2026 Medicare Physician Fee Schedule: Conversion Factor, Key Changes & What Billing Teams Must Do Now
The 2026 Medicare Physician Fee Schedule introduces a two-track conversion factor for the first time — $33.5675 for APM participants and $33.4009 for everyone else — alongside a 2.5% efficiency adjustment that cuts work RVUs on 9,000 procedure codes, 285 inpatient-only surgeries moving to outpatient settings, and a MIPS threshold locked at 75 points through 2028. Whether your net payment goes up or down depends entirely on your specialty and APM participation status.
What Is the Medicare Physician Fee Schedule?
The Medicare Physician Fee Schedule (MPFS) is the annual CMS rule that determines what Medicare pays for every covered physician service. It sets the conversion factor that translates relative value units (RVUs) into dollar payments, adds and removes covered codes, and establishes the rules under which the Quality Payment Program (MIPS and APMs) operates. CMS releases the proposed rule each summer and finalizes it by November 1, with changes taking effect January 1.
The CY 2026 MPFS Final Rule (CMS-1832-F) was released on October 31, 2025, and took effect January 1, 2026. It is one of the most consequential fee schedule years in recent history — introducing a two-track conversion factor structure for the first time and applying a system-wide efficiency adjustment across the majority of the code set.
The 2026 Conversion Factor: Two Tracks, Two Different Numbers
For 2026, CMS established separate conversion factors for APM participants and non-participants — a first in MPFS history. The split reflects statutory updates under the One Big Beautiful Bill Act (H.R. 1), which created an additional payment increment for qualifying APM participants (QPs).
| Practitioner Type | 2026 Conversion Factor | Change from 2025 |
|---|---|---|
| Qualifying APM Participant (QP) | $33.5675 | +3.77% |
| Non-APM Participant | $33.4009 | +3.26% |
The conversion factor increase alone does not tell the full story. A higher conversion factor means more dollars per RVU — but if the efficiency adjustment also reduces your code's RVUs, the net payment can still go down. The two factors work simultaneously and in opposite directions for most procedure-heavy practices.
What Makes Up the 2026 Rate Increase
The final conversion factors reflect several stacked statutory adjustments:
- 2.5% payment increase — one-year statutory update mandated by the One Big Beautiful Bill Act
- 0.75% additional update for QPs / 0.25% for non-QPs — differential APM incentive
- 0.49% budget neutrality adjustment — applied to account for changes in total work RVU pool from code revisions
The 2.5% Efficiency Adjustment: What Gets Cut and What Doesn't
The most operationally significant change in the 2026 MPFS is the efficiency adjustment — a 2.5% reduction to work RVUs and intraservice time applied to nearly all non-time-based services. CMS characterized this as capturing efficiencies that accrue over time as procedures become routine, using a five-year lookback at the Medicare Economic Index productivity factor.
The adjustment is not a one-time cut. CMS finalized a policy to apply the efficiency adjustment every three years going forward, making it a permanent recurring feature of the fee schedule.
| Service Category | Efficiency Adjustment Applies? | Examples |
|---|---|---|
| Surgery and procedures | Yes — 2.5% RVU cut | Orthopedic, spine, cardiac, general surgery CPT codes |
| Diagnostic imaging interpretation | Yes — 2.5% RVU cut | Radiology reads, nuclear medicine interpretations |
| Interventional pain management | Yes — 2.5% RVU cut | Epidural injections, nerve blocks, spinal cord stimulation |
| E/M visits (office, hospital, outpatient) | No — exempt | 99202–99215, 99221–99223, 99231–99233 |
| Behavioral health services | No — exempt | Psychotherapy, psychiatric evaluation, SUD treatment codes |
| Care management services | No — exempt | CCM (99490), TCM (99495–99496), AWV (G0438–G0439) |
| Maternity global codes | No — exempt | 59400, 59510, 59610, 59618 |
The practical implication: a surgical practice billing procedure codes at high volume will see net payment reductions even after the conversion factor increase. A primary care practice billing predominantly E/M codes will benefit from the higher conversion factor without the RVU penalty.
