The first Medicare remits of 2026 will reach most practices in the third week of January, and for the first time the allowed amounts will depend on which of two conversion factors applies to your tax ID. That is new. Every other year we have compared the January remit to December and looked for one number to move. This year there are two numbers, and a long list of codes where the work value itself changed.
CMS issued the CY 2026 Medicare Physician Fee Schedule final rule (CMS-1832-F) on October 31, 2025. The policies took effect January 1, 2026. We have spent the last two months loading it for the practices we bill for, and this is the short version of what actually changes in the practice, in the order it will show up.
Key takeaways
- There are two conversion factors for 2026: $33.57 for qualifying APM participants and $33.40 for everyone else, both up from $32.35. Which one you get depends on QP status in the QPP lookup, not on anything the MAC decides.
- A 2.5 percent efficiency adjustment cut the work RVUs on most procedural codes, so a surgical or dermatology practice can see the conversion factor rise and the payment per procedure fall at the same time.
- Office-based practice expense went up and facility-based practice expense went down, so the same code now pays differently by place of service more than it used to.
- Skin substitutes are paid as incident-to supplies at a flat rate of $127.14 per square centimeter, which is the single largest dollar change in the rule.
- The one-year 2.5 percent increase expires December 31, 2026, so none of the 2026 rate should be assumed in a 2027 budget.
Two conversion factors, and which one you get
For 2026 the conversion factor is $33.57 for clinicians who are qualifying participants (QPs) in an Advanced Alternative Payment Model and $33.40 for everyone else. Both are up from $32.35 in 2025, a 3.77 percent and 3.26 percent increase respectively. The increase is built from three pieces: the statutory update of 0.75 percent for QPs or 0.25 percent for non-QPs, a one-year 2.5 percent increase from the reconciliation law enacted in July 2025, and a 0.49 percent budget neutrality adjustment tied to the RVU changes below.
| Component | QP conversion factor | Non-QP conversion factor |
|---|---|---|
| 2025 conversion factor | $32.35 | $32.35 |
| Statutory update | +0.75% | +0.25% |
| One-year 2026 increase (July 2025 law) | +2.50% | +2.50% |
| Budget neutrality adjustment | +0.49% | +0.49% |
| 2026 conversion factor | $33.57 | $33.40 |
The one-year increase is the part to remember. It expires December 31, 2026 unless Congress acts again, so the 2027 baseline drops back unless something changes. Do not build a budget on the 2026 rate holding.
Your QP status comes from the Quality Payment Program, not from the MAC. If your clinicians participated in an ACO track that qualifies as an Advanced APM in 2024, check the QPP participation status lookup for each NPI. Practices that assume they are QPs and are not will spend February chasing a 17-cent difference that was never owed.
The efficiency adjustment: a 2.5 percent cut hiding inside the increase
CMS finalized a 2.5 percent reduction to the work RVUs and the intraservice time of services that are not time-based. The reasoning is that procedures get faster over time and the RVUs have not kept up. The cut lands on roughly 7,000 codes, which is most of the procedural fee schedule.
The exemptions matter as much as the cut. Time-based codes are excluded: evaluation and management visits, care management codes, behavioral health services, services on the Medicare telehealth list, and maternity codes. New codes for 2026 are also excluded. A primary care practice that bills mostly 99213 and 99214 with some chronic care management will see the full 3.26 percent increase. A dermatology or orthopedic practice will see the conversion factor go up and the work RVU on its procedures go down, and the net depends on the mix.
A worked example shows why the mix matters. Take an illustrative procedure with 4.00 work RVUs, 3.00 practice expense RVUs and 0.50 malpractice RVUs in 2025, priced at $32.35, for an allowed amount of about $242.63 before geographic adjustment. For 2026 the work RVU drops 2.5 percent to 3.90, and if the practice expense and malpractice RVUs are unchanged the total is 7.40 RVUs at $33.40, or $247.16. That is a 1.9 percent increase, not 3.26 percent. If the practice expense RVU also fell because the service is usually performed in a facility, the code can come out flat or slightly down. The numbers are illustrative, but the arithmetic is exactly what the MAC file did for every code, and it is why we tell procedural practices not to read the conversion factor headline as their raise.
