Important Update: CMS releases CY 2026 Physician Fee Schedule and Hospital Outpatient/ASC Proposed Rules
Last week, CMS posted two proposed rules updating the Medicare payment policies for the Physician Fee Schedule (PFS) and the Hospital Outpatient Prospective Payment System (OPPS)/Ambulatory Surgical Center (ASC) for calendar year (CY) 2026.
Some highlights:
PFS:
Beginning in CY 2026, as required by statute, there will be two separate conversion factors: one for qualifying participants (QPs) in an alternative payment model (APM) and one for physicians and practitioners who are not QPs. By statute, QPs are those that meet certain thresholds for participation in an Advanced APM, which encompasses a payment model that has features to ensure accountability for quality and cost of care.
The proposed CY 2026 qualifying APM conversion factor of $33.59 would represent a projected increase of $1.24 (+3.83%) from the current conversion factor of $32.35. The proposed CY 2026 nonqualifying APM conversion factor of $33.42 would represent a projected increase of $1.17 (+3.62%) from the current conversion factor of $32.35. CMS is also proposing updates to the geographic practice cost indices (GPCIs) and malpractice relative value units (RVUs), per statutory requirements.
For CY 2026, CMS is proposing to reimburse skin substitute products as incident-to supplies when used as part of a covered application procedure in non-facility (office) setting and the hospital outpatient and ASC settings. Additionally, CMS intends to align the categorization of skin substitutes with three FDA regulatory classifications: Pre-Market Approvals (PMAs), 510(k) clearances/De Novo authorizations, and 361 Human Cells, Tissues, and Cellular or Tissue-Based Products (HCT/P).
CMS also proposes simplifying the process for adding services to the Medicare Telehealth Services List for CY 2026. This would involve eliminating the distinction between provisional and permanent telehealth services and streamlining the review criteria to focus solely on whether a service can be delivered via an interactive, two-way audio-video telecommunication. In addition, for services that must be provided under the direct supervision of a physician or other supervising practitioner, CMS is proposing to permanently adopt a definition of direct supervision that permits using real-time, two-way audio and visual interactive telecommunications (excluding audio-only) to meet the supervision requirement.
Finally, CMS proposes permanently eliminating frequency limitations for subsequent inpatient visits, nursing facility visits, and critical care consultations.
OPPS/ASC:
To expand beneficiary access to care and potentially reduce out-of-pocket costs, CMS is proposing to phase out the Inpatient Only (IPO) list over a three-year period. This process would begin in CY 2026 by removing 285 procedures—primarily musculoskeletal procedures.
For CY 2026, CMS is also proposing revisions to the criteria for the ASC Covered Procedures List (ASC CPL). These changes include modifying the general standard criteria and removing five general exclusion criteria. Rather than eliminating these considerations entirely, CMS plans to relocate them to a new section as nonbinding physician guidance focused on patient safety. As a result of these revisions, CMS is proposing to add 276 procedures to the ASC CPL. In addition, 271 codes proposed for removal from the IPO list for CY 2026 are also proposed for inclusion on the ASC CPL.
CMS is proposing to "unpackage" skin substitute products from their associated application services under the hospital outpatient and ASC settings and instead establish three new Ambulatory Payment Classifications (APCs) based on relevant product characteristics. This would replace the current packaged payment methodology when used during application procedures as reported with CPT codes 15271–15278 and HCPCS codes C5271-C5278. Additionally, CMS intends to align the categorization of skin substitutes with three FDA regulatory classifications: PMAs, 510(k) clearances/De Novo authorizations, and 361 HCT/Ps.
CMS notes the need to address the payment policies for software as a service (SaaS), as there is no comprehensive Medicare payment policy to support to SaaS. For CY 2026, CMS is soliciting public comments on payment policies for SaaS under the OPPS, including insights gained from risk-bearing payment models and feedback on how to better reflect the value and payment for these technologies in clinical practice. CMS is also requesting comments on this topic under the CY 2026 PFS proposed rule.
