CY 2027 Medicare Physician Fee Schedule Proposed Rule: What Practices Should Know

Every summer CMS proposes next year's Medicare physician payment rates, and every November it finalizes them. The 2027 proposal points to a small cut for most clinicians. Here is what changed and what to do before January.

The proposed numbers

The conversion factor turns each service’s relative value units (RVUs) into dollars. A change in the conversion factor moves almost every Medicare professional payment in the same direction, although individual services also shift as their RVUs are revalued.

Why the rate went down

For 2026, Congress provided a one-year 2.5% increase. Because it was temporary, it expires at the end of 2026. The statutory updates for 2027 are smaller (reported as +0.75% for qualifying APM participants and +0.25% for others), and a budget-neutrality adjustment adds back about half a percent. Together they do not fully replace the expiring 2.5%, so the proposed conversion factors fall.

The rule-making calendar

How Medicare turns a service into a payment

It helps to know the moving parts, because a lower conversion factor is only one of them. Every service on the fee schedule has relative value units (RVUs) in three parts:

• Work — the clinician’s time, skill and effort.
• Practice expense — staff, space, equipment and supplies.
• Malpractice — the cost of professional liability insurance.

Each part is adjusted for your location by a geographic practice cost index, the three are added together, and the total is multiplied by the conversion factor. That is why two practices billing the same service in different states are paid different amounts, and why a service can rise or fall in a given year even when the conversion factor moves the other way: its RVUs were revalued.

Facility and non-facility rates differ. When you see a patient in a hospital or surgery center, the facility carries much of the practice expense, so your professional payment uses a lower practice expense value than the same service in your own office. Practices that split time between settings feel a change in practice expense values differently in each.

Working out your own exposure

You do not need a consultant to estimate the effect. Use your own data:

1. Pull last year’s Medicare payments by service, and list the services that make up most of your Medicare revenue. For many practices a small number of visit and procedure services account for the majority.
2. Look up the proposed 2027 payment for each of those services in your locality when CMS publishes the files, and compare it with what you were paid.
3. Multiply the difference by your expected volume to see the effect in dollars, not percentages.
4. Add contracts tied to Medicare. If a commercial contract pays a percentage of the Medicare fee schedule, run the same calculation for that payer.
5. Repeat with the final rule in November; the proposed figures are a planning estimate, not the answer.

What else to watch in the final rule

The conversion factor is the headline, but the annual rule also covers policies that change day-to-day billing. When the final rule is published, read the summary for changes that touch your specialty’s most-billed services, any telehealth policies that affect how and where you see patients, and quality program requirements that change your reporting for the year. Each of these can matter as much to a practice’s year as a one-percent change in rates.

What it means for your practice

• Medicare revenue per visit is likely to dip slightly in 2027 for most services, before any change in your payer mix or volume.
• Commercial contracts that pay “a percentage of Medicare” will move with the Medicare rates, so check which of your contracts are tied to the fee schedule.
• Your own fee schedule (your charges) should not be set below what any payer allows; review it when the final rule is published.

What to do before January 1

1. Read the final rule summary when CMS publishes it in early November, and note any changes to your top 20 services.
2. Update your fee schedule and expected-payment tables so underpayments can be spotted on the remittance.
3. Check contracts tied to Medicare rates and model the effect on next year’s revenue.
4. Watch for coding changes that take effect January 1, and update templates and your code library.

This article summarizes a proposed rule and will be updated when CMS publishes the final rule. It is general information, not billing or legal advice.