2026 Medicare Physician Fee Schedule Updates: Efficiency and Payment Reforms

The 2026 Medicare Physician Fee Schedule (PFS) introduces several changes aimed at supporting primary, preventive, and comprehensive healthcare. A key update is the implementation of an efficiency adjustment, which adjusts payments to better reflect evolving clinical practice and resource utilization. This adjustment reduces work relative value units (RVUs) by 2.5% for most non-time-based services like procedures and diagnostics, aiming to balance payments more fairly, especially benefiting primary care services which have historically been undervalued. However, this adjustment may negatively impact some subspecialties relying more heavily on procedures, such as gastroenterology. The American College of Physicians (ACP) supports this move, viewing it as a step toward rebalancing within the fee schedule, though it stresses the need for data-driven approaches in the future. The PFS also reforms practice expense reimbursement by significantly reducing payments for services delivered in hospital or ambulatory surgical center settings compared to non-facility settings. This change promotes site-neutral payment policies, shifting funds toward ambulatory and primary care settings, supporting private practices operating outside large institutions. Some specialties, including infectious disease, could face financial challenges due to this shift because of their necessary hospital-based care. The American Medical Association (AMA) expressed concern that cuts in facility-based physician payments could reduce competition and encourage consolidation, particularly affecting oncologists and obstetricians/gynecologists facing significant payment reductions. Another feature of the PFS is the continued enhancement of Advanced Primary Care Management (APCM) codes, which support longitudinal and behavioral health care management. Despite these improvements, challenges remain related to patient copayments and the classification of such services as non-preventive. The Centers for Medicare & Medicaid Services (CMS) is exploring ways to integrate more preventive services into these payment bundles without copays. Budget neutrality remains a fundamental constraint in the PFS, requiring any payment increases to be offset by reductions elsewhere, limiting the potential for overall reimbursement growth for physicians. This constraint causes tension among medical specialties competing for resources and impacts physicians disproportionately compared to other parts of the healthcare system. Lastly, a persistent lack of inflationary adjustments for physician payments under Medicare contrasts with other providers such as hospitals and ambulatory surgical centers that receive such updates, compounding financial pressures on physician practices. The ACP advocates for legislative support to integrate inflationary adjustments to sustain physicians effectively. Overall, the 2026 Medicare PFS advances policies intended to better align reimbursements with current healthcare delivery models while highlighting challenges in balancing budget constraints and equitable payment across specialties.