Coding

Changes to Physician Fee Schedule (PFS) for 2026

Paul Saiz, MD

Co-Vice Chair, NASS Coding Committee 3 Crosses Orthopaedic Spine Las Cruces, NM


Conversion Factor Changes for 2026

For qualified providers, the 2026 conversion factor will be $33.57, compared to $33.40 for non-qualified providers, representing an increase from the 2025 rate of $32.35. This adjustment includes a one-time budget increase of 2.5%, as well as a Budget Neutrality adjustment of +0.49%. The conversion factor is a critical component of the Medicare payment formula: Payment = Conversion Factor (CF) x RVUs x Geographic Modifier (GPCI).

The Budget Neutrality adjustment is another variable influencing the conversion factor. It is generally applied when projected RVUs differ from expectations.

Beginning in 2026, CMS will implement an Efficiency Adjustment, resulting in a negative 2.5% reduction for non-time-based services. CMS has stated that “physicians inevitably will become more efficient in delivering these services.” As a result, specialties such as orthopedics and neurosurgery may experience a 3% to 5% reduction in payments for non-time based (intra-service time) services.

Practice Expense Changes in 2026

CMS has found that physicians working in hospitals or ambulatory surgical centers (ASCs), referred to as facilities, have lower practice expense (PE) costs compared to those practicing in non-facility settings. According to CMS, allocating indirect costs for PE RVUs at the same rate for both facility and non-facility settings no longer accurately represents current clinical practices. Practice expense is a key factor in how Relative Value Units (RVUs) are calculated:

RVUs = Practice Expense (PE) + Physician Work + Professional Liability Expense

As a result, CMS will reduce PE payments by 50% for practitioners working in facilities. This reduction means that some of these PE RVUs will be reallocated to physicians providing services in non-facility or office-based settings. Neurosurgeons and orthopedic surgeons performing procedures in facilities can expect payment reductions of about 7% and 9%, respectively. In contrast, physicians working outside of facilities will likely see a payment increase of 5-6%.

Telehealth Updates

  • Virtual direct supervision is now a permanent feature. Doctors may meet supervision requirements by using real-time, audio-video communication for all services, except those that are classified as 10- or 90-day global procedures.
  • There are no longer frequency restrictions on follow-up telehealth visits for hospital inpatients and nursing facility residents, as well as for critical care telehealth consultations.
  • A streamlined process has been established for updating the Medicare Telehealth List, condensing it from five steps to three.
  • Medicare Telehealth will add five new services to its coverage list in 2026.

E/M and Surgical Care Policies

The G2211 add-on code may be billed with home and residence E/M visits beginning in 2026. CMS expects utilization to continue increasing.

Modifier -54: CMS is expanding use of modifier -54 when surgeons provide only the operative portion of a global service. This is to be used when postoperative care is provided by other physicians. CMS continues to reassess the valuation of global surgical packages based on postoperative visit utilization data.

Quality Payment Program Changes in 2026

Anticipated changes to the Merit-Based Incentive Payment System (MIPS) program include maintaining the performance threshold at 75 points for 3 more years. It is also anticipated that small and solo practitioners will remain disproportionately affected by MIPS penalties. CMS also estimates that 87% of clinicians will receive a positive adjustment in 2026 payment year.

CMS aims to move at least 80% of providers to Alternative Payment Models (APMs) or MIPS Value Pathways (MVPs). Traditional MIPS are scheduled to sunset in 2027. There are currently 21 existing MVPs. There are 6 new MVPs that will be instituted which are focused on radiology, interventional radiology, pathology, podiatry, vascular surgery and neuropsychology.

Upcoming New Ambulatory Specialty Model—Low Back Pain

CMS is proposing a new mandatory ambulatory specialty model (ASM) in select geographical areas which will start in 2027 and run through 2031. The goal of this new model is to test whether adjusting payments for specialists- based on their performance on targeted measures- will enhance quality of care and reduce cost through more effective chronic condition management. The measures that will be evaluated will include quality, cost, care coordination and meaningful use of electronic health records (EHR).

The low back pain model will likely include multiple specialties, including anesthesiology, PM&R, neurosurgery, orthopedic surgery, pain management, and interventional radiology. The goal of the ASM is to encourage better collaboration between specialists and primary care physicians.

Like MIPS, ASM performance could generate payment adjustments of +/- 9% for physicians. The payment adjustments could reach as much as +/- 12% by 2033. Quality measure sets to be used will also involve some current MIPS metrics. It is anticipated that the metrics to be used will be complex. Closer to the time of initiation of the ASM, NASS will be doing a webinar to discuss specifics.

While there is possible upside, this appears to be only for high performers. A minority of physicians may earn positive payment adjustments if they outperform peers on ASM measures, but early modeling suggests most physicians will face net reductions under the finalized structure.

WISeR Model

Wasteful and Inappropriate Services Reduction Model

Starting in January 2026, CMS will establish technology-enabled prior authorization and pre-payment review processes for some Medicare services in 6 states: New Jersey, Ohio, Oklahoma, Texas, Arizona, and Washington. The specific services to be affected include epidural steroid injections, cervical spinal fusion, percutaneous lumbar decompression as well as percutaneous vertebral augmentation.

This model will use technology (AI) for prior authorization and prepayment review. Per CMS, “While technology will support the review process, final decisions that a request for one of the selected services does not meet Medicare coverage requirements will be made by licensed clinicians, not machines.”

The integration of AI and machine learning technologies and Medicare administration represents a significant technological advancement that could reshape how government health care programs operate in the future. If this pilot program demonstrates effective fraud reduction, without significant patient care disruption, CMS may expand prior authorization requirements to additional services and states.

Site Neutral Payment Policy

The Centers for Medicare & Medicaid Services (CMS) intends to begin phasing out the inpatient only (IPO) list over a three-year period beginning in 2026. This process will initially affect more than 285 musculoskeletal services, including numerous spine procedures. With CMS's broader aim of implementing site-neutral payment policies, reimbursement rates for services will become standardized across hospitals, ambulatory surgery centers (ASCs), and office settings.

For spine surgeons and hospitals, these changes suggest that surgeons may have increased discretion regarding the appropriate setting for surgical procedures. However, the economic advantages currently afforded to hospitals could render certain procedures, such as adult scoliosis surgery, less financially feasible due to higher associated costs. Consequently, both spine surgeons and hospital administrators may need to evaluate the potential benefits of transitioning applicable cases to ASCs or office-based environments.

In conclusion, the evolving environment shaped by CMS, advances in information technology, and emerging ambulatory specialty care models contribute to an uncertain outlook for spine care providers.

Author Disclosure

P Saiz: Other: TurningPoint Healthcare Solutions (D); Stock Ownership: Doctorpedia (None, <1%).

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