CMR Expansion Program

MEDICARE PHYSICIAN FEE SCHEDULE (MPFS) BACKGROUND – CY2026 UPDATE

Since its implementation in 1992, the Medicare Physician Fee Schedule (MPFS) has served as the foundational payment system for physicians and other qualified healthcare professionals. Under the MPFS, Medicare reimburses services furnished across a wide range of care settings, including physician offices, hospital outpatient departments (HOPDs), ambulatory surgical centers (ASCs), skilled nursing facilities, post-acute care settings, hospices, outpatient dialysis facilities, clinical laboratories, and patientsʼ homes. In addition to practitioners, certain suppliers—particularly those furnishing technical services in non-institutional settings—also receive payment under the MPFS.

Payment methodologies under the MPFS differ based on the site of service. For services furnished in non-facility settings such as physician offices, Medicare provides a single global payment that reflects the full complement of resources required to deliver the service, including clinical staff, equipment, and supplies. In contrast, when services are performed in facility settings (e.g., HOPDs or ASCs), MPFS payments to practitioners are limited to the professional component, as the facility receives separate reimbursement under applicable institutional payment systems (e.g., OPPS or ASC payment system) for overhead and technical resources.

For many diagnostic tests and select therapeutic services, the MPFS allows for separate billing of professional and technical components. The professional component (PC) represents the physicianʼs or practitionerʼs interpretation and report, while the technical component (TC) reflects the resources required to perform the test. The TC is often billed by entities such as independent diagnostic testing facilities (IDTFs), imaging centers, or radiation therapy providers.

MPFS payment rates are determined based on relative value units (RVUs), which quantify the relative resources required to furnish each service. RVUs are comprised of three components: physician work (wRVU), practice expense (PE RVU), and malpractice expense (MP RVU). These components are geographically adjusted using the Geographic Practice Cost Indices (GPCIs) to account for regional variation in input costs. The adjusted RVUs are then converted into payment amounts through application of a national conversion factor (CF), which is updated annually and subject to statutory requirements, including budget neutrality adjustments.

For CY2026, the MPFS continues to operate under significant policy and financial pressures, including statutory budget neutrality constraints, ongoing evaluation and revaluation of misvalued codes, and evolving payment policies related to care delivery innovations such as telehealth, remote monitoring, and digital health services. Conversion factor updates remain a focal point, reflecting the interplay between legislative changes, spending targets, and redistributive adjustments across services. Additionally, CMS continues to refine practice expense methodologies, expand data collection efforts, and address site-of-service differentials and payment equity across care settings.

Source: Centers for Medicare & Medicaid Services (CMS) – https://www.cms.gov/medicare/payment/fee-schedules/physician