Run your top 50 codes by volume through the new fee schedule before the remits arrive. The MAC fee schedule files were published in December, and your practice management system vendor should have a 2026 Medicare load available. If the vendor has not loaded it yet, load it yourself from the MAC file. Guessing at expected reimbursement in January means every underpayment check for the quarter is wrong.
Practice expense: office-based practices gain, facility-based practices lose
The rule also changes how indirect practice expense is allocated. CMS now assigns a larger share of indirect costs to services performed in an office setting than to the same service performed in a facility, on the reasoning that a physician in a hospital-owned setting does not carry the same overhead. For an independent practice performing procedures in its own office, this is a modest gain. For clinicians who see patients mostly in the hospital, the facility rate falls. If your surgeons split time between an ASC and the office, the same CPT code now pays differently by place of service more than it used to.
Skin substitutes move to a flat rate
The largest single dollar change in the rule affects a small number of practices. Skin and tissue substitute products used in the office are now paid as incident-to supplies at a single rate of $127.14 per square centimeter, instead of at product-specific rates derived from average sales price. The final rule printed the rate as $127.28; CMS revised it to $127.14 in a technical correction published in the Federal Register on November 28, 2025, so make sure whichever figure your fee schedule vendor loaded is the corrected one. CMS pointed to spending on these products rising from roughly $250 million in 2019 to more than $10 billion in 2024. Wound care practices that built a business around high-priced grafts will see a large drop. Everyone else should note it because the same product category is also on the WISeR prior authorization list in six states, which we cover separately this month.
New codes for primary care and telehealth policy
Three new add-on G-codes attach behavioral health integration to the Advanced Primary Care Management codes (G0556, G0557 and G0558): G0568 for an initial month of collaborative care, G0569 for a subsequent month, and G0570 for general behavioral health integration. Unlike the CPT codes they are built from, these add-ons do not require time tracking in the record. We will publish a coding walk-through in February once we have seen how the MACs adjudicate them.
On telehealth, the rule made permanent several policies that were previously renewed year by year. The Medicare telehealth list no longer distinguishes provisional from permanent services. Frequency limits on subsequent inpatient visits, subsequent nursing facility visits and critical care consultations are gone. Direct supervision may be furnished through real-time audio and video technology (not audio only) on a permanent basis. Keep in mind that the statutory flexibilities on geographic and originating site are a different matter and currently run only through January 30, 2026. The rule cannot fix that; only Congress can.
Patient cost sharing also reset on January 1
The Part B deductible for 2026 is $283 (up from $257) and the standard Part B premium is $202.90 per month. Every Medicare patient without a supplement will owe the full allowed amount on their first visits of the year until the deductible is met. Update the estimates your front desk gives at check-in, and expect the first six weeks of Medicare patient balances to be larger than usual. Our medical billing team treats January as deductible season for exactly this reason.
Questions we hear
Our remits in January still show the old rate. Is that wrong?
Check the date of service. Claims for December 2025 services paid in January are priced at 2025 rates. If a January date of service pays at $32.35 per RVU, that is a MAC pricing error and worth a call, but in our experience it is almost always a December service.
Does the efficiency adjustment apply to our commercial contracts?
Only if the contract pays a percentage of the current Medicare fee schedule. Many do. Read the contract language on which year's schedule applies; some payers freeze the schedule to the year the contract was signed. If yours floats with Medicare, your commercial procedure payments also fell in January. An RCM audit that compares contract terms to actual remits is the fastest way to know.
Our physicians are paid on work RVUs. Did their compensation just drop 2.5 percent?
If the compensation plan references the current year's Medicare work RVU values, then yes, the same volume of procedures produces fewer work RVUs in 2026 than it did in 2025, while E/M visits are untouched. Some groups froze their compensation plan on 2025 values for the year; others are renegotiating. This is a contract decision for the practice and its counsel, but the billing office should hand the physicians a code-level comparison so the conversation starts from numbers rather than from the remit.
What to do this month
- Confirm QP status for every NPI in the QPP lookup and record which conversion factor applies.
- Load the 2026 MAC fee schedule and compare expected allowed amounts for your top 50 codes to 2025.
- Flag your procedural codes that lost work RVUs and tell the physicians before they see the remit.
- Update the Part B deductible in your patient estimate scripts and statements.
- If you perform skin substitute applications in the office, confirm the loaded rate is $127.14 and model it against your product costs before ordering.
- Set a reminder to review the 2027 proposed rule in July, because the one-year increase does not carry forward.
