Conversion Factors

Beginning in 2026 there will be four separate conversion factors to guide reimbursements for the Physician Fee Schedule. Currently there are two – one for anesthesia and one for other physician services. The new wrinkle is to establish separate conversion factors for physicians who are qualifying participants (QPs) in advanced alternative payment models (APMs). (https://www.ama-assn.org/system/files/2026-mpfs-nprm-topline-summary.pdf)

Under MACRA (Medicare Access and CHIP Reauthorization Act of 2015), physicians who are QPs will receive a slightly higher conversion factor update and, thus, slightly higher Medicare payments in 2026 compared to physicians who are not QPs. Each conversion factor also reflects the temporary, one-year 2.5 percent update enacted in HR1 – The Great Big Beautiful Bill.

For physicians who are QPs the conversion factor for 2026 is $33.5875, an increase from $32.3465, which reflects a permanent 0.75 percent update, a temporary 2.5 percent update, and a .55 percent budget neutrality adjustment and applies to Medicare payments to QPs in advanced APMs.

For physicians who are not QPs including Merit-based Incentive Payment System (MIPS) eligible clinicians, the conversion factor for 2026 is $33.4209, an increase from $32.3465, which reflects a permanent 0.25 percent update, a temporary 2.5 percent update, and a .55 percent budget neutrality adjustment.

Similarly, CMS proposes two anesthesia conversion factors. The anesthesia conversion factor for QPs is $20.6754, and the anesthesia conversion factor for non-QPs is $20.5728; both increased from $20.3178.

Budget Neutrality Adjustment for G2211

When the office visit add-on code was implemented in 2024, the Biden administration significantly over projected utilization for 2024. The final estimate that CMS included in the MFS Final Rule for 2024 was that G2211 would be billed with 38 percent of all office/outpatient E/M visits reported in 2024. However, instead of being reported with 38 percent of all office visits, an AMA analysis of the first three quarters of 2024 Medicare claims data found that G2211 was reported with only 10.5 percent of office visits.

In May 2025, the AMA outlined a letter describing that the first two quarters of 2024 utilization which delineated that CMS overestimated the expected cost of G2211 by $1 billion. This overestimate is not without consequence. Because G2211 was implemented in a budget neutral manner and was expected to increase Medicare spending drastically, it resulted in a steep, unwarranted cut to the Medicare Conversion Factor. Specifically, the budget neutrality adjustment in the 2024 Final Rule resulted in a 2.18 percent decline to the 2024 CF, but the actual 2024 claims data suggest this should have been a 0.79 percent decline. Therefore, the 2024 budget neutrality adjustment cut was three times as large as it should have been, unnecessarily removing $1 billion from the MFS.

There is no mention in the 2026 proposed rule to correct the utilization estimate for G2211 based on actual claims data from 2024 by making a positive prospective budget neutrality adjustment to the 2026 CF in the forthcoming MFS Final Rule for 2026. This is warranted.

Efficiency adjustment

CMS historically has relied on survey data primarily provided by the AMA Relative Value Scale Update Committee (AMA RUC) to estimate practitioner time, work intensity, and practice expense, which are often reflected in the valuation of codes paid under the PFS. CMS has found that only a small number of all codes are considered for revaluation annually, and valuation relies primarily on subjective information from surveys that have low response rates, with respondents who may have inherent conflicts of interest (since their responses are used in setting their payment rates). CMS now considers that the time assumptions built into the valuation of many PFS services are, as a result, very likely overinflated. CMS is now proposing to apply an efficiency adjustment to the work RVU and corresponding intraservice portion of physician time of non-time-based services for which we “expect to accrue gains in efficiency over time”. This would periodically apply to all codes except time-based codes, such as evaluation and management (E/M) services. (https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-pfs-proposed-rule-cms-1832-p)

CMS is proposing to use a sum of the past five years of the Medicare Economic Index (MEI) productivity adjustment percentage to calculate this efficiency adjustment. This would result in a proposed efficiency adjustment of -2.5% for CY 2026. The net effect on orthopaedic surgery is estimated to be a 3% cut and for neurosurgery a 5% cut for 2026.

