The short answer: Medicare payment rates fall in 2027 for most practices. The one-year 2.5 percent increase Congress provided for 2026 expires, and the final rule CMS issued Nov. 4 does not replace it. The final conversion factor is $32.9548 for qualifying alternative payment model participants, down 1.83 percent. It is $32.6286 for everyone else, down 2.31 percent. Both cuts run deeper than CMS proposed in July. Advantum Health helps practices model the impact by specialty and site of service before the rule takes effect Jan. 1. A narrowed same-day evaluation and management policy may matter more to a procedural practice than the conversion factor does.
Why this matters: the decrease is arithmetic, not a policy judgment
The 2027 reduction is not CMS deciding physician work is worth less. It is a temporary patch expiring on schedule.
Congress provided a one-year 2.5 percent conversion factor increase for calendar year 2026. That increase applied to 2026 only. When it lapses, the baseline returns to where statute puts it, and the statutory updates that replace it are much smaller: 0.75 percent for qualifying alternative payment model participants and 0.25 percent for everyone else under MACRA. The proposed rule carried a positive 0.53 percent budget neutrality adjustment. The final rule applies a negative 0.12 percent adjustment instead. That swing is why the final cuts are deeper than the proposed ones. CMS posts the final rates and files on its Physician Fee Schedule payment page. CMS cannot add funding to the fee schedule on its own. Absent congressional action, the cut takes effect Jan. 1.
This is the second year of the two-conversion-factor structure MACRA created. Practices with meaningful participation in advanced alternative payment models take a smaller reduction than practices without it. That gap widens every year the statute runs, which makes advanced APM participation a payment question rather than a quality-program question.
The conversion factors
Qualifying APM participants. The final CY 2027 conversion factor is $32.9548, a decrease of 1.83 percent from $33.5675 in 2026. CMS proposed $33.1693.
Nonqualifying APM participants. The final CY 2027 conversion factor is $32.6286, a decrease of 2.31 percent from $33.4009 in 2026. CMS proposed $32.8409.
Treat the conversion factor as the floor of the analysis rather than the answer. Relative value unit reallocation is budget neutral in aggregate, which means specialty-level impact varies widely around the headline number. A practice can face a conversion factor decrease of 2.31 percent and a total allowed charge impact several times that, or almost none, depending on procedure mix and whether services are furnished in a facility or non-facility setting.
The change that may matter more than the conversion factor
CMS proposed reducing payment when a separately identifiable office or outpatient evaluation and management visit is furnished by the same physician or group on the same day as a procedure. The July proposal covered procedures with 0-, 10- and 90-day global periods and paid the second service at 50 percent. The final rule narrows the policy. It applies only to procedures with a 0-day global period. The highest-paid service is paid at 100 percent and the lower-paid service takes a 20 percent reduction. The separately identifiable visit still requires modifier -25.
For a procedural specialty that routinely evaluates and treats in the same encounter, this is still a direct revenue change to a common billing pattern. It is smaller than proposed. Practices whose same-day work centers on 10- and 90-day global procedures now fall outside the policy. Model it separately from the conversion factor, and model it on your own claims rather than on a national average.
CMS also sought comment on whether the facility and non-facility payment differential remains appropriate, especially for hospital-employed physicians. It made no change for 2027 and will weigh the feedback in future rulemaking. It signals the direction of travel for practices weighing office, ambulatory surgical center and hospital outpatient arrangements.
The rest of what practices should track
Practice expense methodology. CMS finalized its proposal. It phases out the indirect practice cost index over two years and adds a practice expense stabilizer to limit short-term swings. Indirect practice expense is now allocated on both work and clinical labor relative value units, except for 10- and 90-day global codes. The effect is uneven by specialty and it compounds with the conversion factor change.
Evaluation and management complexity add-on. CMS replaced HCPCS code G2211 with modifiers. Modifier B1 adds 16 percent to the E/M payment. Modifier B2 adds 32 percent. It is voluntary and limited to clinicians in a Medicare Shared Savings Program accountable care organization or the LEAD Model. Update your billing configuration before the first January claim.
Telehealth. The originating site facility fee for HCPCS code Q3014 rises to $32.68 from $31.85, reflecting a 2.6 percent Medicare Economic Index increase. Medicare telehealth flexibilities run through Dec. 31, 2027.
Behavioral health and preventive services. CMS increased payment values for smoking cessation and behavioral health assessment services. It also created national payment pathways for health and well-being coaching and finalized two new Advance Care Planning codes.
340B reporting. Covered entities must report Part D claims data for 340B-discounted drugs to the CMS repository for dates of service on or after Jan. 1, 2027. CMS delayed the deadline for the first mandatory quarterly submission, which covers the first quarter, to Sept. 30, 2027.
Quality Payment Program. Traditional MIPS reporting ends with the 2031 performance period, two years later than proposed. Clinicians have through 2030 to move to MIPS Value Pathways or advanced alternative payment models. CMS also removed 11 improvement activities, added six and modified five. Confirm which of your reported activities survived before your 2027 reporting plan is locked.
Where practices lose money on a fee schedule year
Modeling the conversion factor and stopping there. The headline percentage is the least specific number in the rule. Your top 25 codes by volume and by revenue will tell you more than any national estimate.
Missing the January cutover. Fee schedules, contract escalators tied to Medicare rates and charge masters all need updating before the first claim of the year. A January denial batch caused by stale rates costs more than the rate change itself.
Forgetting that commercial contracts follow Medicare. Many commercial agreements are priced as a percentage of the Medicare fee schedule. A Medicare decrease quietly reduces commercial revenue too, unless the contract has a floor. Find out which of yours do.
Treating advanced APM participation as a quality decision. It is now a conversion factor decision with a widening spread. Run the numbers rather than deferring to the clinical side.
Waiting for January to read the rule. The final rule came out Nov. 4. Practices that model in November negotiate and adjust in December. Practices that model in January absorb.
Banking on a congressional fix. CMS cannot add funding to the fee schedule on its own. Plan around the rates in the final rule and treat any relief from Congress as upside.
A checklist for practice administrators
- Pull your top 25 codes by volume and by revenue, and reprice each under the final conversion factor for your APM status.
- Model the same-day reduction against your actual 0-day global procedure billing patterns.
- Update billing configuration for modifier B1, which replaces HCPCS code G2211, and confirm whether modifier B2 applies to your clinicians.
- Separate the analysis by facility and non-facility setting rather than blending them.
- Confirm whether your clinicians qualify as advanced APM participants for the 2027 payment year.
- Identify every commercial contract priced off the Medicare fee schedule and check whether it has a rate floor.
- Schedule the fee schedule, charge master and contract escalator updates for December, not January.
- Reconcile your 2027 quality reporting plan against the improvement activities that were finalized.
- Brief your physicians on specialty-level impact before they hear the national headline number.
- Set a January denial-rate watch to catch configuration errors early.
Model it in November, not in January
A fee schedule year is one of the few revenue events a practice can see coming with months of notice. Most of the loss that follows one is not the rate change. It is the operational lag behind it: stale fee schedules, contracts nobody reopened and physicians surprised in February by a number published in November.
The practices that handle it well treat the final rule as a planning document with a December deadline. Advantum Health supports that work through accurate medical coding, payer contract negotiations and denial management so that a rate change shows up as a modeled number rather than an unexplained variance in the first quarter.
Start with your own claims. A revenue cycle assessment can quantify the 2027 impact for your specialty mix and show which contracts are worth reopening before the year turns.