• CMS proposed a major increase to the PFS conversion factor, including a secondary conversion factor designed to encourage participation in qualifying alternative payment models.
• CMS plans to phase out the Inpatient Only (IPO) list over the course of three years. In 2026, 285 procedures — largely musculoskeletal — would be removed.
• CMS introduced a new mandatory payment model, the Ambulatory Specialty Model, targeting early intervention and preventative care for conditions such as heart failure and lower back pain.
• CMS proposed significant changes to the reimbursement methodology for skin substitutes beginning in 2026. Under the proposal, most skin substitutes would be reimbursed at a standardized flat-rate of $125.38/cm² instead of having product-specific reimbursements.

Under the Medicare Access and CHIP Reauthorization Act (MACRA), CMS must implement two separate conversion factors for the PFS — one for qualifying APM participants and one for nonqualifying participants.¹ For the 2026 Medicare PFS, CMS proposed:

• Qualifying APMs: $33.59 (up 3.8% from 2025)
• Nonqualifying APMs: $33.42 (up 3.3% from 2025)

Under the One Big Beautiful Bill Act (OBBBA), each conversion factor includes a one-year 2.5% temporary increase. Qualifying APMs will receive an additional 0.75% increase while nonqualifying APMs will receive an additional 0.25% increase. The PFS update also includes an estimated 0.55% increase to work RVUs, as well as a -2.5% efficiency adjustment due to changes in the methodology of the Medicare Economic Index.

However, potential Medicare funding cuts could negate the impact of these payment updates. Under the Statutory Pay-As-You-Go (PAYGO) Act of 2010, Medicare payments may be reduced by up to 4% if the Office of Management and Budget determines that there will be an increase in the federal deficit based on its five-year or 10-year scorecards, which are used to track the budget impacts of new legislation.²

Currently, the Congressional Budget Office estimates that OBBBA will lead to both five-year and 10-year deficits, which would trigger Medicare funding cuts under PAYGO.² These cuts will likely take effect in January 2026 unless Congress delays them. Historically, Congress has always intervened to prevent PAYGO funding cuts from going into effect.

For the 2026 Medicare PFS, CMS proposed expanding QP determinations to include both entity-level and individual-level qualification in advanced APMs. This change could increase the number of clinicians who meet APM thresholds and qualify for QP status.

Currently, most QP determinations are made at the entity level, not individually. This means that some eligible clinicians who could earn QP status at an individual level may miss out if they are included in at the entity level instead.³

CMS proposed adding a QP determination at the individual level for all advanced APM participants, starting with the 2026 QP performance period. Under the proposed changes, a clinician would be gain QP status if they meet or exceed the appropriate threshold for patient count or payment amount during the performance year at either the entity level or the individual level.³ To be a QP, clinicians must receive at least 50% of Medicare Part B payments or see at least 35% of Medicare patients through an advanced APM entity during the QP performance period.⁴

These proposed changes are expected to result in more providers qualifying as QPs for the purposes of APMs. Currently, CMS estimates that between 375,000 and 482,200 eligible clinicians will qualify as QPs during the 2026 performance period.⁵

Beyond the PFS, CMS is proposing broader payment reforms that could significantly impact how providers are reimbursed across settings. According to CMS, these changes are designed to promote value, transparency, and proactive care.

The new Ambulatory Specialty Model, launching in January 2027, emphasizes early intervention, data sharing, and preventive care for lower back pain.

CMS is also changing its practice expense methodology, including:

• Discontinuing reliance on the American Medical Association's Relative Value Scale Update Committee (RUC) survey.⁶
• Applying a 2.5% reduction to work RVUs for non-time-based services to reflect efficiency gains.⁶
• Expanding recognition of indirect costs in outpatient settings, such as radiation therapy and remote monitoring.

If CMS switches to hospital outpatient data for rate setting, reimbursement for office-based services, where indirect costs are often underrepresented, could be significantly impacted.