Inpatient-Only List: 285 Codes Moving to Outpatient in 2026
CMS finalized the elimination of the Medicare Inpatient-Only (IPO) list over a three-year transition period. Effective January 1, 2026, 285 musculoskeletal surgical procedures were removed from the IPO list, allowing those procedures to be billed in outpatient hospital settings and ambulatory surgical centers (ASCs) for the first time.
The IPO list will be fully eliminated by January 1, 2028. CMS intends to remove the remaining codes in roughly equal tranches during the 2027 and 2028 rulemaking cycles.
What the IPO List Change Means for Billing
When a procedure moves off the IPO list, it can legally be performed — and billed — in an outpatient or ASC setting under Medicare. Previously, performing an IPO-listed procedure in an outpatient setting would result in claim denial regardless of medical necessity documentation.
For billing teams, the IPO list change creates both opportunity and risk:
- Opportunity: Practices and ASCs can now schedule certain musculoskeletal cases that were previously mandatory inpatient, potentially increasing outpatient volume and ASC revenue.
- Risk: Procedures that move outpatient typically reimburse lower than inpatient rates. Net revenue per case may decline even as volume increases.
- Coding requirement: The 285 removed codes received new status indicator assignments in CY 2026 addenda. Each must be verified to confirm the correct APC assignment before billing.
- Payer alignment: Commercial payers are not required to follow Medicare's IPO list changes. Verify each payer's current policy before scheduling outpatient cases for these procedures.
MIPS and Quality Payment Program: 2026 Updates
The 2026 MPFS final rule also governs the Quality Payment Program (QPP) for the 2026 performance year. CMS signaled a period of stability — most structural elements of MIPS remain unchanged from 2025.
Performance Threshold: 75 Points Through 2028
CMS confirmed the MIPS performance threshold at 75 points for the 2026 performance year, with this threshold remaining in place through the 2028 performance year. The threshold determines 2030 payment adjustments. Practices at or above 75 points receive a neutral or positive adjustment. The maximum penalty for low scorers is negative 9%, applied on a linear scale starting from 18.75 points.
2026 MIPS Category Weights
| Performance Category | Weight | Key Requirement |
|---|---|---|
| Quality | 30% | Report at least 6 measures, including 1 outcome or high-priority measure |
| Cost | 30% | Calculated by CMS from claims — no separate reporting required |
| Improvement Activities | 15% | Complete at least 2 medium-weighted or 1 high-weighted activity for 90 days |
| Promoting Interoperability | 25% | Certified EHR technology use; e-prescribing, health information exchange |
CMS finalized 5 new quality measures and substantive changes to 30 existing quality measures for 2026. Billing teams that track MIPS measure reporting on behalf of providers should review the updated measure specifications before submitting 2026 performance data.
Specialty Impact: Who Gets More and Who Gets Less
The net payment change for any practice depends on its mix of procedure codes, E/M codes, and APM participation status. The table below reflects the combined effect of the conversion factor increase and the efficiency adjustment.
| Specialty | Primary Revenue Driver | Net 2026 Payment Direction |
|---|---|---|
| Primary Care / Internal Medicine | E/M visits (exempt) | Favorable — conversion factor gain, no RVU penalty |
| Behavioral Health / Psychiatry | Time-based services (exempt) | Favorable — no efficiency adjustment applied |
| Orthopedic Surgery | Procedure codes (adjustment applies) | Net negative — RVU cuts offset CF increase |
| Interventional Radiology | Procedure + imaging reads (adjustment applies) | Net negative on most high-volume codes |
| Interventional Pain Management | Procedure codes (adjustment applies) | Net negative — injections, blocks all affected |
| Infectious Disease | Mixed — 81% face cuts of 5%+ | Significantly negative for most practitioners |
| Geriatrics / Care Management | CCM, TCM, AWV codes (exempt) | Favorable — exempt from efficiency adjustment |
What Billing Teams Must Do Before Q4 2026
The 2026 MPFS changes require specific operational responses from billing and revenue cycle teams — not just awareness. The following checklist covers the highest-priority items:
Verify Your Conversion Factor Track
Confirm whether your physicians qualified as APM participants (QPs) for 2026. QP status is determined by the percentage of Medicare payments or patient volume flowing through a qualifying APM. The QP determination for 2026 was based on 2024–2025 performance data. If you are unsure of your status, check the QPP portal at qpp.cms.gov or contact your APM administrator.
