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This audio is auto-generated. Please let us know if you have feedback<\/a>.<\/p>\n The Trump administration proposed a sweeping physician payment rule on Monday that rewrites Medicare payment to comply with recently passed GOP tax and policy law \u2014\u00a0and decade-old healthcare legislation.<\/p>\n The CMS\u2019 proposed physician fee schedule for 2026 includes a base rate hike of 2.5%. The increase was a handout to providers in the controversial \u201cOne Big Beautiful Bill,\u201d which slashes federal Medicaid spending by $1 trillion and is expected to cause millions of Americans to lose health insurance,\u00a0further pressuring reimbursement for hospitals and physicians.\u00a0President Donald Trump signed the bill into law<\/a>\u00a0on July 4.<\/p>\n The draft regulation also, for the first time, includes two separate conversion factors for doctors depending on whether or not they participate in alternative payment models \u2014 a stipulation of the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, which reformed how the government pays providers in the federal healthcare programs.<\/p>\n The more than 1,800-page rule also cracks down on a commonly abused billing practice in Medicare, expands care coordination for the prevention of chronic diseases, cements select telehealth flexibilities, cuts back on efforts to measure and improve health equity, and takes a step toward site neutrality.<\/p>\n \u201cThis rule modernizes CMS payment systems, eliminates perverse incentives, and harnesses better data to improve care for patients with chronic disease while protecting the future of hometown doctors,\u201d HHS Secretary Robert F. Kennedy Jr. said in a statement<\/a> Monday following the rule\u2019s release.<\/p>\n Draft payment updates<\/p>\n Medicare\u2019s payments to doctors are based on the resources used to furnish a service as measured by relative value units, or RVUs. RVUs, which are meant to cover both the cost of labor and practice expenses, become payment rates after a conversion factor is applied.<\/p>\n If Monday\u2019s rule is finalized, beginning next year regulators will apply two separate conversion factors when calculating physicians\u2019 payment rates based on their participation in alternative payment models, which are meant to hold providers accountable for the quality and cost of care.<\/p>\n The proposed update to the conversion factor is three times as large for doctors in qualifying APMs than those not participating in the arrangements: 0.75% versus 0.25%.<\/p>\n Proposed changes also include a 0.55% adjustment to account for changes to select work RVUs.<\/p>\n Overall, this results in a conversion factor of $33.59 for doctors in qualifying APMs, up 3.8% year over year, and one of $33.42 for doctors not in such models, up 3.6% year over year.<\/p>\n Physician groups said the bump was welcome but modest, especially following what they view as years of underpayment in Medicare that\u2019s contributed to practice closures and threatened patient access.<\/p>\n \u201cWhile this proposed rule includes a boost, it is very underwhelming,\u201d said Dr. Carol Langford, the president of the American College of Rheumatology, in a statement.<\/p>\n The CMS has proposed Medicare payment cuts for the last five years, though Congress has normally stepped in to prevent them. Still, that wasn\u2019t the case in 2025 \u2014 physician payments fell 2.9% this year.<\/a>\u00a0<\/p>\n The new draft regulation also proposes a first-of-its-kind \u201cefficiency adjustment\u201d\u00a0to certain work RVUs, cutting them by 2.5%. The adjustment is meant to account for practice efficiencies that build up over time that aren\u2019t factored into current RVU calculations, so payments are being inflated as a result, regulators said.<\/p>\n Physician groups said they\u2019re reviewing that proposal. Lobbies are unlikely to take favorably to an idea that would dampen reimbursement.<\/p>\n However, doctor associations said they do support proposed updates to how the CMS calculates practice expense that would recognize larger indirect costs for doctors in office-based settings, compared to those working in hospitals.<\/p>\n \u201cThe original allocation methodologies assumed physicians maintained separate practice locations even if they furnished some care in hospitals. Since the methodologies were established decades ago, there has been a steady decline in the number of physicians working in private practice, with a corresponding rise in physician employment by hospitals and health systems,\u201d the CMS wrote in a fact sheet on the rule.<\/p>\n \u201cTherefore, we believe that the allocation of indirect costs for [practice expense]\u00a0RVUs in the facility setting at the same rate as the non-facility setting may no longer reflect contemporary clinical practice,\u201d the CMS said.<\/p>\n Partially as a result of that policy, the impacts of the rule vary drastically based on specialty and site of practice.<\/p>\n For example, chiropractors would see Medicare reimbursement drop by 17% next year for services furnished in hospital-owned settings. However, payment would drop just 2% in non-hospital sites of care, according to estimates in the rule.<\/p>\n Endocrinologists outside of hospital sites would see Medicare reimbursement increase 6%, while their peers in hospitals would see payments cut by 10%, the rule predicts.<\/p>\n Still, the proposal is a step in the right direction of equalizing payment between hospital and physician office settings, Nicolas Ferreyros, the managing director of the Community Oncology Alliance, said in a statement.<\/p>\n Skin substitutes<\/p>\n The rule also proposes reforming how Medicare pays for skin substitutes, an area of spending that\u2019s skyrocketed as a result of abusive pricing practices, according to the CMS.<\/p>\n Medicare spending on skin substitutes, materials used to replace skin and aid in wound healing, has risen from $256 million in 2019 to more than $10 billion in 2024, per government data.<\/p>\n That\u2019s because providers are pushing products without clear evidence of clinical value, occasionally to drive profits: In one case, CMS regulators stopped more than $1 million in improper payments to just one practice, according to the agency.<\/p>\n The CMS is proposing to pay for skin substitutes as supplies, instead of biologicals. That will reduce spending on the materials by nearly 90%, saving Medicare billions of dollars, regulators said.<\/p>\n Telehealth provisions<\/p>\n Medicare began covering more virtual care during the coronavirus pandemic, but much of the coverage remains on a temporary basis, despite heavy lobbying by the telehealth industry.<\/p>\n The rule is a mixed bag for virtual care. It further codifies Medicare payment for select physician services, permanently adopting a Medicare waiver that allows physicians to supervise treatments via real-time audio and video. It also extends a waiver allowing clinics to bill for telehealth services through 2026.<\/p>\n However, regulators are not proposing to extend a waiver that allows teaching physicians to be present virtually for billing purposes. Moving forward, teaching physicians will have to be in-person during services furnished by residents to qualify for Medicare payment if the rule is finalized as drafted.<\/p>\n New mandatory payment model<\/p>\n The proposed rule creates a new mandatory payment model<\/a>, called the Ambulatory Specialty Model, that\u2019s meant to improve disease management for Medicare beneficiaries with heart failure.<\/p>\n The five-year model is aimed at holding specialists who treat Medicare patients with heart failure accountable for management of their other chronic conditions, like low back pain. If approved, it would run from 2027 through 2031.<\/p>\n The Ambulatory Specialty Model is the second payment model proposed by the CMS\u2019 innovation center under the Trump administration, which has generally pared back such tests.<\/p>\n In March, the agency canceled four tests early<\/a> and halted two before they began. The CMS said in May it would pursue a refreshed strategy<\/a> focusing more on disease prevention and management, and helping beneficiaries reach health goals through access to technology. Then,\u00a0earlier this month, regulators proposed a model<\/a> adding new prior authorization requirements to some Medicare services.<\/p>\n Shared savings and MAHA<\/p>\n