CMS Is Proposing a New Same Day E/M Payment Reduction: What Office Specialty Practices Should Know

When CMS released its proposed 2027 Medicare Physician Fee Schedule on July 14, most of the headlines went to the conversion factor. That number is falling 1.68% to $32.84 for most physicians, largely because the one year 2.5% increase Congress provided for 2026 expires (CMS Fact Sheet, July 14, 2026).

For specialty practices that do most of their work in the office, the bigger story sits further down in the rule. CMS wants to cut payment when an evaluation and management (E/M) visit and a procedure happen on the same day, and that is the focus of this article.

What CMS Is Proposing

Today, Medicare pays separately for a medically necessary, separately identifiable E/M service billed with modifier 25 on the same day as a procedure. Under the proposal, when the same physician (or a physician in the same practice) furnishes an office or outpatient E/M visit on the same day as a procedure with a global period of 0, 10 or 90 days, the highest paid service would be paid at 100% of the fee schedule amount and the other services at 50% (CMS Fact Sheet; 91 FR 43842, July 16, 2026).

CMS's reasoning is that the two services share overlapping physician work, so paying both in full amounts to likely duplicate payment (Becker's ASC, Sept. 22, 2026). The concept borrows from Medicare's existing Multiple Procedure Payment Reduction policies.

We have seen this idea before. CMS proposed a narrower version in 2019, limited to 0 day global procedures, and did not finalize it. The 2027 version reaches much further (AMA, Sept. 4, 2026).

Who Takes the Hit

The effect will not be spread evenly. A primary care group that bills mostly standalone visits has limited exposure. A specialty practice where the physician evaluates the patient and treats them in the same encounter is exposed on a large share of its Medicare claims.

The numbers bear that out. Milliman, in an analysis commissioned by the American Academy of Dermatology Association, estimates the policy would reduce Medicare allowed amounts by about $969 million nationally. Dermatology alone would absorb about $291 million of that, roughly 30% of the total, and see a 7% reduction in its fee schedule allowed amounts (Milliman, updated Oct. 12, 2026). Avalere found that about 60% of dermatology E/M claims fall within the policy's scope (Avalere Health, Oct. 7, 2026).

Layer in the rest of the rule and the projected 2027 cuts by specialty look like this: about 9% for dermatology and ENT, 7% for orthopedic surgery, 3% for ophthalmology and 2% for urology and pain management (Becker's ASC, Oct. 14, 2026). CMS also expects podiatry to be among the hardest hit by the same day policy (Avalere Health).

So, a policy that looks modest across the whole Medicare program (about 1% of fee schedule spending, per Milliman) lands hard on particular practice models.

The Cuts Compound

The same day E/M reduction does not arrive alone. The proposed rule also overhauls the practice expense methodology, phasing out the indirect practice cost indices at 50% in 2027 and eliminating them in 2028. Avalere estimates that once fully implemented, those changes combined with the modifier 25 policy could reduce dermatology Medicare payment by nearly 16% compared with 2026 (Avalere Health, Oct. 7, 2026).

All of this lands on top of a long decline. The AMA reports that Medicare physician pay fell 33% from 2001 to 2025 after adjusting for inflation (AMA, April 21, 2025).

That means leaders should not evaluate each CMS proposal on its own. The useful exercise is to model the combined effect across the practice.

Watch Your Commercial Contracts Too

I spent nearly 25 years on the payer side at Humana, and I can tell you that when Medicare moves, commercial payors pay attention. This risk reaches your commercial book in two ways.

First, many commercial contracts set rates as a percentage of the current Medicare fee schedule. If your contract floats with Medicare and does not lock in a base year, the RVU and practice expense changes can flow straight into your commercial rates, and some contracts adopt Medicare payment policies by reference.

Second, payors have tried this exact cut before. Anthem announced a 50% reduction for modifier 25 E/M visits in 2017 and rescinded it in 2018 after pressure from the AMA and specialty societies (AMA, 2018). A Medicare precedent would make the next attempt much easier for a payor to defend.

This is where we spend our time at Accretive. We review the reimbursement language in your payor contracts, identify which agreements are tied to the current Medicare schedule, and negotiate protections (a fixed base year, a rate floor or carveouts for key codes) before the change reaches your remittances.

Start With Your Claims Data

The important question is not whether the policy sounds significant nationally. It is how often the rule would touch your own claims.

Practices should identify:

·       How often E/M visits and procedures are billed on the same day. Count the encounters where a separately identifiable E/M service is billed alongside a procedure with a 0, 10 or 90 day global period.

·       Which CPT codes drive the exposure. High frequency combinations matter much more than isolated procedures.

·       The reimbursement tied to those encounters. Model what last year's Medicare payments would have been with the reduction in place.

·       Which physicians and service lines are most affected. Exposure may be concentrated in one subspecialty or a few providers.

·       How Medicare heavy the relevant patient population is. A practice with substantial Medicare volume will feel this more than one with a diversified payor mix.

