2027 fee schedule proposal: Another pay cut and 'MIPS on steroids'

Medicare physician pay is headed down again in 2027, and this time the cut is baked into the math before the rule is even final.

The Centers for Medicare & Medicaid Services released the calendar year 2027 Medicare Physician Fee Schedule proposed rule July 14, and for practice leaders the top line is familiar: lower conversion factors, more budget neutrality reshuffling and a quality program overhaul that trades one acronym for another.

"Unfortunately, the one recurring theme is the inability for Medicare to keep up with inflation in terms of the payments to physicians," Anders Gilberg, senior vice president of government affairs at the Medical Group Management Association, said in an interview with Physicians Practice.

How much would Medicare physician pay drop in 2027?

The proposed conversion factors are $33.1693 for clinicians who are qualifying participants in advanced alternative payment models and $32.8409 for everyone else, decreases of 1.19% and 1.68% from the final 2026 figures. The rule includes statutory updates of 0.75% for qualifying APM participants and 0.25% for all others, plus a 0.53% budget neutrality adjustment tied to proposed work RVU changes. Those increases are swamped by the expiration of the one-year 2.5% conversion factor boost Congress provided for 2026.

Gilberg said the cuts land hardest on independent groups with no other margin to lean on.

"We have practices that are independent, who have to pay their own rent, have to pay their own salaries," he said. "They're dependent on the physician fee schedule because that's how they're paid, 100% in Medicare at least, and it just isn't keeping up."

The result, he said, is practices subsidizing Medicare losses through commercial contracts or selling to health systems that can absorb the losses. "All kinds of different things that are just heaping pressure on physician practices today," he said.

Why do the cuts keep coming back?

Gilberg pointed to Medicare's budget neutrality requirements, which force offsetting cuts elsewhere whenever CMS raises payment for one set of services. The 2027 rule, he said, amplifies the problem rather than solving it.

"You're going to always have to rob Peter to pay Paul, and you may have a very laudable reason to increase, let's say, primary care, but again, at the expense of surgical or other specialties," he said. "It's not a very effective or sustainable system."

He named dermatology and several surgical specialties as likely losers under the proposal, with practice expense changes compounding work RVU policies carried over from last year's rule. CMS is proposing a significant overhaul of how indirect practice expense is allocated, arguing that the current methodology relies on specialty-level survey data that is nearly two decades old.

Gilberg is skeptical the agency has the evidence to back the rebuild. CMS has signaled it wants to move away from the American Medical Association's relative value update process, he said, but without offering an alternative data foundation.

"In justifying their proposals, they don't really have any support data to support what they're trying to do," he said. "They just say they don't necessarily like what the AMA has come up with in the last couple years, which I find kind of disingenuous, to be honest."

What happens to MIPS?

The rule proposes to sunset traditional Merit-based Incentive Payment System reporting in 2029 and move clinicians into MIPS Value Pathways. MGMA has criticized MIPS for years, but Gilberg said the replacement is no victory.

"What are value pathways? They're just MIPS on steroids," he said.

His concern is multiplication. A 30-physician multispecialty group could face a MIPS-like measure set for each specialty under the MVP framework, he said, potentially pushing a single practice's reporting obligation to dozens of measures. "Just exponentially increase the burden that occurred in MIPS without, after all this time, moving these practices into actual value-based care," he said.

What should administrators watch in the fine print?

Beyond the headline numbers, Gilberg urged practice leaders to track what he called the "under the hood" adjustments, which can swing revenue sharply by specialty and code mix.

He flagged the proposed changes to modifier 25 billing as an example. CMS proposes that when an evaluation and management visit and a global period procedure occur the same day, Medicare would pay the most expensive service at 100% and all other services at 50%.

"That could be substantial for a dermatology practice, for example," Gilberg said. "It's just very important for your readers and listeners to just be aware that these changes can have dramatic effects. Some specialties will get a slight increase, and some will see a dramatic decrease."

For small and rural groups, he said, the rule offers no administrative relief while adding new modifiers, new practice expense mechanics and program integrity initiatives. "They're being challenged to do more with less," he said. "This rule does not do anything to address the administrative burden for those practices."

One bright spot he identified: the rule's accountable care push. CMS is proposing changes to the Medicare Shared Savings Program's benchmarking and financial methodology intended to strengthen incentives for ACOs to participate, provisions Gilberg said MGMA will likely support in its comments.

Will Congress step in before the cut hits?

The conversion factor fix is legislative, not regulatory, and Gilberg is not counting on a rescue.

"I'm not entirely sure they're going to act to avert this cut this year," he said. "These smaller cuts sometimes can be overlooked, but they're real cuts. These are actual cuts, not cuts in growth rate." Any fix, he said, will likely wait for the lame duck session after the election, alongside the annual extenders package.

A longer-term vehicle arrived the day after the rule. Reps. John Joyce, M.D., Greg Murphy, M.D., and Kim Schrier, M.D., chairs of the GOP and Democratic Doctors Caucuses, introduced the bipartisan Patients First Act on July 15. The bill would tie physician reimbursement to a measure of medical inflation, replace MIPS with a new physician-led quality program and raise the budget neutrality threshold from $20 million to $54.3 million.

Gilberg called it an important bill, though he noted it does nothing for the immediate 2027 cut. In a formal MGMA statement, he said the legislation's payment, quality reporting, value-based care and budget neutrality provisions lay a solid foundation for addressing the underlying issues driving financial and administrative burdens on medical groups.

Comments are due Sept. 14. Will CMS budge?

The 60-day comment period on the proposed rule closes Sept. 14. Gilberg's expectations are modest. He pointed to last year's efficiency adjustment on work RVUs, which hit surgeons and other proceduralists, as a policy the agency declined to revisit despite pushback.

"I have not seen a lot of course corrections so far with the administration," he said. "I hope they do listen to us."

Until then, his advice to practice leaders is to run the numbers on their own code mix rather than trusting the topline figure, because in a budget neutral system, the average hides the damage.