Going forward, CMS may give preference to empiric studies of time to incorporate into service valuation, rather than low-response rate survey data, and solicit comment on the types of empiric data that CMS could consider. CMS expects that moving away from survey data would lead to more accurate valuation of services over time.

In response, the American College of Surgeons analyzed National Surgical Quality Improvement Program (NSQIP) data from 2019 and 2023. The sample included more than 1.7 million operations across 249 CPT codes and 11 surgical specialties. Operative times rose by 3.1% in 2023 versus 2019, with 90% of procedures showing similar or longer durations. In addition, patient complexity correspondingly increased. This seems to contradict the findings of CMS.

(Childers et al. Longitudinal Trends in Efficiency and Complexity of Surgical Procedures: Analysis of 1.7 Million Operations Between 2019 and 2023. Journal of the American College of Surgeons ():10.1097/XCS.0000000000001588, August 13, 2025. | DOI: 10.1097/XCS.0000000000001588)

The AMA has offered several objections to the proposed efficiency adjustment:

• The efficiency adjustment is arbitrary and is not resource-based.
• Significant unintended consequences will result from the efficiency adjustment. For instance, physician practices and health systems rely on stable physician work RVUs to use in their productivity and compensation plans. If there are arbitrary and unexpected payment cuts going forward, planning and budgeting will be impossible.
• There will be difficulty in maintaining relativity within RBRVS. Adjusting physician work RVUs and intra-service time for all codes, while exempting commonly performed services that are often used as key reference services, will cause disruption in the processes to update the RBRVS and ensure appropriate relativity of new and revised codes.
• CMS’ s exempted code list is not accurate. CMS states that the proposed efficiency adjustment will be applied to the work RVUs for all codes with the following exceptions: time-based services, E/M, care management, maternity care, and services on the CMS telehealth list from this efficiency adjustment. However, in the CMS list of codes subject to efficiency adjustment, CMS includes several codes that fall under these stated criteria for exemption.

It is anticipated that the CMS proposal to implement the efficiency adjustment will meet considerable resistance going forward and will be subject to considerable negative comment in response to the proposed rule for 2026

Practice Expense

Practice expense is an important component of reimbursements to physicians paid under the physician fee schedule. Practice expense encompasses the costs associated with running a medical practice, including overhead expenses, staff salaries, equipment, supplies and other non-physician expenses. The PE is further divided into direct and indirect practice expenses. Direct PE includes non-physician clinical labor, disposable medical supplies, and medical equipment that are typically used to provide a service. Indirect PE relates to such expenses as administration, rent, and other forms of overhead that cannot be attributed to any specific service.

The practice expense (PE) methodology currently relies primarily on the AMA's Physician Practice Information (PPI) Survey data from 2008 that measures specialty-specific practice costs. In 2024, the AMA conducted updated survey efforts and submitted data to CMS in early 2025 for consideration in CY 2026 PFS rate setting. “ Due to several limitations with the data” CMS has proposed not to use data from the AMA's extensive Physician Practice Information and Clinician Practice Information (CPI) Survey. Instead, CMS is proposing updates to its own PE methodology in order to recognize greater indirect costs for practitioners in office-based settings compared to facility settings. CMS perceives that the allocation of indirect costs for PE RVUs in the facility setting at the same rate as the non-facility setting may no longer reflect contemporary clinical practice.

(https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-pfs-proposed-rule-cms-1832-p)

This change in practice expense methodology, which only recognizes 50 percent of the physician's work of facility-based services in the indirect cost method, results in a dramatic shift of payment between sites-of-service. Facility-based payment to physicians will decrease overall by -7 percent while non-facility-based payment to physicians will increase by 4 percent.

