Medicare Finalizes 3.8% Physician Reimbursement Increase

On Oct. 31, the Centers for Medicare and Medicaid Services (CMS) released the 2026 Physician Fee Schedule Final Rule (Final Rule), which outlines the changes to payments under the Medicare Physician Fee Schedule (PFS) for next year. Among other changes, the Final Rule details significant reimbursement updates, including:¹

• Separate Conversion Factors: In 2026, there will be separate conversion factors for qualifying alternative payment model (APM) participants (QPs) and providers who are not QPs.
• Overall Increase: The non-qualifying APM conversion factor for 2026 will be $33.40, a 3.26% increase over the current conversion factor. The qualifying APM conversion factor for 2026 will be $33.57, a 3.77% increase.
• Impact by Specialty: While reimbursement under the Medicare PFS will increase overall, the impact by specialty varies:²

• Impact by Place of Service: CMS finalized an update to its methodology in determining practice expense relative value units (PE RVUs). While the original methodology —established decades ago — assumed physicians maintained separate practice locations even while providing facility-based services, this updated methodology is intended to recognize the reduced number of physicians working in private practice. As a result of these changes, reimbursement for procedures performed in the non-facility setting is expected to increase 4% overall, while reimbursement for the facility setting will decrease 7%.²

The reimbursement changes outlined in the Final Rule are generally similar to those originally proposed and are likely to be viewed favorably by healthcare operators overall. The PFS conversion factor declined 10.4% from 2020 to 2025, and an increase to Medicare reimbursement is expected to provide relief to providers facing elevated operational costs.

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Footnotes

1 Calendar Year 2026 Medicare Physician Fee Schedule Final Rule Fact Sheet

2 Calendar Year 2026 Medicare Physician Fee Schedule Final Rule; excludes 0.75% and 0.25% updates to the qualifying APM and nonqualifying APM conversion factors, respectively, and the single year increase of 2.50 percent to the conversion factor

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