CMS Finalizes Mandatory Ambulatory Specialty Model for Specialists in Medicare

On October 31, 2025, the Centers for Medicare & Medicaid Services (CMS) finalized the Calendar Year 2026 Medicare Physician Fee Schedule, which includes the Ambulatory Specialty Model (ASM). This model targets specialists treating chronic conditions in outpatient settings, marking a strategic shift from CMS Innovation Center’s prior focus on primary care to mandatory two-sided risk models for specialty providers. The ASM specifically applies to specialists treating heart failure and low back pain and aims to improve chronic disease management by emphasizing prevention, early risk detection, reduced unnecessary procedures, and enhanced patient experience. A central feature of the model is the requirement for specialists to engage in preventive care screenings and establish collaborative care arrangements (CCAs) with primary care providers to facilitate coordinated care and information exchange. ASM participants will be evaluated based on four categories: quality, cost, improvement activities, and promoting interoperability. These performance measures focus on clinical outcomes, cost reduction, patient engagement, social needs assessments, and the use of certified electronic health record technology to support data sharing and care coordination. Participants must maintain CCAs with primary care providers who share at least one ASM beneficiary with them, reinforcing a patient-centered approach within the Medicare ecosystem. The model’s performance period is from January 1, 2027, to December 31, 2031, with payment adjustments starting in 2029 and extending through 2033. Participants assume two-sided financial risk, with payment adjustments ranging up to 9 percent in 2029 and increasing to 12 percent by 2033. Addressing concerns about smaller providers, CMS included positive scoring adjustments for participants serving medically or socially complex patients and for small or solo practices, promoting equity and participation. Providers’ accountability is linked directly to patients they have treated, improving the accuracy of performance assessments. Additionally, small practice participants are allowed to report quality measures at the Taxpayer Identification Number level, reducing administrative burdens. The ASM diverges from previous voluntary models by being mandatory and including downside risk for all participants. This approach aims to broaden value-based care's impact by including specialists, who represent significant Medicare spending, into the value-based payment framework, thus extending CMS’s transformation efforts beyond primary care. Specialists must operate within a primary care framework, maintaining contractual relationships with primary care physicians to ensure coordinated management of chronic conditions. This requirement reflects CMS's intent to integrate specialty care closely with primary care under value-based arrangements. CMS's concurrent initiatives, including the proposed Transforming Episode Accountability Model (TEAM), emphasize a comprehensive approach to value-based care across the healthcare spectrum. ASM implementation signals a broader evolution in federal payment reform, incorporating specialists into mandatory value-based models with financial accountability tied to quality and cost outcomes. Challenges for specialists include compliance with collaborative care arrangements and managing financial risks associated with two-sided risk models. Smaller or rural practices may require strategic partnerships to meet model demands effectively. However, the ASM also offers opportunities, with potential financial incentives for high-quality, cost-effective care and encourages adoption of innovative care coordination practices. In summary, the ASM marks a significant policy development in Medicare payment reform by mandating specialist participation in value-based care models with accountability for both cost and quality. It highlights CMS’s expanded focus on comprehensive care management across specialties, aiming to improve outcomes, reduce unnecessary utilization, and align Medicare spending with national healthcare goals.