Key Takeaways: 2026 Medicare Physician Fee Schedule Final Rule

By Ronda Ash, MHLW, CPC, CPMA, CHC, CIHFA, Vice President of Coding 

When the 2026 Medicare Physician Fee Schedule (MPFS) Final Rule was published, it marked one of the most significant shifts in Medicare reimbursement in over 30 years.

For the first time, CMS is instituting separate conversion factors for Qualifying Providers/Participants (QPs) in Advanced Alternative Payment Models (APMs) and those who are not QPs, aligning payment rates with value-based performance. The Final Rule also includes the adoption of an efficiency adjustment to reflect what CMS perceives as productivity gains in the delivery of physician services over time.

This year’s changes are not just about payment mechanics. Instead, Medicare is sending a clear message that efficiency and value are the new foundation of physician reimbursement.

Practices need to understand these changes as they have immediate implications for cash flow, resource allocation, and strategy.

Key MPFS takeaways

This year’s MPFS includes two major updates regarding value- and efficiency- based performance, as well as more standard updates, such as changes to misvalued codes and technical corrections to the fee schedule.

Major update #1: Dual conversion factors 

Although there is an overall reimbursement increase for all providers, qualifying participants in an advanced payment model will see the biggest reimbursement increase. The changes to how conversion factors are derived and applied are likely to impact practices this upcoming year. 

The table below demonstrates the changes in the conversion factors for both the flat fee (RVU-based) codes, as well as anesthesia services, as they have their own separate conversion factor. The table clearly shows that Qualifying Participants (QPs) in advanced APMs will see the largest increase in reimbursement, while non-QPs will see smaller increases.

Major update #2: Efficiency adjustment

The efficiency adjustment is a new policy designed to reflect what CMS perceives as productivity and efficiency gains over time through improvements in technology, workflow, and clinical practice. It is incorporated directly into the Relative Value Units (RVUs), including the work RVU, practice expense RVU, and malpractice RVU, to calculate the total RVU that determines reimbursement for each CPT code.

This adjustment will reduce the work RVUs for thousands of services by 2.5%, which will directly lower Medicare reimbursement for affected procedures.

RVU reduction in action

To illustrate the impact, the table below shows how the efficiency adjustment reduces the intraservice time and work RVU for two common procedures, which will result in lower reimbursement.

Efficiency adjustment by specialty

Specialties that are procedure-heavy will see the greatest impact, while time-based services like most E/M visits will remain largely unaffected. The table below highlights how the 2.5% efficiency adjustment is expected to affect different specialties based on their typical service mix and reliance on procedural codes.

Key standard updates

This year’s Final Rule included refinement updates to telehealth, incident to supervision policies, and addressed new codes for Behavioral Health Integration (BHI), Digital Mental Health Treatment (DMHT), Remote Monitoring, and Skin Substitutes & Dental Services. Highlighted below are three of the top refinement updates you need to know.

1. COVID-era telehealth flexibilities have expired, which means the old rules of limiting telehealth to rural areas and requiring the patient to be at a facility to receive telehealth will continue to derail Medicare telehealth.
   
   
2. Telehealth codes (98000-98015) are no longer recognized by Medicare and should not be reported to Medicare. Payer recognition of these codes varies, so it is recommended that you know the payer rules before using these codes widely. 
   
   
3. Teaching physicians can now be virtually present during all E/M visits with residents and patients, provided the physician is on the call and documentation specifies their participation.  

How to prepare: A two-step approach

These changes are complex and will require the right blend of strategic oversight and detailed revenue cycle execution.

Step 1: Ask your billing team the right questions

Use the questions below to assess whether your practice is prepared for the changes ahead.

1. Are we tracking which CPT codes are affected by the 2.5% reduction in work RVUs?
2. Have we calculated the impact of dual conversion factors for qualifying vs non-qualifying APM participants?
3. Are our most frequently billed codes reviewed for correct documentation and coding levels?
4. Have we modeled the dollar impact of these changes on our specialty mix and overall cash flow?
5. Are we fully compliant with permanent telehealth policies and exemptions from efficiency adjustments?

Step 2: Use the checklist to get prepared

Use the checklist below to guide your team through proactive steps to prepare your practice for sustained financial performance.

1. Understand the Impact on Your Specialty 

• Review the specific CPT codes you bill most frequently. 
• Identify which codes are subject to the 2.5% efficiency adjustment (non-time-based services). 
• Estimate the dollar impact using CMS public use files or consult your billing team. 
  

2. Optimize Coding and Documentation 

• Ensure accurate and complete documentation to support the highest appropriate level of service. 
• Consider whether time-based codes (e.g., prolonged services, E/M visits) are more appropriate and exempt from the efficiency adjustment. 
  

3. Evaluate Service Mix 

• Analyze your current service offerings:  
  • Are you heavily reliant on procedural codes affected by the efficiency adjustment?
  • Can you diversify into services that are less affected (e.g., chronic care management, behavioral health integration, telehealth)? 
    

4. Review Practice Expense Inputs 

• Submit updated invoices for supplies and equipment to CMS. 
• Ensure your practice’s costs are accurately reflected in PE RVUs. 
  

5. Monitor Telehealth Opportunities 

• Leverage expanded telehealth coverage and permanent additions to the Medicare Telehealth Services List. 
• Ensure compliance with supervision and billing rules for virtual services. 
  

Health Prime can help your organization prepare for the regulatory changes ahead. To learn more, please send us an email or visit us at hpiinc.com.

As Vice President of Coding at Health Prime, Ronda Ash leverages her deep expertise in healthcare compliance and law to help clients achieve accuracy, efficiency, and peace of mind in their revenue cycle. With a master’s degree in healthcare law (Nova Southeastern University, summa cum laude) and a bachelor’s in business administration (Northwood University, with honors), Ronda ensures coding integrity and regulatory adherence across all Health Prime programs. Her leadership in auditing, compliance, and reimbursement strategy helps clients minimize risk, reduce denials, and optimize financial performance.