Medicare physician pay reform 2027: Patients First Act and 4 other bills explained

A House Energy and Commerce health subcommittee hearing on Sept. 15 put the Patients First Act of 2026 at the center of Congress' latest attempt to end the yearly cycle of Medicare physician pay cuts and last-minute patches. The bipartisan bill, along with four related proposals the panel reviewed, would tie annual pay updates to inflation, loosen budget neutrality rules, rebuild MIPS and set new cybersecurity requirements for practices.

Anders Gilberg, senior vice president of government affairs at MGMA, pointed to the bill as the one significant shift on physician pay in recent months. "All in all, we're very pleased to see action on the Hill on some of the very, very important kind of macro issues in physician payment, and this is one of them," Gilberg told Physicians Practice in an interview the day before the hearing.

Here is what each bill would do.

What would the Patients First Act change about Medicare pay?

The Patients First Act (H.R. 9693) would replace the small fixed updates set by the Medicare Access and CHIP Reauthorization Act (MACRA) with an inflation-linked formula. Starting in 2027, the conversion factor update for clinicians outside advanced alternative payment models (APMs) would equal the Medicare Economic Index (MEI) minus 1 percentage point, with a floor of 25 percent and a ceiling of 75 percent of MEI. Qualifying APM participants would get an extra half point.

Reps. John Joyce, R-Pa., and Kim Schrier, D-Wash., both physicians, introduced the bill July 15.

"One of the important things in that would be to at least align future adjustments to the Medicare physician fee schedule annual updates with the Medicare economic index," Gilberg said.

The bill would also extend the 1.0 floor on the work geographic practice cost index through 2031, raising it to 1.025 in years when consumer prices rise more than 2 percent. It would delay scheduled increases in the thresholds clinicians must meet to qualify as advanced APM participants and let HHS lower them. Gilberg said that matters because APM status now drives the conversion factor. "If you can't incentivize people to get into APMs, then the differential and the conversion factor and the like will just hurt practices even more, especially smaller ones that can't take the risk that a large entity could take," he said.

Murad Alam, MD, MSCI, MBA, FAAD, president of the American Academy of Dermatology Association, testified that the formula falls short of full inflation but "takes a big step in the right direction."

Not everyone on the dais agreed. Rep. Raul Ruiz, D-Calif., called the bill "a good next step, but this isn't the fix," and pressed for updates pegged to the full MEI. Schrier answered that critique later in the hearing. "What we do here in Washington, D.C., is all about the art of the possible," she said.

The bill also folds in two other measures on the hearing list: the Access to Claims Data Act, which would let clinician-led data registries buy Medicare claims data, and the ROOT Act, which would rework imaging appropriate use criteria and exempt practices with 15 or fewer ordering professionals.

How would the primary care hybrid payment work?

From 2027 through 2031, eligible primary care clinicians could choose a monthly per-patient payment in place of fee-for-service billing for a set of core services. Those services are care management, behavioral health integration, office evaluation and management visits (in person or by telehealth) and communications such as phone calls, emails and portal messages.

The payment would equal one-twelfth of the national average annual fee schedule payment for those services, adjusted for geography and risk. Patients would owe no cost sharing on it, and the payments would sit outside fee schedule budget neutrality.

To qualify, a clinician must be a family medicine, internal medicine, geriatric or pediatric physician, or a physician assistant, nurse practitioner or clinical nurse specialist, with at least 60 percent of Medicare payments coming from those services. Practices with non-physician ownership or control are excluded unless they have 15 or fewer clinicians.

Rebecca Andrews, MS, MD, MACP, immediate past chair of the American College of Physicians Board of Regents, said the model would pay for work that visit-based billing misses. "If my pharmacist from my office calls patients and makes sure they're taking their medications, that helps them stay out of the hospital. But I need a way to be able to pay for that," she said.

How would the bills change budget neutrality?

Budget neutrality forces a cut to the conversion factor whenever CMS changes relative values in a way that moves spending by more than $20 million. "That's in law, and that's why we're pursuing it on the congressional side. CMS can't change that on their own, but it has a huge implication," Gilberg said.

Both the Patients First Act and the Provider Reimbursement Stability Act (H.R. 8163) from Reps. Greg Murphy, R-N.C., and Brad Schneider, D-Ill., would raise that threshold. H.R. 8163 sets it at $54.3 million starting in 2027. The Patients First Act sets it at $57.64 million starting in 2028. Both index the figure to MEI every five years.