Audit Your High-Volume Procedure Codes
Pull your top 20 procedure CPT codes by claim volume and identify which carry the efficiency adjustment. For each affected code, recalculate expected Medicare payment using the new work RVUs and the applicable conversion factor. Update your fee schedule and payer contract benchmarks accordingly — commercial payers that use MPFS as a reference rate will not automatically adjust.
Update Payer Contract Benchmarks
Many commercial payer contracts are expressed as a percentage of Medicare rates (e.g., 110% of MPFS). When Medicare rates shift — in either direction — your effective commercial rates shift with them. Run a contract review to identify which agreements reference the MPFS and quantify the downstream impact on commercial revenue.
Review Outpatient Scheduling for IPO-Affected Codes
For practices and ASCs that perform musculoskeletal surgery, pull the CY 2026 addenda to identify which of the 285 removed codes are relevant to your case mix. Verify payer-by-payer coverage policies before scheduling outpatient cases under these codes — commercial payers may still require inpatient admission for some procedures regardless of CMS's IPO list changes.
Confirm MIPS Measure Selections for 2026
With 5 new measures added and 30 revised in 2026, practices using the same MIPS measure portfolio from prior years should confirm that each selected measure still aligns with their clinical workflow and scoring potential. Measures that scored well historically may have changed their benchmarks or been retired. Reselect measures before the midyear reporting checkpoint.
Frequently Asked Questions
What is the 2026 Medicare Physician Fee Schedule conversion factor?
For 2026, CMS established two separate conversion factors for the first time. Practitioners participating in a qualifying alternative payment model (APM) receive a conversion factor of $33.5675 — a 3.77% increase from 2025. Practitioners not participating in an APM receive $33.4009 — a 3.26% increase from 2025. The difference reflects the additional statutory update available to APM participants under the One Big Beautiful Bill Act.
What is the 2.5% efficiency adjustment in the 2026 Medicare Fee Schedule?
CMS applied a 2.5% reduction to the work RVUs and intraservice time for approximately 9,000 non-time-based billing codes — including surgery, diagnostic imaging interpretation, interventional pain management, and orthopedic services. The adjustment does not apply to time-based services such as E/M visits, behavioral health services, maternity global codes, and care management services. CMS will apply this efficiency adjustment every three years going forward.
What happened to the Medicare inpatient-only list in 2026?
CMS removed 285 musculoskeletal surgical procedures from the Medicare Inpatient-Only (IPO) list effective January 1, 2026, allowing those procedures to be billed in outpatient settings, including ASCs. The IPO list will be fully eliminated by January 1, 2028. Alongside this change, 560 new procedures were added to ASC coverage, including 271 drawn from the IPO list.
What is the 2026 MIPS performance threshold?
The 2026 MIPS performance threshold is 75 points out of 100, unchanged from 2025. CMS confirmed this threshold will remain stable through the 2028 performance year, which determines payment adjustments through 2030. Practices scoring at or above 75 receive a neutral or positive payment adjustment. Practices below 75 face a linear penalty maxing out at negative 9%.
Which specialties are most affected by the 2026 Medicare Fee Schedule changes?
The 2.5% efficiency adjustment hits procedure-heavy specialties hardest — orthopedic surgery, interventional radiology, interventional pain management, and certain surgical subspecialties all face work RVU reductions on their highest-volume codes. Infectious disease is particularly impacted, with 81% of practitioners facing cuts of 5% or more. E/M-heavy specialties — primary care, internal medicine, geriatrics — are largely shielded because E/M visits are exempt from the efficiency adjustment.