CMS moving away from the RUC's guidance, as well as the proposed changes to RVU, will likely negatively impact specialist reimbursement. Previously, the RUC has faced criticism for favoring specialist reimbursement over primary care reimbursement. Overall, specialists will likely see reduced payments even as the top-line PFS payment update improves primary care reimbursement.

For the 2026 Medicare PFS, CMS is proposing changes to the way accountable care organizations (ACOs) participate in the Medicare Shared Savings Program (MSSP), suggesting new limits for certain organizations.

For ACOs considered to be inexperienced with performance-based risk initiatives, participation in the MSSP under a one-sided model would be limited to five years, a slight decrease from the current maximum of seven years.⁶ Inexperienced ACOs would also be required to progress to higher levels of risk and potential reward under a two-sided model by their second agreement period.

According to CMS, the goal of this change is to increase participation in two-sided risk arrangements.⁷

Under the 2026 OPPS proposed rule, hospitals will be required to update their machine-readable files to include percentile pricing starting Jan. 1, 2026. Hospitals will be required to publish 10th, 50th (median), and 90th percentile of the allowed amounts for services at their facilities when payer-specific negotiated charges are based on a percentage or algorithm. They are also required to disclose the number of allowed amounts used to determine the percentiles to more accurately show the distribution of actual prices hospitals receive for an item or service.

CMS is also updating its quality reporting to focus on measurable outcomes, such as chronic disease management and patient safety. Providers will also be required to submit more detailed data on quality measures. These changes will apply to the Hospital Outpatient Quality Reporting, Rural Emergency Hospital Quality Reporting, and Ambulatory Surgical Center Quality Reporting Programs.⁸

CMS proposed changing how skin substitutes are reimbursed, as well as aligning reimbursement for the OPPS/ASC and PFS.

Currently, Medicare reimburses skin substitutes using an average sales price model, which means that each product has its own unique billing code and payment limit. This has led to a wide variation in reimbursement for skin substitutes, with some products reaching as high as $2000/in².⁹ Between 2019 and 2024, Medicare spending on skin substitutes jumped from $252 million to over $10 billion.¹⁰

Starting in 2026, CMS proposed skin substitutes be reimbursed as incident-to-supplies instead of biologicals, with a proposed flat rate of $125.38/cm².⁹ According to CMS, this change could reduce spending on skin substitutes by an estimated 90%.¹⁰

CMS proposed a 2.4% payment increase for both outpatient care facilities and ASCs in 2026. This payment increase includes a 3.2% market basket update, along with a -0.8 percentage point productivity adjustment.

Another proposed change includes expanding site-neutral payments to align drug infusion administration reimbursement with the PFS, which would lead to an estimated $210 million in savings for CMS.

In 2017, CMS finalized regulation that cut reimbursement rates for 340B drugs by almost 30%.¹¹ To maintain budget neutrality, CMS increased outpatient reimbursement for all hospitals. Between 2018 and 2022, CMS redistributed $7.8 billion for hospital outpatient services. The 340B rate cuts were later overturned.¹¹ Although CMS has repaid hospitals for the years of decreased 340B reimbursement, it still needs to recoup the $7.8 billion in overpayments it made for outpatient services.

In 2023, CMS codified a 0.5% reduction in the OPPS conversion factor as part of this recoupment effort.⁸ However, CMS proposed the reduction be increased to 2% to accelerate the recoupment timeline, going from an estimated end date of 2041 to 2031.⁸

CMS also introduced a proposal to phase out the Inpatient Only (IPO) list over the course of three years. In 2026, 285 procedures, largely musculoskeletal procedures, would be removed from the IPO list.⁷ Of these procedures, 271 would be added to the ASC Covered Procedure list.

Several telehealth enhancements were also proposed, including:

• Streamlining additions to the Medicare Telehealth List
• Permanently removing frequency limits for inpatient, nursing facility, and critical care visits
• Allowing virtual direct supervision via real-time audio-visual technology