(American Medical Association’s Topline Summary: Medicare Physician Fee Schedule (MPFS) Proposed Rule) In the meantime, CMS has engaged the RAND Corporation to research approaches to collect new data, along with potential changes to the current allocation system. ( https://www.cms.gov/medicare/payment/fee-schedules/physician-fee-schedule/practice-expense-data-methods#:~:text=CMS%20has%20not%20changed%20the,Linkedin%20link)

Solicitations for Strategies for Improving Global Surgery Payment Accuracy

CMS continues to express concern about the accuracy of global surgery payment. Most recently, in the Final Rule for the 2025 MFS, CMS finalized a proposal to require the use of the appropriate transfer of care modifier (modifier -54, -55, or -56) for all 90-day global surgical packages in any case when a physician plans to furnish only a portion of a global package both when there is a formal, documented transfer of care (current policy) and when there is an informal, non-documented but expected, transfer of care. Separately, CMS also created HCPCS code G0559 to capture the additional time and resources spent in providing follow-up post-operative care by a physician or other qualified health care professional who did not perform the surgical procedure and who has not been involved in a formal transfer of care agreement.

There are several concerns at play: Does the physician who bills a global fee for a service actually provide the post op care? Are all the visits included in the global surgical package provided to the patient? Are primary care physicians and hospitalists providing post op care which is reimbursed outside the global fee?

We recall that in 2014 CMS proposed to do away with 10 and 90 day global codes and make all procedures zero-day global codes. This would mean that each and every post op visit would be billed separately no matter who provided them. This proposal met considerable resistance and was eventually precluded by statute.

Going forward, CMS is soliciting public comments for suggestions to improve the accuracy of payment for global surgical packages. They are specifically seeking comments related to the procedure shares and what the procedure shares should be based on when the transfer of care modifier(s) is applied for the 90-day global packages. They are also seeking comments and stakeholders input as to current practice standards and division of work between surgeons and providers of post-operative care.

Telehealth

CMS has proposed permanent changes to Medicare telehealth access, including keeping all current services on the Telehealth Services List, removing frequency limits for subsequent care in inpatient and nursing facility settings, and allowing supervising practitioners to be immediately available via audio/video technology (except for certain surgical services).

However, statutory telehealth flexibilities enabling beneficiaries to receive care from home expire in September. Without Congressional action, many will lose convenient access to care.

Lastly, we are concerned about no mention of continuing the current flexibility that lets physicians report their practice location instead of their home address for telehealth services beyond 2025.

Elimination of the Inpatient Only (IPO) List:

CMS plans to phase out the IPO list over three years from 2026, starting with 285 mainly musculoskeletal services, including spine procedures. The IPO list has limited certain surgeries to inpatient settings, denying Medicare payment to the facility if they are performed in an outpatient setting.

Expansion of the ASC Covered Procedures List (CPL)

The 2026 proposed rule suggests adding 547 new procedures to the ASC covered procedure list including 271 codes that would be removed from the Inpatient only list. CMS is also proposing to relax some exclusion criteria for adding procedures to this list, allowing physician judgment to be weighted more heavily. This expanded ASC list would add complex spine procedures, such as posterior lumbar interbody fusions, making them eligible for ASC reimbursement. While this expansion may be seen positively by many surgeons, the negative payment adjustments and site-of-service differential create significant uncertainty.

Key Effects for Spine Surgeons:

SITE OPTIONS: Removing spine procedures from the IPO list enables surgeries in hospital outpatient departments and ASCs.

FLEXIBILITY: Surgeons can choose the most suitable and cost-effective setting for each patient, improving access to minimally invasive and same-day spine procedures.

REGULATORY CLARITY: Ending the IPO list aims to reduce uncertainty and support advancements in outpatient spine surgery.

Site Neutral Payment Policies:

CMS plans to introduce site neutral payment policies, standardizing rates for certain services regardless of whether they're provided in hospitals, ASCs, or physician offices. The initial focus is on drug administration, with plans to expand to procedures like spine surgery. Hospitals have traditionally received higher Medicare payments for outpatient procedures, encouraging acquisition of physician practices. The new policy aims to remove this incentive by equalizing payments across settings.

