPOSED
Pages 12-18, 30-42, 73-80
CMS finalizes its proposal to modify the PFS PE methodology by phasing out the indirect practice cost index (IPCI) over two years. Specifically, CMS is eliminating Steps 12 through 17 of the PE RVU calculation, which currently rescale indirect PE RVUs using specialty-specific PE per hour (PE/HR) survey data from the American Medical Association (AMA). Under the new policy, PE RVUs will instead be based on code-level inputs, including work RVUs, direct PE inputs, and specialty-specific indirect allocators, with a PE stabilizer replacing the current rescaling step during the transition.
CMS also finalizes its proposal to allocate indirect PE based on both work RVUs and clinical labor PE RVUs, rather than the maximum of the two, for all codes except those with 10- or 90-day global periods. Additionally, to align with its CY 2026 site-of-service payment differential policy finalized in the CY 2026 PFS Final Rule,[7] CMS is also revising the indirect PE allocation for visits furnished during a Medicare Part A skilled nursing facility stay.
| PE RVUs will now be calculated by reducing the role of historical specialty-level survey data in favor of code-level inputs. These changes could redistribute Medicare payments across physician specialties and services as the new methodology is phased in. |
CMS Updates E/M Coding, Billing, and Payment
CMS Replaces G2211 with New E/M Modifiers
FINALIZED AS PROPOSED
Pages 324-348
CMS finalizes its proposal to eliminate HCPCS code G2211 and replace it with two modifiers applied directly to qualifying O/O and home or residence E/M services. CMS believes the work currently captured by G2211 is inherent to the underlying E/M visit and can be more accurately paid as a percentage of the associated E/M service rather than through a separate, flat-rate add-on code. The new modifiers include:
- “B1”[8]: Generally applies under the same circumstances as G2211 and is valued at 16 percent of the associated E/M service. B1 recognizes visits in which the practitioner serves as the continuing focal point for a patient’s care or provides ongoing care for a serious or complex condition.
- “B2”[9]: Available voluntarily to eligible MSSP ACO participants, ACO Primary Care Flex participants, and LEAD Model Participant Providers and is valued at 32 percent of the associated E/M service. B2 recognizes the additional care coordination, quality, and cost-accountability responsibilities associated with accountable care. Eligible ACO clinicians may report B2 for qualifying visits furnished to any Medicare beneficiary, regardless of whether the beneficiary is assigned or aligned to the ACO, provided the visit involves qualifying longitudinal complexity.
Payments associated with MOD1 and MOD2 will be included in ACO expenditure, benchmarking, financial reconciliation, and beneficiary assignment or alignment calculations.
CMS generally retains the current restrictions on billing G2211 with modifier -25 and responds to feedback on whether B1 or B2 should also be allowed when a separately identifiable E/M visit is furnished on the same day as a 0-, 10-, or 90-day global procedure.
CMS Reduces Payment for E/M Visits Furnished with Global Procedures
FINALIZED WITH MODIFICATION
Pages 391-404
In response to public comments, CMS finalizes its proposal to reduce payment when a separately identifiable O/O E/M visit is furnished by the same physician on the same day as a procedure, with two modifications. Specifically, CMS limits the policy to procedures with a 0-day global period, rather than the proposed 0-, 10-, and 90-day global periods, and reduces the payment adjustment from 50 percent to 20 percent. Under the finalized policy, the highest-valued service, whether the procedure or E/M visit, will be paid at 100 percent, while the other service will be paid at 80 percent.
Medicare’s global surgical packages include payment for certain pre- and post-operative E/M services associated with a procedure. A separate E/M service furnished on the same day as a procedure generally may only be billed when it is significant and separately identifiable, in which case the claim must include modifier -25. CMS previously proposed a similar policy in the CY 2019 PFS Proposed Rule but did not finalize it.
CMS Expands the Primary Care Exception
FINALIZED AS PROPOSED
Pages 406-410
CMS finalizes its proposal to expand the primary care exception to all levels of O/O E/M services, including level 4 and 5 visits, when the teaching physician determines the arrangement is clinically appropriate. CMS is removing the current limitation to lower- and mid-level E/M visits and intends to specify the eligible codes through program instructions.
The primary care exception allows teaching physicians to bill Medicare for certain services furnished by residents in approved outpatient primary care settings without being physically present for the service, provided applicable supervision and other requirements are met.
CMS Finalizes Telehealth Expansions, New Claims Modifiers, and Broader Teaching Physician Flexibility
Pages 89-102
FINALIZED WITH MODIFICATION
- Extension of Statutory Telehealth Flexibilities: CMS finalizes its proposal to implement the telehealth flexibilities extended through the CAA, 2026, including continued waivers of geographic restrictions, expanded originating sites and practitioner eligibility, coverage of audio-only telehealth services through December 31, 2027, and delaying the in-person mental health telehealth requirement until January 1, 2028. § 410.78 has been revised to align with these extensions, and in accordance with section 6209(g) of CAA, 2026, CMS is creating modifiers “BB” and “BC.”
