CMS Final Rule Introduces 'Efficiency' Cut in 2026 Physician Fee Schedule

The Centers for Medicare & Medicaid Services (CMS) has released the 2026 Medicare Physician Fee Schedule (MPFS) Final Rule, effective January 1, 2026, introducing a new –2.5% “efficiency adjustment” that will reduce reimbursement for many surgical and procedural specialties.

 Key Changes:

• Efficiency Adjustment: CMS will apply a –2.5% cut to work relative value units (RVUs) for non–time-based services that the agency believes have gained efficiency over time. The change will impact most surgical, radiology, and interventional procedures, while new 2026 codes will be exempt.
  • Although NANS and other physician societies' comments raised several questions about the proposed efficiency adjustment and recommended alternative approaches to achieve CMS’ objectives, CMS  moved forward with the proposal and will apply the negative adjustment to work relative value units (RVUs) and the corresponding intra-service portion of physician time of non-time-based services that CMS believes accrue gains in efficiency over time.
• Conversion Factors: For the first time, CMS finalized four conversion factors—two for non-anesthesia services and two for anesthesia—reflecting modest baseline increases under MACRA and a temporary 2.5% statutory update. Despite these small gains, the efficiency cut is expected to offset much of the benefit for procedural specialties.
• Practice Expense Adjustments: CMS will revise its indirect practice expense methodology, reducing payment for facility-based services by about 7% and increasing non-facility services by about 4%, with larger shifts possible depending on practice type.
• Telehealth Policies: CMS will permanently remove frequency limits for hospital and skilled nursing facility telehealth visits and continue virtual supervision policies. Broader telehealth flexibilities—such as pandemic-era codes and coverage--remain pending Congressional action amid the current government shutdown.
• MIPS: The Merit-based Incentive Payment System (MIPS) performance threshold will remain at 75 points through 2030, providing continued scoring stability for clinicians.
• Ambulatory Specialty Model (ASM): A new mandatory payment model, the ASM, will launch in 2027 for select specialties managing heart failure and low back pain. Performance will determine payment adjustments starting in 2029.

 
The 2026 Final Rule underscores CMS’s continued push toward “efficiency” within a constrained payment system—introducing what many view as a significant across-the-board reduction for procedural care while maintaining incremental updates elsewhere.

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