Most practices met the 2026 CMS changes the way they meet every rule cycle: a headline about a payment increase, a vague sense that telehealth was in trouble again, and no clear picture of what actually hits the bottom line. The reality is more specific than the headlines, and in several places it moves in the opposite direction from what the top-line number suggests.
Here is what the 2026 CMS updates changed, which parts affect your reimbursement, and what to act on now.
The Short Answer
Medicare now uses two conversion factors instead of one, and both rose over 2025. But a new -2.5% efficiency adjustment to work RVUs and a change to facility practice expense pull payment back down for many procedural specialties, so a higher conversion factor does not automatically mean higher payment. Telehealth flexibilities were extended through the end of 2027 after a brief lapse, several telehealth provisions became permanent, and skin substitutes moved to a single flat payment rate.
1. Two Conversion Factors, Not One
Beginning 1 January 2026, Medicare applies separate conversion factors depending on whether a clinician is a qualifying participant (QP) in an advanced alternative payment model:
- $33.5675 for qualifying APM participants – an increase of roughly 3.77% over the 2025 rate.
- $33.4009 for everyone else – an increase of roughly 3.26%.
Both figures include a one-year 2.5% statutory increase and a small positive budget-neutrality adjustment. The practical consequence is that the same CPT code now pays two different amounts depending on your APM status, which makes participation a financial question rather than an administrative one – and makes your fee schedule loads and contract benchmarks something to check rather than assume.
2. The Efficiency Adjustment: -2.5% on Work RVUs
This is the change most likely to surprise practices that only read the conversion factor headline. CMS finalized an “efficiency adjustment” that reduces work RVUs – and the intraservice portion of physician time – by 2.5% for most non-time-based services, on the reasoning that these services have become more efficient over time.
What is excluded: time-based codes (including E/M, care management and behavioral health services), services on the Medicare telehealth list, and maternity codes with an MMM global period.
What it means in practice: procedural, radiology and diagnostic-heavy specialties absorb the reduction, while evaluation-and-management-weighted practices are largely shielded. A practice whose revenue is concentrated in procedures can see total Medicare payment fall in 2026 despite a higher conversion factor. If you have not modelled your own code mix against the new RVUs, that is the single most valuable hour of analysis available to you this year.
3. Facility Practice Expense and the Site-of-Service Differential
CMS also reduced the portion of facility practice expense RVUs allocated on the basis of work RVUs to half the amount allocated in the non-facility setting. The effect is a wider payment gap between the same service delivered in an office versus a facility.
For hospital-employed physicians and practices with facility-based service lines, this reshapes the economics of where care is delivered. For office-based practices it matters less directly – but it changes the comparison anyone uses when evaluating employment, provider-based conversions or ASC arrangements.
4. Telehealth: What Became Permanent, and What Has a 2027 Deadline
Telehealth in 2026 split into two categories, and it is worth being precise about which is which.
Permanent, through CMS rulemaking
- Frequency limits on subsequent inpatient visits, subsequent nursing facility visits and critical care consultations furnished by telehealth were permanently removed as of 1 January 2026.
- The distinction between “provisional” and “permanent” services on the Medicare Telehealth Services List was eliminated, simplifying how services get added.
- Direct supervision may now be met permanently through real-time audio-video presence (audio-only does not satisfy it) for many services.
- Behavioral and mental health telehealth in the patient’s home, without geographic restriction, remains permanent – including audio-only where the patient cannot use or does not consent to video.
Temporary, now running to 31 December 2027
The pandemic-era flexibilities lapsed briefly at the end of January 2026 before the Consolidated Appropriations Act, 2026 restored them retroactively and extended them through 31 December 2027. Through that date, non-behavioral telehealth may continue to be furnished to patients at home and in any geographic location, and the broader group of eligible practitioners may continue to bill for it.
Two dates to diary: RHCs and FQHCs may report HCPCS G2025 for non-behavioral telehealth through 31 December 2026, and from 1 January 2028 physical therapists, occupational therapists, speech-language pathologists and audiologists are currently scheduled to lose telehealth billing eligibility absent further congressional action.
What to do: confirm your place-of-service usage (02 versus 10) is correct on every telehealth claim, keep modifier and consent documentation tight, and do not build a service line on the assumption that the 2027 date will move. It might; plan as though it will not.
5. Skin Substitutes Move to a Single Flat Rate
From 1 January 2026, CMS pays for skin substitutes as incident-to supplies rather than as biologicals, grouping products by their FDA regulatory pathway and reimbursing at a single blended rate of approximately $127.28 per square centimetre. CMS cited spending growth from roughly $252 million in 2019 to over $10 billion in 2024 as the reason.