- Telehealth Originating-Site Facility Fee: CMS increases the originating-site facility fee (HCPCS Q3014) from $31.85 in CY 2026 to $32.68[10] in CY 2027, based on the most recent increase in the 2017-based MEI of 2.6 percent.
- Medicare Telehealth Services List: CMS will be finalizing the addition of five HCPCS G-codes for ACP (GACP1, GACP2), shared medical appointments (GSMAS), pediatric speech-language services (GSLPP), and vaccine adverse effects management (GADV1). CMS also establishes Modifier BB for services furnished through certain virtual telehealth platforms and Modifier BC for telehealth services furnished “incident to” another professional service, and revises HCPCS codes G0508 and G0509 to align telehealth critical care consultation reporting with in-person critical care services. CMS will remove three CPT codes, one of which will be replaced by other codes, from the Medicare Telehealth Service List, as they were inadvertently maintained in the proposed rule.
FINALIZED AS PROPOSED
- Teaching Physician Virtual Presence: CMS finalizes its proposal to permit billing for Medicare telehealth services involving residents when either the teaching physician or the resident is physically present with the patient and the other participates by real-time audio-video technology (eliminating the current requirement that all three be in separate locations). The policy applies only to services on the Medicare Telehealth Services List, with existing documentation and teaching physician oversight requirements remaining in place.
| The finalized telehealth provisions represent a modest update and continuation of prior policy, rather than a major shift. |
CMS Finalizes RPM and RTM Requirement Changes
FINALIZED WITH MODIFICATION
Pages 272-301
CMS finalizes several changes to RPM and RTM services, most beginning with CY 2027, including:
- Established-patient requirement for RTM: RTM services may be furnished only to established patients to ensure the practitioner has sufficient knowledge of the patient’s medical history, current condition, and treatment needs.
- Required initiating visit: Practitioners billing RPM or RTM will be required to conduct a separately reportable initiating visit to assess clinical appropriateness, evaluate the patient’s needs, and obtain beneficiary consent. The visit must be furnished by the billing practitioner, in person or via telehealth, and specifically address RPM or RTM services.
- Limits on third-party clinical staff – finalized with a delay, to January 1, 2029: RPM and RTM services may be billed only when furnished by clinical staff directly employed by the billing practitioner or practice. Services performed by third-party contractors would no longer qualify. Clinical staff would remain subject to general supervision and applicable “incident to” requirements under § 410.26. CMS will also publish additional guidance addressing clinical staff arrangements that may be appropriate for remote monitoring.
| Remote monitoring requirements will require changes to providers’ operational workflows and arrangements with third-party clinical staff, as final policies are a significant change from current policies. |
CMS Limits Medicare Coverage for Certain Individuals
FINALIZED WITH MODIFICATION
Pages 840-898
CMS finalizes regulatory updates to implement Medicare eligibility restrictions established by section 71201 of Public Law 119-21, limiting Medicare eligibility to U.S. citizens and nationals and certain eligible noncitizens, including lawful permanent residents, Cuban and Haitian entrants, and individuals lawfully residing in the U.S. under a Compact of Free Association (COFA). Individuals enrolled in Medicare as of July 4, 2025, who no longer meet these requirements are subject to an 18-month transition period, with coverage terminating effective February 1, 2027. CMS also finalizes procedures for notifying affected individuals, verifying eligibility, and terminating Medicare enrollment, including Medicare Advantage (MA), Part D, and cost plan coverage.
CMS also finalizes, with modifications, a SEP for individuals who become eligible or regain Medicare eligibility following a change in citizenship, nationality, or immigration status. Specifically, CMS extends the proposed SEP from six to 12 months and will allow individuals enrolling in premium Part A or Part B to elect up to six months of retroactive coverage, subject to eligibility verification and applicable premiums. CMS also clarifies that the MA and Part D SEPs begin when individuals receive notice of Medicare entitlement or enrollment and continue for two additional calendar months.
| These updates codify statutory changes to Medicare eligibility requirements and could affect Medicare coverage continuity and access to healthcare services for impacted beneficiaries. |
CMS Finalizes Updates to IRA Rebate Program
Pages 904-985
The Inflation Reduction Act of 2022[11] requires manufacturers to pay inflation rebates to the federal government if they raise prices for certain Medicare Part B and Part D drugs faster than the rate of inflation, based on the Consumer Price Index for All Urban Consumers (CPI-U). Rebates are calculated quarterly for Part B drugs and annually for Part D drugs. In this rule, CMS finalizes policies impacting both Part B and Part D drugs.
Medicare Part B Drug Inflation Rebate Program
FINALIZED AS PROPOSED
- Definition of “First Marketed Date”: CMS finalizes its proposal to clarify that when the first marketed date is missing from Average Sales Price (ASP) data, it will use the first marketed date from an alternative public source, such as the National Drug Code (NDC) Directory, or, if unavailable, the Food & Drug Administration (FDA) approval date in the Orange Book or Purple Book.
