The 2027 Medicare Physician Fee Schedule: Why the Impact Depends on Your Specialty
A Medicare fee schedule update is rarely as simple as one percentage up or down, and the proposed 2027 Medicare Physician Fee Schedule (PFS) is a good example.
The headline is easy enough. CMS proposed a 2027 conversion factor of $32.84 for physicians who are not Qualifying APM Participants, a 1.68% decrease from 2026, and $33.17 for Qualifying APM Participants, a 1.19% decrease. Most of that drop comes from the expiration of the one year 2.5% increase Congress provided for 2026 (CMS Fact Sheet, July 14, 2026).
But the conversion factor is only the tide. It lifts or lowers every boat by the same amount. Underneath it, CMS is changing how it calculates Practice Expense Relative Value Units (PE RVUs), and that current pulls each specialty in a different direction. For many office specialty practices, the current matters more than the tide, and that is the focus of this article.
Why Practice Expense Matters
Every Medicare fee schedule payment is built from three components: physician work, practice expense and malpractice expense. Practice expense is meant to cover the resources it takes to deliver care in your setting, including clinical staff, equipment, supplies, rent and other overhead. For independent practices that own their offices and employ their own staff, it is often the component that decides whether a service makes money.
CMS is in the middle of a multiyear overhaul of that methodology. For 2027, the agency proposes to:
· Phase out the indirect practice cost indices. These tie each specialty's indirect costs to practice expense per hour data from 2007 or earlier. CMS would apply them at 50% in 2027 and eliminate them in 2028 (CMS Fact Sheet; Avalere Health, Oct. 7, 2026).
· Change how indirect costs are allocated. Indirect practice expense would be allocated using both work RVUs and clinical labor, except for codes with 10 and 90 day global periods (AMA, Sept. 4, 2026).
· Add a stabilizer. A new PE stabilizer and a 5% annual cap on changes for most existing codes are meant to limit volatility (AMA). Avalere notes the cap applies before the phase in and budget neutrality, so a code's final change can still exceed 5%.
· Question the site of service differential. CMS asked for comment on whether the facility versus non facility payment difference is still appropriate (CMS Fact Sheet), which could support expanded site neutral payment down the road (HFMA, July 15, 2026).
CMS says it wants to move toward objective, auditable and routinely updated cost data rather than the older specialty surveys (HFMA). Whatever you think of that goal, the change creates winners and losers. Two practices facing the same conversion factor cut can end up with very different results.
Proposed Impacts Vary Significantly by Specialty
CMS's own impact estimates show how wide the spread is. The estimated combined 2027 impacts on total allowed charges by specialty:
Specialty | Proposed 2027 Impact vs. 2026 |
Clinical Social Work | +12% |
Clinical Psychology | +11% |
Geriatrics | +4% |
Vascular Surgery | +3% |
Interventional Radiology | +3% |
Radiation Oncology | +3% |
Psychiatry | +3% |
Radiology | +2% |
Nurse Practitioner | +2% |
Cardiology | +1% |
Internal Medicine | +1% |
Family Practice | +1% |
Hematology/Oncology | 0% |
Nephrology | 0% |
Anesthesiology | 0% |
Gastroenterology | −1% |
Rheumatology | −1% |
Urology | −2% |
Interventional Pain Management | −2% |
Ophthalmology | −3% |
Podiatry | −4% |
Hand Surgery | −5% |
Orthopedic Surgery | −7% |
Dermatology | −9% |
Otolaryngology (ENT) | −9% |
Source: CMS CY 2027 PFS proposed rule, Table D-B5 (91 FR 43842), as reported by HFMA, Becker's, the ACR, ASH, ASN, the ACC and the AAFP. CMS's specialty estimates reflect RVU changes and do not include the conversion factor reduction.
One important note: CMS's specialty figures leave out the conversion factor cut. For most physicians, the net change is roughly 1.7 points worse than the table shows, which turns a neutral specialty into a cut and dermatology's −9% into something closer to −10.5% (ACR; ASN, July 2026).
These are specialty averages, not a forecast for any one practice. Your results will depend on your procedure mix, payor mix, geographic adjustments and site of service.
But the direction is clear. The specialties with the most procedural work in the office face the largest proposed reductions. Dermatology and ENT also carry the proposed 50% same day E/M reduction, which Milliman estimates would cut dermatology's fee schedule allowed amounts by about 7% on its own (Milliman, updated Oct. 12, 2026). We cover that policy in a separate article.
The 2027 Numbers Show Only Half the Change
This is the part many practices will miss. Because the indirect practice cost indices phase out over two years, the 2027 impact table reflects only the first half of the change. Avalere estimates that once fully implemented, the practice expense changes alone would reduce dermatology Medicare payment by about 10%, and close to 16% when combined with the same day E/M policy (Avalere Health, Oct. 7, 2026).
