The Centers for Medicare & Medicaid Services (CMS) on July 14 released its proposed calendar year (CY) 2027 Physician Fee Schedule. The rule would make routine updates to physician payment rates, change 340B Drug Pricing Program reporting requirements, and update the Medicare Shared Savings Program, alongside significant updates to quality reporting and value-based payments.
America’s Essential Hospitals is analyzing the proposed rule for comment and will send members a detailed Washington Briefing in the coming days. Comments on the proposed rule are due to CMS on Sept. 14.
Conversion Factor and Payment Update
As required by law, CMS proposes to implement two separate conversion factors—one for participants in alternative payment models (APMs), and one for nonparticipants. For physicians in qualifying APMs, CMS proposes a conversion factor reduction of -1.19% and a nonqualifying APM conversion factor reduction of -1.68%. The reduction is primarily driven by a statutory sunsetting of enhanced physician payments directed by Congress.
CMS also proposes updates to the practice expense (PE) methodology as the agency seeks to reduce reliance on specialty-specific, per-hour data. The agency proposes a continuing phase-out of historic PE methodology, replacing part of the PE calculation with a methodology to reduce volatility. CMS specifically seeks feedback on whether the site-of-service payment for facility and nonfacility payments is appropriate.
Behavioral Health Payment Changes
As part of the administration’s Make America Healthy Again agenda, CMS proposes new, separate coding for shared medical appointments with multiple beneficiaries. Under this proposal, providers could seek reimbursement for services provided to multiple beneficiaries receiving multidisciplinary support in a group setting.
CMS proposes to expand a policy that increases payments for timed behavioral health services for psychotherapy that began implementation in CY 2024. In this final year of implementation of a four-year upward adjustment, CMS proposes to increase payments related to smoking and tobacco use cessation relative value units for psychotherapy codes payable under PFS.
340B Updates
CMS proposes to make the Medicare Part D 340B Drug Pricing Program claims repository mandatory in 2027. The agency finalized a voluntary claims repository in the CY 2026 PFS rule to separate 340B purchased drugs for the purposes of calculating inflationary penalties for drug manufacturers required by the Inflation Reduction Act.
Covered entities would be required to submit five fields for each submission:
- Date of service
- Prescription or service reference number
- Fill number
- Dispensing pharmacy National Provider Indicator
- National Drug Code-11
Medicare Shared Savings Program
CMS proposes several changes to strengthen financial incentives for accountable care organizations (ACOs) participating in the Shared Savings Program, including:
- Increasing the shared savings rate for ACOs participating in Level E of the Basic track from 50% to 60%
- Reducing the positive regional adjustment for ACOs in the ENHANCED track
- Increasing the prior savings adjustment to lessen benchmark rebasing effects
- Risk-adjusting the cap on benchmark increases to better account for organizations serving higher-risk populations.
CMS also proposes a new growth adjustment that would reward ACOs for expanding participation in value-based care by adding clinicians inexperienced with accountable care arrangements and serving beneficiaries new to value-based care.
Shared Savings Program Benchmark and Beneficiary Assignment Updates
CMS proposes revising the Accountable Care Prospective Trend methodology by establishing guardrails around projected spending growth and updating annual growth calculations.
The proposed rule would also modify beneficiary assignment policies by excluding certain primary care services billed outside an ACO when determining beneficiary assignment, updating Medicare enrollment criteria, and adding new primary care service codes used for assignment.
The agency also proposes allowing eligible ACOs to reduce or eliminate Medicare Part B for cost sharing for certain services through CMS-approved arrangements to improve beneficiary access to care.
Quality Reporting and Digital Quality Measurement
Aiming to reduce reporting burden and support the transition to digital quality measurement, CMS proposes to:
- Extend the availability of Merit-based Incentive Payment System Clinical Quality measures
- Create a new Medicare electronic clinical quality measure reporting option
- Revise quality reporting requirements
- Simplify Certified Electronic Health Record Technology requirements.
CMS also proposes to remove two measures in the Alternative Payment Model Performance Pathway (APP) Plus quality measure set beginning in performance year 2027: the Initiation and Engagement of Substance Use Disorder Treatment measure and the Adult Immunization Status measures.
Contact Director of Policy Rob Nelb, MPH, at rnelb@essentialhospitals.org or 202.585.0127 with questions.
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