CMS released its CY 2027 Medicare Physician Fee Schedule proposed rule on July 14, 2026, and the headline number is a pay cut: both conversion factors drop from their 2026 levels because a temporary 2.5% statutory increase Congress provided for 2026 expires at the end of the year. The proposed rule is open for public comment through September 14, 2026, before CMS finalizes it later in the year.
What Is the Physician Fee Schedule Conversion Factor?
The conversion factor is the dollar amount CMS multiplies against a service’s relative value units (RVUs) to determine the Medicare payment rate. Since 2026, CMS has used two separate conversion factors instead of one — a higher rate for providers who qualify as participants in an Advanced Alternative Payment Model (AAPM), and a lower rate for everyone else.
What’s Changing in the 2027 Conversion Factors
- Qualifying APM participants: proposed conversion factor of $33.17, down $0.40 (-1.19%) from the current $33.57
- Non-qualifying APM participants: proposed conversion factor of $32.84, down $0.56 (-1.68%) from the current $33.40
Both figures actually include a small statutory increase — 0.75% for qualifying participants and 0.25% for everyone else, plus an additional 0.53% adjustment tied to proposed changes in work RVUs. The net cut happens because those increases are outweighed by the loss of the one-year 2.5% boost Congress added specifically for 2026 under the Working Families Tax Cut legislation, which does not carry into 2027 unless Congress acts again.
Other Proposed Changes That Affect Physician Practices
- Modifier 25 changes. CMS is proposing to reduce payment by 50% for a separately identifiable E/M service billed the same day as a procedure in the office setting — a direct hit to practices that regularly bill an E/M visit alongside a same-day procedure.
- G2211 restructured. The complexity add-on code G2211 would change from a standalone code to a modifier, with reimbursement calculated as a percentage of the primary code rather than a flat rate.
- Practice expense methodology. CMS proposes phasing out the indirect practice cost index over two years in favor of code-level cost inputs, which will shift practice expense RVUs — and therefore payment — differently across specialties.
- Telehealth flexibilities extended. Medicare telehealth flexibilities allowing beneficiaries to receive services at home are extended through December 2027, with new billing modifiers proposed for certain arrangements.
- MIPS performance threshold held at 75 points for the 2027 performance year, unchanged from the prior threshold.
Why This Matters for Independent Practices Specifically
A rate cut compounds for practices that are also absorbing rising overhead, and the proposed Modifier 25 change specifically targets a billing pattern that’s common in specialties like dermatology, orthopedics, and primary care, where a same-day E/M-plus-procedure visit is routine rather than exceptional. A practice that hasn’t modeled what a 50% Modifier 25 reduction does to its actual same-day-procedure volume is going to find out the number the hard way, in a revenue report months from now instead of in a budget projection today.
This is a proposed rule, not a final one. CMS accepts public comments through September 14, 2026, and the final rule — typically released in early November for the following calendar year — can and often does shift specific provisions based on that comment period. Practices and their specialty societies that want to weigh in still have a window to do so.
Frequently Asked Questions About the 2027 Physician Fee Schedule
When does the CY 2027 Physician Fee Schedule take effect?
The proposed rule covers calendar year 2027, meaning the finalized rates and policies would take effect January 1, 2027, assuming CMS finalizes them as proposed or with modifications after the comment period closes.
Is the 2027 conversion factor cut confirmed?
Not yet. The July 2026 release is a proposed rule, open for public comment through September 14, 2026. CMS could adjust the final conversion factors based on comments before the rule is finalized.
Why is the Medicare conversion factor decreasing for 2027?
Primarily because a temporary 2.5% statutory payment increase that Congress provided specifically for 2026 expires at the end of that year and does not automatically continue into 2027, even though small statutory and RVU-related increases are built into the proposed 2027 rate.
Which specialties are most affected by the proposed Modifier 25 change?
Specialties that routinely bill a separately identifiable E/M service on the same day as an in-office procedure — commonly dermatology, orthopedics, and primary care — would see the most direct impact from the proposed 50% payment reduction on that combination.
What OmniBridge Actually Does
We track CMS rule changes like this one and model what they mean for a specific practice’s actual billing patterns as part of our revenue cycle management service, so a rate change shows up as a plan, not a surprise on next year’s collections report.
If you want to know how the proposed Modifier 25 change would hit your specific claim mix, request a free practice audit and we’ll run the numbers against your actual billing history.
