CMS Proposes Physician Payment Rule to Significantly Cut Spending Waste, Enhance Quality Measures, and Improve Chronic Disease Management for People with Medicare
The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would increase quality care for Medicare recipients while significantly reducing unnecessary spending. The calendar year (CY) 2026 Medicare Physician Fee Schedule (PFS) proposed rule would advance primary care management through new quality measures, reduce waste and unnecessary use of skin substitutes, and introduce a new payment model focused on improving care for chronic disease management.
“For the last four years, powerful interests have targeted independent medical practices,” said U.S. Health and Human Services Secretary Robert F. Kennedy, Jr. “Thanks to Dr. Oz’s decisive leadership, this 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.”
“We are taking meaningful steps to modernize Medicare, cut waste, and improve patient care,” said CMS Administrator Dr. Mehmet Oz. “We’re making it easier for seniors to access preventive services, incentivizing health care providers to deliver real results, and cracking down on abuse that drives up costs. This is how we protect Medicare for the next generation while helping Americans live longer, healthier lives.
Reducing Medicare Spending Waste for Skin Substitutes
Medicare spending on skin substitutes has had unprecedented growth, rising from $256 million in 2019 to over $10 billion in 2024, according to Medicare Part B claims data. This dramatic spending increase is largely attributed to abusive pricing practices in the sector, including the use of products with limited evidence of clinical value. In one notable case, the CMS Fraud Defense Operations Center stopped more than $1 million in improper payments for skin substitutes to a medical group practice. The practice was submitting Medicare claims for wound care services allegedly performed by the owner, a psychiatrist.
CMS currently treats skin substitutes as biologicals for the purposes of Medicare payment, which can reach as high as $2,000 per square inch. CMS is proposing to pay for skin substitutes as incident-to supplies, a change expected to reduce spending on these products by nearly 90%. These proposed savings would not come at the expense of patient access or quality of care. If finalized, this will save billions for Medicare and taxpayers and incentivize the use of products with the most clinical evidence of success.
Shifting the Healthcare Paradigm to Prevention and Wellness
CMS is proposing to improve the care of chronic diseases by reducing burdens associated with the integration of behavioral health treatment into advanced primary care management. Additionally, CMS is proposing to make Americans healthier by removing ten quality measures that did not directly improve patient health outcomes and adding five new outcome measures that focus on the prevention of chronic disease, including prescreening for diabetes.
If the proposed rule is finalized, a change to the Medicare Diabetes Prevention Program will allow more people with Medicare to access coaching, peer support, and practical training in dietary change, physical activity, and behavior change strategies to delay or prevent the onset of Type 2 diabetes for people with prediabetes, at no cost to the beneficiary.
CMS is also issuing a Request for Information (RFI) to gather recommendations on improving wellness, prevention, and chronic disease management. This includes input on nutrition counseling and physical activity.
New Payment Model to Improve the Upstream Management of High-Cost Chronic Conditions
CMS is proposing the new Ambulatory Specialty Model (ASM), a mandatory payment model focused on specialty care for beneficiaries with heart failure and low back pain – significant areas of Medicare spending. The model aims to enhance the quality of care and reduce low-value care by improving upstream chronic disease management. Participants will be held accountable for their performance, generating savings.
The proposed ASM, one of the newest CMS Innovation Center models, aims to improve beneficiary and provider engagement, incentivize preventive care, and increase financial accountability for specialists. ASM rewards specialists who detect signs of worsening chronic conditions early, enhance patients’ function, reduce avoidable hospitalizations, and use technology that allows them to communicate and share data electronically with patients and their primary care providers. If finalized, the model will begin in January 2027 and run for five performance years through December 2031.
Improving Payment Accuracy and Recognizing New Technologies
CMS is proposing to reduce payment differentials for physicians across settings of care by leveraging hospital data to calculate more accurate payment rates for certain services and better accounting for increased efficiencies in procedures and tests. CMS is also signaling an interest in moving away from using low-response rate surveys of practitioners to value services, towards preferentially using empiric information instead. To ensure that Medicare recognizes innovations in medical care, CMS is also proposing to make some COVID-era flexibilities permanent, and to simplify the process for making services available by telehealth. CMS is also proposing to broaden its payment policies for digital mental health treatment devices to make more options available to patients.
Beginning in 2026, there will be two separate conversion factors for Qualifying APM Participants (QPs) and non-QP clinicians. The update to the qualifying APM conversion factor (which applies to PFS payments for QPs) for CY 2026 is 0.75 percent while the update to the nonqualifying APM conversion factor (which applies to PFS payments for all other clinicians) for CY 2026 is 0.25 percent. The change to the PFS conversion factors for CY 2026 includes these updates as required by statute, a one-year increase of +2.50 percent for CY 2026 stipulated by statute, and an estimated 0.55 percent adjustment necessary to account for proposed changes in work RVUs. Thus, the CY 2026 qualifying APM conversion factor represents a projected increase of $1.24 (3.83%) from the current conversion factor of $32.35, for a total of $33.59. Similarly, the CY 2026 nonqualifying APM conversion factor represents a projected increase of $1.17 (3.62%) from the current conversion factor of $32.35, for a total of $33.42.
“This move reflects our continued shift toward smarter, data-informed policymaking,” said Chris Klomp, Deputy Administrator and Director of the Center for Medicare at CMS. “We’re advancing technical improvements that reward high-quality, efficient care; addressing the root causes of unique health challenges; and aligning health care spending with value so that new innovations help to deliver better quality at a lower price.”
The 60-day comment period for the CY 2026 PFS proposed rule (CMS-1832 P) ends on September 12, 2025.
For a fact sheet on the CY 2026 Physician Fee Schedule proposed rule, please visit https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-pfs-proposed-rule-cms-1832-p.
For a fact sheet on the CY 2026 Quality Payment Program proposed changes, please visit https://qpp-cm-prod-content.s3.amazonaws.com/uploads/3362/2026-QPP-Proposed-Rule-Fact-Sheet-and-Policy-Comparison-Table.pdf.
For a fact sheet on the proposed Medicare Shared Savings Program changes in the CY 2026 PFS proposed rule, please visit https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-proposed-rule-cms-1832-p-medicare-shared.
To view the new Ambulatory Specialty Model (ASM), please visit https://www.cms.gov/priorities/innovation/innovation-models/asm.
To view the CY 2026 PFS proposed rule, please visit: https://www.federalregister.gov/public-inspection/current.
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