2026 Medicare Physician Fee Schedule: What Physicians and ACOs Need to Know Right Now

CMS has officially released the 2026 Medicare Physician Fee Schedule, introducing more significant changes than a typical annual update. Payment rates are changing, a mandatory specialty model is being introduced, and behavioral health billing is being updated.

Physicians, specialists, and ACO leaders will see impacts on revenue, compliance obligations, and care delivery. Getting ahead of them now, before January 2026, puts you in a far stronger position than scrambling to catch up later.

Payment Rate Increases Under the 2026 PFS

The headline number is a 2.5% increase in the PFS conversion factor. But your actual reimbursement depends on how your practice participates in Medicare payment models.

Breakdown by Provider Type

A few things to keep in mind:

• Most procedure-based specialties may see slight reductions in payments due to CMS efficiency adjustments.
• Participation in Advanced APMs continues to be the most effective way to increase reimbursement.
• The APM and non-APM payment gap is increasing, and it is worth considering them in your 2026 strategy.

The Ambulatory Specialty Model

This is the biggest structural change in the 2026 Medicare Physician Fee Schedule. CMS is launching the Ambulatory Specialty Model, a mandatory Innovation Center model starting January 1, 2027, with payment adjustments kicking in by 2029.

Ambulatory Specialty Model (ASM) refers to specialists who treat two chronic diseases, i.e., low back pain (LBP) and congestive heart failure (CHF). Eligible providers are required to participate.

Who Must Participate

Specialists must enroll who have treated 20 or more Medicare FFS patients with either of the two disorders within 12 months in an identified geographical location. Specialties that become affected are:

• Cardiologists (CHF)
• Anesthesiologists, orthopedists, pain management providers, neurosurgeons, and PM&R specialists (LBP)

How ASM Works

ASM implements two-sided financial risk: high performance earns bonuses, while poor performance results in payment reductions. Medicare Part B payments are directly tied to quality metrics, cost outcomes, and care coordination.

On the positive side, the ASM participants do not have to report MIPS during the years in which they participate. CMS modeled ASM to overlap with Advanced APMs and other models of the Innovation Center, but it is not clear how payments might be reconciled in order to avoid duplicate payments.

Behavioral Health Billing Updates

CMS also offers three new GPCM add-on codes, which allow practices to bill Collaborative Care Model (CoCM) and behavioral health integration services, as well as Advanced Primary Care Management, without time tracking requirements.

What changes practically:

• Less documentation burden tied to time tracking.
• Less complicated integrated behavioral health primary care billing.
• Commerce mental health services: decreased obstacles to practices seeking to offer the services.

A consequence of this change is that it lessens the obstacles to primary care practices that avoided CoCM billing owing to the complexity of the billing.

Telehealth and Digital Health Expansion

CMS is transforming the digital service culture at Medicare. The 2026 proposals cover:

• Expanded coverage for digital mental health devices, including ADHD treatment tools.
• An expedited procedure to add services to the Medicare Telehealth Services List.
• A formal request for industry feedback on payment models for AI tools and SaaS platforms in outpatient care.

Practices using digital health platforms for care coordination or analytics should note that Medicare reimbursement for these tools may be forthcoming.

MSSP and ACO Updates

MSSP will become open to smaller ACOs on January 1, 2027. The ACOs with less than 5,000 beneficiaries may now participate in the Benchmark Years 1 and 2, but must meet the 5,000-beneficiary threshold in the Benchmark Year 3. There is also less shared savings opportunity and financial exposure in such ACOs.

Skin Substitute Payment Change

CMS is overturning individual Average Sales Price reimbursements that typically ranged in the thousands (more than 1,000/cm2), and the flat rate is $125.38 per square centimeter across three types of FDA-approved products. Wound management or surgical practices must now review product choices and cost plans.

Takeaway

The 2026 Medicare Physician Fee Schedule restructures physician payments, implements mandatory specialty accountability, and extends digital health coverage in a manner that requires early preparation. When implementing new billing codes or addressing ASM eligibility and ACO benchmarks, it is advisable to prepare early to avoid financial or compliance issues.

Power Your 2026 Strategy with Persivia’s Solutions

Persivia offers CareSpace®, an AI-driven population health platform built to help physicians and ACOs turn CMS policy complexity into optimized, actionable performance. CareSpace® has everything you need to stay on top of all regulatory changes, starting with automated quality monitoring and risk modelling, through to APM control and care organization.