- Modification to Skin Substitutes Excluded Product Category: Skin substitutes are currently excluded from inflation rebates. CMS finalizes its proposal to narrow the exclusion by clarifying that skin substitutes licensed as drugs or biological products would be subject to Part B inflation rebates. No skin substitutes currently meet this definition, but CMS’s intent is to clarify the application of this policy for future products.
- Determining Benchmark Period CPI-U and Rebate Period CPI-U When CPI-U Data is Unavailable: In response to a scenario that occurred in October 2025, where the CPI-U needed for CMS to perform the inflation rebates calculation was unavailable, CMS finalizes that, if CPI-U data are unavailable, it will use CPI-U data for the first month for which CPI-U data are available following the month of unavailability.
Medicare Part D Drug Inflation Rebate Program
FINALIZED WITH MODIFICATION
- Definition of “Applicable Period CPI-U” When CPI-U Data Are Unavailable for the First Month of the Applicable Period: In response to a scenario that occurred in October 2025, where the CPI-U needed for CMS to perform the inflation rebates calculation was unavailable, CMS finalizes that when the first month’s CPI-U data is unavailable, CMS will use the first month for which CPI-U data are available following the month of unavailability.
- Determining Benchmark Period CPI-U When CPI-U Data Are Unavailable: In alignment with the policy finalized for Part B drugs to address the missing October 2025 CPI-U data, the agency finalizes that if CPI-U data are unavailable, it will use CPI-U data for the first month for which CPI-U data are available following the month of unavailability.
- Requiring Covered Entities to Submit Part D 340B Data to the 340B Repository: Beginning with plan year 2026, CMS is required to exclude 340B-acquired units of Part D rebatable drugs from inflation rebate calculations. Because CMS currently lacks claim-level data to identify those units, the agency previously established a claims-based methodology (the Prescriber-Pharmacy Methodology) and a voluntary 340B repository. CMS finalizes two changes to existing policies:
- CMS finalizes its proposal to make submission of Part D 340B data to the 340B repository mandatory, with data submission required within one calendar quarter following the close of each applicable quarter.[12] However, CMS extends the reporting deadline for Q1 2027 claims (dates of service from January 1 through March 31, 2027) to September 30, 2027. The repository became available for voluntary submissions on October 1, 2026, and providers are strongly encouraged to begin submitting data before submission is mandatory. CMS also finalizes documentation, data, and operational requirements to operationalize submission and data collection.
- CMS also finalizes its proposal to identify prescription drug event (PDE) records for beneficiaries with AIDS Drug Assistance Program (ADAP) supplemental coverage and exclude all associated units from inflation rebate calculations after determining that ADAPs and other Federal grantee sites account for a greater share of 340B antiretroviral claims than previously anticipated.
For both Part B and Part D inflation rebates, CMS makes technical corrections to the date of receipt for rebate report examples included in the CY 2025 PFS Final Rule and provides clarification regarding its enforcement policy for manufacturer payment.
| CMS’s finalized proposals provide operational clarity. The requirement to submit Part D 340B data to the repository will likely improve the accuracy of inflation rebates calculations but also introduces new burden for providers. |
CMS Finalizes Conforming CLFS Updates and Technical Corrections to Implement CAA, 2026
FINALIZED AS PROPOSED
Pages 642-656
CMS finalizes revised definitions of the “data collection period” to mean the 6-month period from January 1 through June 30 and the “data reporting period” to mean the 3-month period from May 1 through July 31 for clinical diagnostic laboratory tests (CDLTs) that are not advanced diagnostic laboratory tests (ADLTs), while maintaining a January 1 through March 31 reporting period for ADLTs. CMS also finalizes conforming changes to the phase-in of payment reductions, specifying that payment reductions are limited to 0 percent in CY 2026 and to up to 15 percent annually in CYs 2027 through 2029, compared with the preceding year.
Separately, CMS finalizes a technical correction to restore regulatory text implementing the statutory $2 increase in the specimen collection fee for specimens collected from Medicare beneficiaries in skilled nursing facilities or by laboratories on behalf of home health agencies.
This Applied Policy® Summary was prepared by Caitlyn Bernard Shreve with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact her at cbernard@appliedpolicy.com or at (571) 451-6594.
[1] All page numbers listed are from the unpublished final rule
[2] Proposed: 33.1693 (a 1.19 percent decrease)
[3] Proposed: $32.8409 (a 1.68 percent decrease)
[4] Section 1848(c)(2)(B)(ii)(II) of the Act
[5] Proposed: 0.53 percent positive budget neutrality adjustment
[6] See Table D-B1 and Table D-B2 on page 1,972 of the unpublished final rule.
[7] 90 FR 49292 through 49297
[8] CMS renamed placeholder modifier “MOD1” in the proposed rule to “B1” in the final rule.
[9] CMS renamed placeholder modifier “MOD2” in the proposed rule to “B2” in the final rule.
[10] Proposed: $32.65
[11] Pub. L. 117-169
[12] See Table B-F1: Medicare Part D 340B Claims Submission Due Dates for Dates of Service in 2027 on page 964 for deadlines for 2027 dates of service.