For wound care, podiatry and dermatology practices this is the most consequential single line in the rule. Product selection that was economically neutral under average-sales-price reimbursement is not neutral under a flat rate, and margin analysis needs redoing at the product level. Coding and documentation for application procedures should be reviewed at the same time – see our medical coding service for how we handle specialty-specific code sets.
6. Behavioral Health Integration and the New Specialty Model
CMS continued to expand behavioral health payment, including an optional add-on to Advanced Primary Care Management for practices delivering behavioral health integration or psychiatric Collaborative Care Model services. For primary care and behavioral health practices, this is new billable ground that most groups are not yet capturing.
Looking ahead, CMS finalized the mandatory Ambulatory Specialty Model, a five-year model launching in January 2027 that focuses on heart failure and low back pain. Payment adjustments begin in 2029 and range from -9% to +9%, scaling to as much as ±12% by 2033. Cardiology, orthopedics, neurosurgery and pain management groups should be treating 2026 as the year to get quality reporting and documentation in order, because the performance data that drives those adjustments starts accruing before the money moves.
What This Means for Your Practice: A Practical Checklist
- Reload your fee schedules. Confirm your practice management system is using the correct 2026 conversion factor for your APM status, not a single blended rate.
- Model your top 25 codes. Compare 2025 and 2026 allowables on the codes that carry your volume. The efficiency adjustment shows up here or not at all.
- Check your commercial contracts. Many are benchmarked to a percentage of the Medicare fee schedule, so Medicare changes propagate into commercial revenue automatically – and not always in your favour.
- Audit telehealth claims. Place of service, modifiers, consent documentation and the correct code set for the current list.
- Re-run product margins if you apply skin substitutes.
- Review APM participation as a payment decision, now that QP status carries a different conversion factor.
- Watch the denial trend. Rule changes always produce a denial spike in the first two quarters as payer edits catch up. Categorising those denials early is how you catch a systemic problem while it is still small – our post on the five denial codes quietly draining revenue covers how to run that analysis.
The Part Nobody Budgets For
Every rule cycle costs practices money twice: once through the payment changes themselves, and once through the operational lag while billing catches up. Claims go out on last year’s logic, denials rise, A/R ages, and by the time the pattern is visible a quarter has gone.
That second cost is avoidable. It comes down to whether someone is watching payer edits, code set changes and denial trends continuously rather than annually. That is the work our revenue cycle management team does inside your existing system – certified coders working to current guidelines, denials worked within 48 hours, and reporting that shows the impact while you can still act on it.
Conclusion
The 2026 headline was a payment increase. The detail is more mixed: a higher conversion factor, a real reduction on non-time-based work RVUs, a widening site-of-service gap, telehealth stability with a 2027 expiry, and a product-payment reset that reshapes wound care economics.
Which of those matters most depends entirely on your specialty and code mix. If you want that quantified against your own claims data rather than estimated, a free billing audit will show you where 2026 helped you and where it did not. Book yours here, or read our guide to cutting your days in A/R in half for the follow-up discipline that protects cash flow through any rule cycle.
*Last reviewed: August 2026. Payment rules change; confirm current figures against the CMS final rule before making financial decisions.*
Frequently Asked Questions
What is the 2026 Medicare conversion factor?
There are two. For 2026, CMS set the conversion factor at $33.5675 for clinicians who are qualifying participants in advanced alternative payment models and $33.4009 for those who are not – increases of about 3.77% and 3.26% respectively over 2025.
What is the CMS efficiency adjustment?
A 2.5% reduction to work RVUs and the intraservice portion of physician time for most non-time-based services, effective 1 January 2026. Time-based codes such as E/M and care management, services on the Medicare telehealth list, and maternity codes with an MMM global period are excluded.
Is Medicare telehealth still covered in 2026?
Yes. After a brief lapse at the end of January 2026, the Consolidated Appropriations Act, 2026 retroactively restored the flexibilities and extended them through 31 December 2027, so patients can continue to receive non-behavioral telehealth at home without geographic restriction. Several provisions – including behavioral health telehealth at home and the removal of certain frequency limits – are permanent.
How did skin substitute payment change in 2026?
CMS now pays for skin substitutes as incident-to supplies rather than biologicals, grouped by FDA regulatory pathway and reimbursed at a single blended rate of approximately $127.28 per square centimetre, effective 1 January 2026.
Do the 2026 changes affect commercial payers too?
Often, yes. Many commercial contracts are priced as a percentage of the Medicare physician fee schedule, so changes to RVUs and conversion factors flow through to commercial reimbursement. It is worth reviewing contract language and re-running expected rates rather than assuming commercial revenue is insulated.