CY 2026 Medicare Physician Fee Schedule (PFS) proposed rule

On July 14, the Centers for Medicare & Medicaid Services (CMS) released the calendar year (CY) 2026 proposed rule for the Medicare Physician Fee Schedule (PFS). This annual update outlines changes to physician payment rates, policy refinements and adjustments to programs that affect healthcare providers nationwide. If finalized, the proposed updates will take effect for services provided on or after Jan. 1, 2026. 

The rule introduces appreciable revisions that impact payment methodology, practice expense allocations and data sources used for setting reimbursement rates. Below are the most critical takeaways for healthcare providers and stakeholders. 

Key proposed changes to the CY 2026 Medicare PFS proposed rule 

CMS’s proposed changes address several major policy areas, including: 

• payment rate updates; 

• Relative Value Unit (RVU) updates; 

• GPCI updates; 

• Rural Health Clinics and Federally Qualified Health Centers; 

• Ambulatory Specialty Model; 

• Medicare Prescription Drug Inflation Rebate Program; 

• Medicare Shared Savings Program; and 

• MPFS Quality Payment Program updates. 

PE methodology refinement: Site of service payment differential 

One of the most notable proposals focuses on the practice expense (PE) RVU methodology. Currently, the PFS maintains different payment structures for facility and non-facility settings. 

• In non-facility settings, payments cover work RVUs, clinical labor, supplies, equipment and indirect costs based on the higher labor cost or work RVUs. 

• In facility settings, payments only include work RVUs and indirect PE costs, while direct costs are reimbursed separately under other payment systems. 

Starting in CY 2026, CMS proposes reducing the portion of facility PE RVUs allocated based on work RVUs to half of what is allocated in non-facility settings. 

CMS is seeking comments on how this change could affect maternity services and whether alternative allocation methods would better reflect evolving care delivery patterns. 

Using OPPS data for PFS rate setting 

CMS is also proposing a shift in methodology to determine certain technical service payments by leveraging Outpatient Prospective Payment System (OPPS) hospital data instead of the American Medical Association (AMA) survey data. 

This change would affect services such as: 

• radiation treatment delivery; 

• superficial radiation therapy services; 

• remote patient monitoring and therapeutic monitoring; and 

• skin substitutes. 

CMS is requesting feedback on whether a single, unified methodology could improve accuracy and better account for practice expense variations across service types. 

Work RVU efficiency adjustment 

Concerns have been expressed previously regarding the use of survey data provided by the AMA’s Relative Value Scale Update Committee (RUC) and an overvaluation of non-time-based services. For CY 2026 CMS is “...proposing to establish an efficiency adjustment to the work RVUs, as well as corresponding updates to the intraservice portion of physician time inputs for non-time-based services.” 

This proposed adjustment would use the Medicare Economic Index (MEI) productivity adjustment of 2.5% and would be applied over a five-year look-back period. If adopted, CMS would continue to apply the adjustment to the work RVUs every three years. 

Determination of Malpractice (MP) RVUs 

To determine MP RVUs for individual PFS services, CMS considers the following factors using an average of the three most recent years of data:  

• specialty-level risk values derived from data on specialty-specific MP premiums incurred by physicians;  

• service-level risk values derived from Medicare claims data of the weighted average risk values of the specialties that furnish each service; and  

• an intensity/complexity of service adjustment to the service-level risk value based on the higher of the work RVU or clinical labor portion of the direct PE RVU.  
  
  

CMS is proposing to use four data sources for the calculation of the MP RVUs:  

• MP insurance premium rates presumed to be in effect as of Dec. 31, 2023;  

• CY 2023 Medicare payment and utilization data;  

• the higher of the CY 2025 final work RVUs or the clinical labor portion of the direct PE RVUs; and  

• CY 2025 GPCIs. 

For CY 2026, CMS is proposing to map technical component (TC)-only services to the allergy/immunology specialty.  

Geographic Practice Cost Index (GPCI) 

CMS uses GPCIs to measure relative cost differences among payment localities compared to the national average for each of the three fee schedule components (work, PE and MP). Work GPCIs reflect the relative cost of physician labor by payment locality.  

As required by statute, the work GPCI reflects 25% of the relative wage differences for each locality compared to the national average. PE GPCIs measures the relative cost difference in the mix of goods and services comprising PEs (excluding MP expenses) among localities as compared to the national average of these costs. MP GPCIs measure the relative cost differences amongst localities for the purchase of professional liability insurance (PLI). 

CMS is required to review and, if necessary, adjust the GPCIs at least every three years. If more than one year has elapsed since the date of the prior GPCI adjustment, the adjustment applied in the first year of the next adjustment will be half of what would otherwise be made. 

CMS is proposing to phase in the updated GPCI over two years, with half going into effect in CY 2026 and the remainder in CY 2027. In the calculation of the CY 2026 GPCIs, CMS is proposing to continue to use the 2006-based MEI cost share weights in Table 31 on page 32534 for determining the PE GPCI values located within the Federal Register. 

CMS is seeking comment on the incorporation of the updated 2017-based cost share weights into the CY 2027 GPCIs. 

Finally, the 1.0 work GPCI floor, last extended by the Full-Year Continuing Appropriations and Extensions Act of 2025, will expire after Sept. 30. 

The proposed CY 2026 geographic adjustment factors (GAFs) and GPCIs by locality may be found in Addenda D and E, respective in the zip file. 

Next steps for healthcare providers 

The CY 2026 Medicare Physician Fee Schedule proposed rule introduces substantial changes that could reshape physician reimbursement and care delivery strategies.  

Providers, administrators and industry stakeholders should review the full CY 2026 Medicare PFS Proposed Rule and submit comments by Sept. 12. Feedback can be submitted electronically via Regulations.gov using file code CMS-1832-P. 

For more details, visit the CMS Physician Fee Schedule Resources page or view the official Federal Register Notice.