On July 14, the Centers for Medicare and Medicaid Services (CMS) released a 1,592-page proposed regulation that would update payment policies and programs regarding Medicare payments to physicians and other providers under the Physician Fee Schedule (PFS) on or after January 1, 2027. CMS released the regulation via a press release with the headline: “CMS Proposes Transformational Medicare Reforms to Expand Accountable Care, Modernize Physician Payment, and Shift from Sick Care to Healthcare.”
Every year, industry stakeholders anticipate the release of this regulation because it proposes annual updates to the rules governing Medicare’s value-based programs and physician payment system. The 2027 proposed rule is now open for public comment and following the close of the public comment period on September 14, CMS will issue a final rule in late October or early November ahead of a January 1, 2027 implementation date. While the rule is very long and complex, and includes numerous provisions, most notably it would:
· Reduce Medicare payment rates by over 1 percent from current levels. As required by the 2015 MACRA law, beginning in 2026 CMS applies two separate conversion factors for the Medicare physician fee schedule: one for qualifying advanced alternative payment model (APM) participants (QPs) and one for physicians and practitioners who are not QPs. The baseline annual update for the qualifying APM conversion factor in 2026 and subsequent years is +0.75 percent, while the baseline annual update for the nonqualifying APM conversion factor in 2026 and subsequent years is +0.25 percent. Additionally, the 2025 One Big Beautiful Bill Act law provided both conversion factors a 2.5 percent increase for 2026. As a result of the expiration of that 2.5 percent increase, this rule proposes a 2027 advanced APM PFS conversion factor of $33.17, a decrease of $0.40 (-1.2 percent) from the current 2026 PFS conversion factor of $33.57. The rule also proposes a non-advanced APM PFS conversion factor of $32.84, a decrease of $0.56 (-1.7 percent) from the current 2026 PFS conversion factor of $33.40. These decreases follow the over 3 percent increases for 2026, which themselves followed a 2.8 percent decrease in 2025. For MIPS eligible clinicians and groups, 2027 Medicare payment rates will also be adjusted based on 2025 performance in MIPS.
· Make the transition to the MIPS Value Pathways (MVPs) voluntary MIPS participation option mandatory for all MIPS participants starting in 2029. CMS first introduced the idea of transitioning MIPS to the MIPS Value Pathways (MVPs) participation framework in 2019. Following several years of amended proposals, CMS then officially first launched MVPs in 2023 with the rollout of twelve voluntary MVPs. Then, CMS added several new MVPs in 2024, 2025, and 2026 to create a list of 27 available voluntary MVPs in 2026. In this year’s rule, CMS proposed to make the transition to MVPs mandatory for all MIPS participants starting in the 2029 performance year. CMS has previously floated the idea of making the transition mandatory and in the 2025 rule mentioned 2029 as a potential timeline for doing so. In addition to making the change mandatory for 2029, this rule proposed minor revisions to the existing 27 MVPs and the addition of three new MVPs (related to diabetic disease, hypertension, and hospitalist care) to create a list of 30 MVPs for 2027. With the focus clearly on the future transition to MVPs, CMS proposed only minor changes to the traditional MIPS categories and measures for 2027.
· Make relatively minor reforms to the Shared Savings ACO program to try to encourage more participation in the program. Last year, CMS under its first year in the second Trump Administration made a relatively minor set of overall tweaks to the ACO program’s rules, including reducing the length of time an ACO can participate in a one-sided financial risk model, tweaking the quality reporting requirements, and tweaking some of the financial cost benchmark policies. That followed the implementation of several reforms under the Biden Administration which were intended to increase participation in the program. This year, following CMS’s reporting of a near record high number of participating ACOs (511) and a record high number of covered patient beneficiaries (12.6 million) in the program, CMS is proposing several different reforms intended to drive further adoption of the ACO model. As noted in CMS’s press release: “These proposals aim to accelerate accountable care service delivery, further CMS’ goal of aligning spending and value in Original Medicare, and support achieving other related strategic objectives.” The rule included numerous proposed changes but many of them are relatively minor. As an example, one change touted by CMS would increase the sharing savings rate (the amount ACOs get to keep if they save CMS money) for one of the participation tracks (Level E of the basic track) from 50 percent to 60 percent. Other changes would amend CMS’s financial cost benchmark calculations to try to make the program more attractive for experienced ACOs to continue participating in, while others would continue to modify the quality measure reporting and EHR certification requirements.
In addition to these changes, the over 1,500-page rule proposes many other important policy updates. Some of these updates offer new FFS-payment opportunities in areas that CMS is trying to encourage providers and patients to focus more on, including primary care and behavioral health. Other changes would simply tweak existing programs and regulations, which if finalized would likely have a minor impact on physician groups’ overall business but nonetheless would require careful consideration to ensure any tweaks are supported by practice workflow, technology, and compliance procedures. As always, the impact of these potential changes differs across specialties and based on patient population since the rule only applies to patients covered by traditional Medicare.
In terms of where this rule fits into the broader healthcare policy debates in Washington, D.C., within hours of CMS’s release of the proposed rule, physician trade and specialty associations called on Congress to step in before the end of the year to prevent the over 1 percent payment cuts from going into effect. Notably, CMS does not itself have the authority to reverse the proposed cuts in the final rule, so Congress would have to pass a law to reverse the proposed cuts. Additionally, it will be interesting to see if based on stakeholder and physician feedback, CMS makes any changes to its proposed timeline for shifting MIPS to mandatory MVP reporting in 2029.
Those interested in further details can access the full rule here, CMS’s press release here, and fact sheet here.
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