So, a practice that budgets for 2027 and stops there may be planning for the smaller of two hits.
The Headline Percentage Is Not Your Practice's Percentage
Assuming Medicare revenue will fall about 1.68% because the conversion factor did produces a misleading forecast. An orthopedic practice facing roughly −7% before the conversion factor cut has a very different planning problem than a family practice expecting +1%.
Even the specialty average can hide what happens inside one organization. A group that performs a high volume of the codes most affected by the PE changes could land well above or below its published specialty estimate.
The right question is not "How much is Medicare cutting physician reimbursement?" It is "What will the proposed rule do to the specific CPT codes and service mix that drive our practice economics?"
This is the work we do at Accretive. We model the proposed rule against your own claims at the CPT and provider level, show you where the current is running against you, and then carry that analysis into your payor contract strategy.
Office Specialty Groups Should Start Modeling Now
Comments on the proposed rule closed September 14, and CMS is expected to release the final rule by November 1, with most changes effective January 1, 2027 (AMA, Sept. 4, 2026). Waiting for the final rule to evaluate exposure leaves very little time to react. Groups should look at:
· CPT level reimbursement exposure. Identify the services that drive the largest share of Medicare revenue and how the proposed RVU changes affect them.
· Service line profitability. A procedure that has always been financially attractive can look different when reimbursement falls while staffing, rent and supply costs keep rising.
· Commercial contracts. Many commercial contracts set rates as a percentage of the current Medicare fee schedule. If yours floats with Medicare and does not lock in a base year, these RVU changes can flow straight into your commercial rates.
· Site of service strategy. Understand whether performing a service in the office still makes economic sense compared with other settings, especially as CMS revisits the facility differential.
· Operating costs. Reimbursement pressure makes visibility into staffing, supplies, equipment use and overhead more important.
Reimbursement Pressure Is Becoming a Strategic Issue
For independent specialty practices, Medicare reimbursement is no longer just a billing department issue. It drives decisions about staffing, service lines, capital investment, contracting, growth and, for some groups, whether to stay independent. The AMA reports that Medicare physician pay fell 33% from 2001 to 2025 after adjusting for inflation (AMA, April 21, 2025), and the 2027 proposal adds to that pressure.
The practices best positioned for the next cycle will understand their economics at a granular level and see where reimbursement pressure creates risk before it shows up on the income statement.
At Accretive Health Advisors, we help specialty physician groups translate reimbursement changes into practice level financial analysis, evaluate service line economics and negotiate payor contracts that protect them from the next Medicare cut. The tide is the same for everyone. We help you understand which way the current is running for your practice, and we make sure your commercial contracts are not quietly pulling you along with it.
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
· Federal Register, CY 2027 Payment Policies Under the Physician Fee Schedule (CMS-1848-P), 91 FR 43842, July 16, 2026. https://www.federalregister.gov/documents/2026/07/16/2026-14327/medicare-and-medicaid-programs-cy-2027-payment-policies-under-the-physician-fee-schedule-and-other
· HFMA, "2027 Medicare Physician Fee Schedule proposed rule includes broad payment changes," July 15, 2026. https://www.hfma.org/payment-reimbursement-and-managed-care/2027-medicare-physician-fee-schedule/
· Becker's Physician Leadership, "The proposed 2027 Medicare physician pay cuts, by specialty," Oct. 14, 2026. https://www.beckersphysicianleadership.com/compensation/medicares-proposed-2027-pay-cuts-by-specialty/
· 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/
· American College of Cardiology, "CMS Releases 2027 Medicare Physician Fee Schedule Proposed Rule," July 14, 2026. https://www.acc.org/Latest-in-Cardiology/Articles/2026/07/14/21/36/cms-releases-2027
· American College of Radiology, 2027 MPFS Proposed Rule Detailed Summary, July 2026. https://edge.sitecorecloud.io/americancoldf5f-acrorgf92a-productioncb02-3650/media/ACR/Files/Medicare-Medicaid/MPFS/2027-MPFS-PR-Detailed-Summary.pdf
· American Society of Hematology, CY 2027 MPFS Proposed Rule Summary, July 2026. https://www.hematology.org/-/media/hematology/files/advocacy/cy27-mpfs-pr-summary--ash.pdf
· American Society of Nephrology, President's Letter, July 2026. https://www.asn-online.org/policy/webdocs/ASN_President_Letter_July_2026.pdf
· AAFP, 2027 MPFS Proposed Rule Summary, July 17, 2026. https://www.aafp.org/assets/image/upload/v1784322005/pdf_mpfs_summary_071726.pdf
· 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/
· 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
· 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
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