What You Should Know:
– The Centers for Medicare & Medicaid Services (CMS) today issued a proposed rule for the Calendar Year (CY) 2026 Medicare Physician Fee Schedule (PFS).
– The proposal aims to increase quality care for Medicare recipients while significantly reducing unnecessary spending. Key initiatives include advancing primary care management through new quality measures, reducing waste in skin substitute spending, and introducing a new payment model focused on improving chronic disease management.
Reducing Medicare Spending on Skin Substitutes
Medicare spending on skin substitutes has seen unprecedented growth, surging from $256 million in 2019 to over $10 billion in 2024, according to Medicare Part B claims data. CMS attributes this dramatic increase largely to abusive pricing practices, including the use of products with limited clinical value evidence. A notable instance involved the CMS Fraud Defense Operations Center stopping over $1 million in improper payments for skin substitutes to a medical group practice where services were allegedly performed by a psychiatrist owner.
To address this, CMS is proposing to pay for skin substitutes as incident-to supplies, a change expected to reduce spending on these products by nearly 90%. These proposed savings are intended to benefit Medicare and taxpayers without compromising patient access or quality of care, incentivizing the use of products with stronger clinical evidence.
Proposed Ambulatory Specialty Model (ASM)
CMS is proposing the new Ambulatory Specialty Model (ASM), a mandatory payment model specifically targeting specialty care for beneficiaries with heart failure and low back pain – both significant areas of Medicare spending. The model aims to enhance care quality and reduce low-value care by improving upstream chronic disease management. Participants will be held accountable for their performance, with the goal of generating savings.
The proposed ASM, one of the newest CMS Innovation Center models, seeks to improve beneficiary and provider engagement, incentivize preventive care, and increase financial accountability for specialists. It rewards specialists who detect early signs of worsening chronic conditions, enhance patient function, reduce avoidable hospitalizations, and use technology for electronic communication and data sharing with patients and PCPs. If finalized, the model will commence in January 2027 and run for five performance years through December 2031.
Shifting Focus to Prevention and Wellness
CMS is proposing several changes to emphasize prevention and wellness in chronic disease management:
- Reducing Behavioral Health Burdens: Proposals aim to reduce burdens associated with integrating behavioral health treatment into advanced primary care management.
- New Quality Measures: Ten quality measures that did not directly improve patient health outcomes will be removed, and five new outcome measures focusing on chronic disease prevention, including prescreening for diabetes, will be added.
- Medicare Diabetes Prevention Program: If finalized, changes to this program will allow more Medicare beneficiaries free access to coaching, peer support, and practical training in dietary change, physical activity, and behavior change strategies to delay or prevent Type 2 diabetes.
- Request for Information (RFI): CMS is issuing an RFI to gather recommendations on improving wellness, prevention, and chronic disease management, including input on nutrition counseling and physical activity.
Optimizing Payment Accuracy
CMS is proposing to reduce payment differentials across care settings by using hospital data for more accurate payment rate calculations for certain services, and by better accounting for increased efficiencies in procedures and tests. CMS also signals an interest in moving away from low-response rate practitioner surveys for valuing services, preferring empiric information instead.
To recognize medical care innovations, CMS is proposing to:
- Make COVID-era flexibilities permanent and simplify processes for telehealth services.
- Broaden payment policies for digital mental health treatment devices to increase patient options.
Beginning in 2026, there will be two separate conversion factors for Qualifying APM Participants (QPs) and non-QP clinicians. The CY 2026 qualifying APM conversion factor is projected to increase by $1.24 (3.83%) to $33.59 from the current $32.35. Similarly, the CY 2026 nonqualifying APM conversion factor is projected to increase by $1.17 (3.62%) to $33.42 from $32.35.
Next Stetps
The 60-day comment period for the CY 2026 PFS proposed rule (CMS-1832 P) ends on September 12, 2025. For a fact sheet on the CY 2026 Physician Fee Schedule proposed rule, please visit https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-pfs-proposed-rule-cms-1832-p.
