CMS Finalizes 2026 Medicare Physician Fee Schedule and Launches Payment Dashboard

Understanding the 2026 Physician Fee Schedule Final Rule: What It Means for the Insurance Industry

When Centers for Medicare & Medicaid Services (CMS) released its final rule for the Calendar Year 2026 Physician Fee Schedule (PFS) on October 31, 2025, it signalled not only continuity in policy but also new dimensions of scrutiny and opportunity for the healthcare–insurance ecosystem. At its core, CMS largely retained its original proposal—even after requesting and reviewing stakeholder input—making only modest tweaks to the payment reforms previously outlined. Implementation begins January 1, 2026.

What’s changing (and what isn’t)

Here’s a quick breakdown of key shifts already underway and how insurers should view them:

• Conversion-factor increases: CMS has adopted separate conversion factors (CFs) for clinicians participating in qualifying Advanced Alternative Payment Models (APMs) and those who are not. For 2026 the CF for APM-qualified clinicians is set at about $33.5875 and for non-qualified clinicians about $33.4209—representing increases of approximately 3.8 % and 3.3 % respectively.

• Efficiency adjustment: Despite the positive CF update, CMS is applying a -2.5 % efficiency adjustment to the work Relative Value Units (RVUs) and intra-service time of certain non-time-based services (for example, many radiology, pathology and procedural codes).

• Practice expense methodology: CMS is modifying how indirect practice expense (PE) RVUs are allocated (particularly for services in the facility setting), thereby reducing some payments for facility-based services beginning in 2026.

• Telehealth and supervision: The rule permanently expands certain virtual supervision flexibilities, removes frequency limits for specified inpatient or nursing-facility visits, and adjusts other telehealth policy.

• Quality Payment Program (QPP) and value-based care: CMS is continuing to adjust the QPP metrics, MIPS pathways and other value-based initiatives—for insurers, this signals continued movement toward outcomes-focused reimbursement.

• Interactive dashboard: A new tool launched by legal-regulatory advisory firm McDermott+ Consulting tracks payment rates and other metrics for PFS, the Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Centers (ASCs). This provides transparency that may influence insurer contract negotiations, risk-sharing arrangements and modelling.

“Our new dashboard … shows for individual procedure codes … how payments for services of interest have changed across years and how much their services are getting paid across localities.” — McDermott+ team

• Insurance perspective: Insurers should watch how these payment updates affect provider behaviour, cost structures and downstream claims trends. A higher conversion factor may increase fee-schedule amounts paid by Medicare, which could in turn influence commercial rate negotiations or network contracting dynamics. The efficiency and practice-expense cuts suggest pressures on provider margins—potentially fuelling consolidation or changes in service mix.

Why this matters to insurers

For the insurance industry, the 2026 PFS final rule offers a number of insights and strategic implications:

1. Rate-setting dynamics: Medicare reimbursement often sets a benchmark or reference point. Changes in the PFS can ripple into commercial reimbursement trends and networks.

2. Provider behaviour and incentives: With the dual conversion factors and greater focus on value-based care, providers may increasingly steer toward APM participation, integrate services, or consolidate. Insurers need to adjust network design and population-health strategies accordingly.

3. Cost containment and risk: The efficiency adjustment and cuts to facility-based practice expense indicate CMS’s intent to squeeze margins for certain services. Insurers might reflect deeper cost-pressure on providers by structuring cost‐sharing, utilization advisories and value-based contracts.

4. Data transparency and benchmarking: The new dashboard gives unprecedented visibility into reimbursement trends by code and geography. Insurers can use that data to enhance forecasting, audit provider reimbursement claims and design more nuanced managed-care programs.

5. Telehealth and supervision evolution: As telehealth becomes more firmly embedded in payment policy, insurers will want to reassess coverage design, remote-care pathways and cost/quality trade-offs.

6. Managed care contract language: The final rule signals areas where providers may push back (e.g., facility‐based PE reductions, new efficiency cuts, value-based participation incentives). Insurers negotiating rates or provider agreements should anticipate these pressures and design contract terms accordingly.

What insurers should be doing now

To stay ahead of these shifts, insurers may wish to focus on the following strategic actions:

• Run scenario-modelling : Evaluate how the modest CF increases and efficiency/PE reductions might affect provider reimbursement costs and your network-rate trends in 2026.

• Leverage the dashboard tool : Use the McDermott+ interactive dashboard (and other data sources) to compare physician reimbursement by service code, locality, facility vs non-facility setting.

• Review contract language : Ensure your provider agreements incorporate mechanisms that reflect evolving Medicare payment norms—adjusting for new telehealth practices, site-of-service differentials and value-based arrangements.

• Monitor provider strategy : Keep an eye on how physician practices and hospitals respond—whether by consolidating, shifting to outpatient settings, or increasing telehealth—and anticipate how that will impact insurer networks and claims volumes.

• Adapt value-based strategies : With CMS pushing more strongly into value-based payment models, insurers should consider alignment in their population-health programs, shared-savings models and alternative-payment framework to stay compatible with provider incentives.

• Inform providers and network stakeholders : Consider producing educational materials or holding forums for network providers to help interpret the 2026 rule changes—especially smaller practices that may struggle with operational shifts.

Pull Quotes

“Clinicians who meet certain participation thresholds in an Advanced APM will receive a slightly higher conversion factor update and thus slightly higher Medicare payments in 2026 compared to physicians who are not QPs.” — American Medical Association summary

“Services employing two-way, real-time interactive communication are proposed to permanently include audio-video supervision for incident-to services, although audio-only remains excluded.” — AAPC Knowledge Center at a glance summary

Key Takeaway

While the 2026 final rule for the PFS does not introduce dramatic overhauls, insurers should take note of the subtler shifts: a modest increase in the conversion factor, counter-vailing efficiency adjustments, altered practice-expense methodology, and deeper focus on value and transparency. These changes create a new reference point for reimbursement, provider behaviour and network strategy. For insurers ready to engage with these dynamics—not merely react—the rule offers a strategic advantage.