Both bills would also force CMS to correct bad utilization guesses. When a newly unbundled or add-on service's estimated spending misses actual spending by more than 0.1 percent of total fee schedule spending, CMS would adjust the conversion factor two years later, up or down, outside budget neutrality.

Gilberg said a 2024 add-on code for complex services shows why. "CMS estimated that utilization would be three times what it turned out to be, and in essence made a $1 billion error in its estimates, which then caused a reduction in the conversion factor that year," he said. "We got the offset without the spending."

The bills would also require CMS to update clinical staff wages, supply prices and equipment prices used in practice expense relative value units at least every five years, all in the same year. "You got to keep the lights on in the practice, you got to pay the staff, you have to buy the supplies. So that's what practice expense covers," Gilberg said.

Finally, both would bar budget neutrality from moving the conversion factor more than 2.5 percent from the prior year.

What would replace MIPS?

Schrier said MIPS costs about 53 hours and nearly $13,000 per physician per year with no clear gains in outcomes. Asked whether dermatology's MIPS measures reflect actual quality, Alam said, "I think the simple answer is they do not."

The Patients First Act would cut the maximum MIPS payment adjustment from 9 percent to 2 percent for 2027 through 2031, then raise it a point a year to 5 percent in 2034. Clinicians could not be penalized if CMS fails to deliver feedback on claims-based measures. In 2032, MIPS would become the Patient Outcome Improvement National Tabulation System (POINTS), adding a care efficiency category, and a Quality Reform Task Force with a clinician majority would advise on measures. Starting in 2032, clinicians in excluded practices would see positive adjustments cut in half.

A separate bill, the Medicare Physician Data-driven Performance Payment System Act (H.R. 8622), from Reps. Mariannette Miller-Meeks, R-Iowa, and Herb Conaway Jr., D-N.J., takes a different approach. Starting in 2028, a clinician's score would scale the annual conversion factor update itself: 1.25 times the update above the performance threshold, 1.0 at it, 0.75 below it and 0.5 for the lowest possible score. The multiplier would not apply in years when the update is negative, and the threshold could not exceed 75 points through 2033.

"A payment model that works for a large health system in an urban area may not work for a 2 or 3 physician practice in rural Iowa," Miller-Meeks said.

What other bills target practices?

The Promoting Fairness for Medicare Providers Act (H.R. 7863) from Reps. Gus Bilirakis, R-Fla., and Ruiz would pay physician offices a facility fee for surgical procedures that use a supply item priced above $500. Starting in 2027, offices that meet HHS standards and accept assignment would receive 90 percent of the ambulatory surgical center facility rate, and patient coinsurance would be capped at the inpatient hospital deductible.

The Health Care Cybersecurity and Resiliency Act of 2026, still a discussion draft, would direct HHS to update the HIPAA Security Rule to require covered entities and business associates to adopt multifactor authentication, encryption of protected health information and monitoring that includes penetration testing. Breach notices would have to state how many people were affected. HHS would also write rules within a year on how recognized security practices factor into fines and audits.

The draft's grants would go to federally qualified health centers, rural health clinics, nonprofit hospitals and Indian Health Service facilities, not independent practices.

Greg Garcia, executive director for cybersecurity at the Health Sector Coordinating Council, urged lawmakers to "avoid congressionally prescribed technical solutions such as multifactor authentication and encryption," arguing that security frameworks should evolve with technology.

Could Congress act before Jan. 1?

Subcommittee Chair Morgan Griffith, R-Va., said Congress will again need to consider a potential doc fix by the end of the year. Frank Pallone Jr., D-N.J., the full committee's ranking member, noted it was the subcommittee's last hearing before members return home for the election, leaving the lame-duck session as the window. The full hearing is available from the committee.

Gilberg is cautious. "I think it's going to be tricky," he said, noting the proposed cuts are small enough to escape attention. "One of the problems we had when the cuts were small is you could get the death by 1,000 cuts," he said. He added that the geographic floor and the expiring APM incentive bonus are also on the table, and that "the last thing we want to do is have this spill into the new year and have it retroactively applied."

Schrier urged the committee to send the Patients First Act straight to markup. "We can't pass yet another short-term fix and leave everybody on edge till the end of the year," she said.

For administrators, that leaves 2027 budgeting with two scenarios: the proposed fee schedule as written, or a legislative package that changes the conversion factor, MIPS exposure and budget neutrality math before Jan. 1.