Fiscal Year 2026 Medicare Rate Setting
Key Takeaways
Medicare payments under the Physician Fee Schedule are based on RVUs, geographic adjustments, and a national conversion factor.
Beginning in 2026, CMS will apply two separate conversion factors for qualifying APM participants and non-qualifying providers.
Providers participating in Advanced Alternative Payment Models may receive higher reimbursement if qualifying status is properly established.
Accurate provider enrollment and billing information is critical to ensure APM incentive payments are issued correc
Payments from Medicare have been made under the Physician Fee Schedule (PFS) since 1992. Payments are made for the services of physicians and other qualified billing professionals. Providers’ services paid under the PFS are furnished in a variety of locations, including physician offices, hospitals, ambulatory surgical centers (ASCs), skilled nursing facilities, other post-acute care settings, hospices, outpatient dialysis facilities, clinical laboratories, and beneficiaries’ homes.
PFS payments are based on the resources typically used to furnish the service. Relative value units (RVUs) are applied to each service for work, practice expense, and malpractice expense. These RVUs are added together with a geographic indicators and multiplied by a national conversion factor. Geographic adjusters (geographic practice cost indices) are applied to the total RVUs to account for variation in costs by geographic area.
For most services furnished in an office setting, Medicare makes payments to physicians and other practitioners at a single rate based on the full range of resources involved in furnishing the service.
PFS rates paid to physicians and other billing practitioners in facility settings, such as a hospital outpatient department (HOPD) or an ASC, reflect only the portion of the resources typically incurred by the practitioner while furnishing the service allocating the overhead to the facility.
Beginning in Calendar Year (CY) 2026, federal statutes require two separate conversion factors: one for qualifying alternative payment model (APM) participants (QPs) and one for physicians and practitioners who are not QPs.
A Notice by the Centers for Medicare & Medicaid Services in the federal register, page 35862 cited the following: “Under the Medicare Quality Payment Program, an eligible clinician who participates in an Advanced Alternative Payment Model (APM) and meets or exceeds the applicable payment amount or patient count thresholds for a performance period is a qualifying APM participant (QP) for that year.” 2025-14434.pdf
This federal register on page 35863 went on to cite that they were unable to process payments for several years due to their inability to match provider tax identification numbers to those whom they needed to make an APM payment. “CMS has compiled a list of QPs for whom we were unable to identify any associated TIN to which we can make the APM incentive payment. These QPs, and any others who anticipated receiving an APM Incentive Payment but have not, should follow the instructions to provide CMS with updated Medicare billing information. < Quality Payment Program (QPP)>
By statute, QPs are those providers that meet certain thresholds for participation in an Advanced APM, which means generally that the payment model has features to ensure accountability for quality and cost of care. To determine eligibility practitioners can use the QPP lookup tool at qpp.cms.gov here: https://qpp.cms.gov/participation-lookup?npi= by entering their NPI.
Conversion factors used to create a reimbursement amount for each procedure in the MPFS in 2026 are below. This is the first time the provider community is seeing 2 separate conversion factors. You can see in the table below in 2025 the conversion factor
Having a higher rate of reimbursement for 2026 as a QP will ensure the incentives for participation in the quality incentive program will be dispersed timely. If you are unfamiliar with all of this see Advanced Alternative Payment Models (APMs) - QPP The quick start worksheet can be found by going to the learning resources for QP Status and APM Incentive Payment at https://qpp-cm-prod-content.s3.amazonaws.com/uploads/2925/2024-Learning-Resources-for-QP-Status-and-APM-Incentive-Payment.zip
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