CMS Proposes 2.4% Medicare Payment Increase and New Two-Tier Physician Reimbursement Model for 2026
The Centers for Medicare & Medicaid Services (CMS) has proposed a 2.4% increase in Medicare payment rates for hospital outpatient departments and ambulatory surgery centers for the year 2026. This proposal includes a market basket update of 3.2%, partially offset by a 0.8% productivity adjustment. Alongside these payment rate changes, CMS plans to implement a two-tiered physician reimbursement structure, differentiating payments based on participation in value-based care models, as per the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Physicians participating in alternative payment models (APMs) would receive a conversion factor of $33.59, a 3.8% increase, while those outside these models would have a factor of $33.42, up 3.6% from the previous year.
Provider groups, including the American Academy of Family Physicians and the American Medical Group Association, have expressed cautious optimism about the near-term payment increases but voiced concerns regarding their sufficiency to address ongoing financial challenges. The AAFP highlighted that the increases are largely temporary adjustments linked to legislative provisions set to expire at the end of 2026, foreseeing potential pay cuts in 2027 that may affect providers' ability to keep pace with inflation. Similarly, the AMGA criticized the incremental updates as inadequate for offsetting inflation and escalating practice costs, calling for a fundamental overhaul of the Medicare physician fee schedule to align better with the shift toward value-based care.
The proposed payment structure aims to incentivize participation in value-based care by offering higher payment rates to clinicians engaged in alternative payment models, supporting CMS's broader goal to transition Medicare away from fee-for-service reimbursement methods. However, the absence of more comprehensive reforms in the proposal leaves provider groups concerned about the long-term sustainability of current reimbursement frameworks and their impact on healthcare access and delivery.
Physician groups emphasize the need for systematic, long-term reforms to ensure that reimbursement models reflect the evolving healthcare landscape, including rising operational costs and the increasing importance of high-value care. Without such reforms, the current fee-for-service structure may hinder the financial viability of healthcare providers in the Medicare program.
This CMS proposal situates itself within ongoing policy discussions about balancing short-term payment relief with structural changes in Medicare payment methodology, underscoring tension between immediate financial pressures faced by healthcare providers and the ambitious goals of value-based healthcare transformation.