Medicare is finalizing a controversial cut in specialty care next year
By Rebecca Pifer | Published: 2025-11-03 13:02:00 | Source: Healthcare Dive – Latest News
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Medicare has controversially reduced wages for specialty doctors next year, normalizing reimbursement between specialists and primary care doctors and limiting the influence of the powerful physician association in setting prices.
CMS finalized the 2026 Medicare physician fee schedule on Friday. The massive payment base includes what’s called an “efficiency adjustment,” which reduces payment for thousands of services including surgeries, outpatient interventions, pain management and more starting next year.
The -2.5% adjustment is intended to take into account that non-time-based services will become more efficient over time as technology and workflow improve. As a result, these services have become easier to perform, so Medicare is overpaying, regulators say.
“CMS promotes primary care as the foundation of a better health care system while ensuring that Medicare dollars support true value for patients, not the kind of waste or abuse that erodes trust in the system,” Medicare Director Chris Klump said in a statement. “Our goal is simple: to achieve better patient outcomes and to be wise stewards of the taxpayer resources that make medical care possible.”
However, specialty groups are not happy with the change, arguing that it is based on faulty logic and will harm American doctors.
“These CMS policies represent poor policy decisions that demonstrate CMS’s unwillingness to listen to doctors who are under significant financial pressure,” Dr. Patrick Giam, president of the American Society of Anesthesiologists, said in an email statement.
Specialty cuts are on the horizon
The content management system (CMS) has been finalized Medicare fee schedule for 2026Â On Friday, one day before the rule was scheduled to take place on November 1st. The agency was able to meet the legal deadline even during the government shutdown after bringing back furloughed workers to help with its operations earlier in the week.
The industry is still waiting for Medicare to finalize it Outpatient payment rules For the year 2026, in addition to the payment rules Home health and End stage kidney disease.
Overall, the physician fee schedule reinforces key provisions of the version proposed in July, including a one-time 2.5% reimbursement increase for doctors that Congress introduced in the “big, beautiful bill.”
But the efficiency adjustment erases pay increases for more than 7,000 services, according to the specialty groups. The -2.5% rate applies to all codes except those that are time-based, such as assessment and management services, behavioral health services, and care management.
Regulators said the efficiency adjustment is needed to realign payments for specialty and primary care, which have historically been undervalued in the fee schedule. They blamed it in part on the American Medical Association, a powerful lobbying group for doctors with outsized influence over the medical billing system.
In particular, CMS objected to the use of American Medical Association surveys to estimate the amount of time a physician takes to perform a service, the intensity of work and other factors that affect payment.
Regulators argue that the surveys are subjective, have low response rates, and that participating doctors are financially motivated to inflate the difficulty of their work.
Friday’s final rule does not eliminate the surveys but “rebalances the approach,” organizers said in a news release. The policy is a blow to the AMA, since it reduces the physician association’s influence in setting rates.
However, the adjustment is arbitrary and based on false assumptions, according to physician groups — including the AMA.
One recent study found There was no efficiency gain In procedure times – and that some procedures are actually becoming more complex and taking doctors longer to perform.
“The AMA urges CMS to make policy changes on verifiable data, including the results of the Physician Practice Information Survey,” AMA President Dr. Bobby Mukamala said in a statement.
The final rule also reduces reimbursement for services provided by physicians in a facility, such as in hospitals or ambulatory surgery centers. Regulators said more and more doctors are being hired by hospitals years after consolidation, so the current system for determining costs for practice expenses is outdated.
“Private practices across the country are expressing concern that this rule will put them at a disadvantage simply treating patients in a hospital or ambulatory surgery center,” the AMA’s Mukamala said.
Together, the AMA said the efficiency adjustment and facility service rate cuts would result in more than a third of oncologists facing cuts of between 10% and 20% in the next year. Meanwhile, 37% of obstetricians and gynecologists will see their compensation reduced.
Unsurprisingly, however, primary care groups applauded the rule – including the Primary Care Collaborative, which… He said he was eating “Approaches that have long diverted funding away from the interpersonal, primary care that Americans need.”
The American Academy of Family Physicians also said it was pleased to prioritize primary care at the base.
However, the Medical Group Management Association said the rule does not compensate for years of use Lack of funding Or provide future sustainability for doctors.
Physician groups have long called for an overhaul of the Medicare billing system. Because annual updates are required by law to be budget neutral, pay increases for one group of doctors must generally be offset by reductions for others. Although Congress usually intervenes to approve increases before cuts take effect, this creates a financial headache for American doctors, who instead want the Medicare program to tie annual increases to inflation.
The final fee schedule “includes several policies that would threaten the medical groups’ financial sustainability and cause significant disruption to their operations,” Anders Gelberg, senior vice president of government affairs at MGMA, said in a statement.
Alternative payment models, skin substitutes, telehealth, and more
CMS also finalized, for the first time, two separate conversion factors for physicians depending on whether they participate in alternative payment models or not. Conversion factors become payment rates after they are applied to the scale of resources used to provide the medical service.
The conversion factor update is three times greater for eligible physicians Anti-personnel mines Of those who do not participate in arrangements — 0.75% versus 0.25% — to reward doctors who bear responsibility for the quality and cost of care, according to regulators.
Friday’s rule “realigns physician incentives and helps move our country from a patient care system to a true health care system,” Health and Human Services Secretary Robert F. Kennedy Jr. said. He said in a statement.
The rule also cracks down on inappropriate spending on skin substitutes, materials used to replace skin and aid wound healing. Medicare spending on skin substitutes has risen from $256 million in 2019 to more than $10 billion in 2024, according to government data. That’s because providers push the products without clear evidence of clinical value, sometimes to increase profits, CMS said.
Next year, the agency will begin paying for skin substitutes as supplies, rather than biological materials. That would reduce Medicare spending on the products by about 90%, saving the program nearly $20 billion next year, CMS said.
The final rule also expands some telehealth flexibility, including lifting frequency limits on virtual care provided to patients in hospitals and allowing physician educators to supervise residents via video.
However, CMS allows others to expire. Notably, after 2025, doctors will no longer be allowed to bill Medicare for after-hours telehealth visits they perform from home.
CMS also finalized a new mandatory payment model aimed at increasing accountability for specialists who treat beneficiaries with heart failure and low back pain, two important areas of Medicare spending.
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