This analysis turns an abstract regulatory proposal into something leadership can plan around.

A Simple Example

Consider a hypothetical specialty practice with 4,000 Medicare encounters a year where a qualifying procedure and a separately payable E/M service occur on the same day. Assume the lower priced service averages a $100 Medicare payment.

At a 50% reduction, the practice receives $50 less per encounter. Across 4,000 encounters, that is $200,000 a year. The actual figure for any practice could be higher or lower, and not every same day encounter will fall within the policy. But it shows why utilization matters: small changes at the claim level become meaningful changes at the enterprise level.

The coalition of physician groups opposing the rule makes the point at the code level. For CPT 11300, the example CMS itself cites, they estimate the reduced payment would be about $45 against roughly $60 in clinical staff, supply and equipment costs, before counting any physician work (Becker's ASC, Sept. 22, 2026).

What Practices Should Not Do

The right response is not to make clinical decisions to preserve reimbursement. Patient care and medical necessity stay at the center. Nor is changing coding patterns the answer. Services must continue to be coded and documented accurately and in line with Medicare requirements.

Instead, leadership should use the proposed rule to better understand the economics of its care model: where these encounters occur, how profitable those service lines are and whether the broader operating model holds up.

The Bigger Issue: Practice Economics

CMS is paying closer attention to how Medicare pays when multiple services are delivered in the same encounter. Whether or not every element of the 2027 proposal is finalized, the direction is clear, and knowing total collections is no longer enough.

Leadership should understand:

·       Which services generate margin.

·       Which services subsidize others.

·       How reimbursement changes affect physician compensation.

·       Whether staffing models remain sustainable.

·       Whether payor contracts adequately reimburse the resources required to deliver care.

·       How changes in Medicare reimbursement affect the broader strategic plan.

With labor, supply and overhead costs rising, those questions are becoming urgent.

Prepare Before the Final Rule

The policy is still a proposal. On August 27, the AMA and more than 150 physician and healthcare organizations sent a joint letter to CMS Administrator Mehmet Oz, MD asking him to drop it (Becker's ASC, Sept. 22, 2026). Comments closed September 14, and a final rule is expected by November 1, with most changes effective January 1, 2027 (AMA, Sept. 4, 2026). CMS could finalize, narrow or withdraw the policy.

That uncertainty is not a reason to wait. It is a reason to scenario plan. Practices that identify their exposure now will be in a much better position to evaluate the final rule, update budgets and decide whether their operating or reimbursement strategy needs to change.

At Accretive Health Advisors, we help specialty physician practices translate reimbursement policy into practice level financial analysis, and then we take that analysis to the negotiating table with your commercial payors. CMS writes the rule at a national level. We help you understand what it means for your own economics, and we make sure your payor contracts do not quietly carry the same cut forward.

Sources

·       CMS, "Calendar Year (CY) 2027 Medicare Physician Fee Schedule Proposed Rule" fact sheet, July 14, 2026. https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2027-medicare-physician-fee-schedule-proposed-rule

·       CMS, CY 2027 PFS Proposed Rule (CMS-1848-P), 91 FR 43842, July 16, 2026. https://www.cms.gov/medicare/payment/fee-schedules/physician/federal-regulation-notices/cms-1848-p

·       Becker's ASC, "A 50% Medicare cut has physicians sounding the alarm," Sept. 22, 2026. https://www.beckersasc.com/asc-coding-billing-and-collections/a-50-medicare-cut-has-physicians-sounding-the-alarm/

·       Becker's ASC, "Medicare's proposed 2027 pay cuts, by specialty," Oct. 14, 2026. https://www.beckersasc.com/asc-coding-billing-and-collections/medicares-proposed-2027-pay-cuts-by-specialty/

·       Milliman, "Estimated payment impact of the CY 2027 MPFS proposed modifier 25 policy on same-day dermatology services," updated Oct. 12, 2026. https://www.milliman.com/en/insight/cy-2027-mpfs-proposed-modifier-25-policy-impact

·       Avalere Health, "Medicare's proposed IPCI and modifier 25 changes could reduce dermatology reimbursement," Oct. 7, 2026. https://avalerehealth.com/thought-leadership/medicares-proposed-ipci-and-modifier-25-changes-could-reduce-dermatology-reimbursement/

·       AMA, "2027 proposed Medicare fee schedule: What physicians need to know," Sept. 4, 2026. https://www.ama-assn.org/practice-management/medicare-medicaid/2027-proposed-medicare-fee-schedule-what-physicians-need-know

·       AMA, "Medicare physician pay has plummeted since 2001. Find out why," April 21, 2025. https://www.ama-assn.org/practice-management/medicare-medicaid/medicare-physician-pay-has-plummeted-2001-find-out-why

·       AMA, "A win for doctors: Anthem rescinds pay cut for same-day services," 2018. https://www.ama-assn.org/practice-management/private-payer/win-doctors-anthem-rescinds-pay-cut-same-day-services