Implications for Spine Surgeons and Hospitals:

• If applied to spine surgery, hospitals may lose financial advantages, making some procedures less viable onsite due to higher costs.
• Spine surgeons and hospital systems may need to consider shifting appropriate cases to ASCs or office-based sites.

Hospitals could face challenges maintaining access to complex spine surgeries if reimbursement does not cover inpatient expenses.

New Mandatory Ambulatory Specialty Model:

CMS is proposing a new mandatory alternative payment model in select geographical areas for heart failure and low back pain. This would start January 1, 2027, and run through December 31, 2031.

This ASM would test whether adjusting payment for specialists based on their performance on targeted measures of quality, cost, care coordination, and meaningful use of certified electronic health record (EHR) technology (CEHRT) results in enhanced quality of care and reduced costs through more effective upstream chronic condition management. As noted above, this model would focus on heart failure and lower back pain, meaning the specialties involved would likely include anesthesiology, neurosurgery, orthopedic surgery, pain management, interventional pain management, and cardiology. This ASM is intended to encourage better collaboration between specialists and primary care physicians to prevent exacerbations and avoidable surgical procedures and hospital admissions.

Like MIPS, however, ASM performance could generate payment adjustments starting in 2029( based on 2027 data) of up to +/- 9 percent for the physicians who would be mandated to participate in it. By the end of the five-year model, payment adjustments would grow to +/- 12 percent. The WISeR Model- Preauthorization to now be required for certain Spine procedures in 6 states

The Centers for Medicare & Medicaid Services (CMS) recently announced the Wasteful and Inappropriate Services Reduction (WISeR) Model, which will establish technology-enabled prior authorization and pre-payment review processes for some Medicare services in 6 states (New Jersey, Ohio, Oklahoma, Texas, Arizona, and Washington) beginning January 1, 2026. Among the affected services are epidural steroid injections for pain management, cervical spinal fusion, percutaneous image-guided lumbar decompression for spinal stenosis and percutaneous vertebral augmentation for vertebral compression fractures.

In this model, prior authorization and pre-payment review will be performed by technology companies (model participants) that leverage enhanced technologies and will be compensated based on a share of averted expenditures. Model participants will use a technology-assisted prior authorization process to help ensure that all relevant clinical and medical documentation requirements are met before services are provided and claims are submitted and to help navigate patients to alternatives when appropriate.

CMS stated that “While technology will support the review process, final decisions that a request for one of the selected services does not meet Medicare coverage requirements will be made by licensed clinicians, not machines.” CMS has stated that appropriately licensed clinicians will apply standardized, transparent, and evidence-based procedures to make their decisions.

Medicare providers and suppliers will have the opportunity to submit a request for prior authorization, along with related documentation, to either the MAC or the model participant. Submission of a prior authorization request would be voluntary, but if a request is not submitted the claim would be subject to pre-payment medical review. CMS is exploring the possibility of implementing a process to exempt providers and suppliers who achieve a prior authorization threshold of 90% during a periodic assessment.

This announcement of expanded use of technology (e.g., AI) for prior authorizations and pre-payment review seems to contrast with the trend of limitations on the use of AI for prior authorization and the recent pledge from payors to improve and reduce the burdens of prior authorization.

Implications and Considerations

• While emergency care and truly urgent procedures remain protected, routine services on the authorization list may require additional planning and lead time.
• Providers and suppliers will need to adapt their workflows to accommodate either the prior authorization requests or post-service pre-payment medical reviews. This is likely to create delays in providing treatment and or receiving payment.
• The integration of AI and machine learning technologies in Medicare administration represents a significant technological advancement that could reshape how government healthcare programs operate in the digital age.
• This announcement of expanded use of technology (e.g., AI) for prior authorizations and pre-payment review seems to contrast with the trend of limitations on the use of AI for prior authorization and the recent pledge from payors to improve and reduce the burdens of prior authorization.
• If the pilot program demonstrates effective fraud reduction without significant patient care disruption, CMS may expand prior authorization requirements to additional services and states.

Conclusion

The 2026 proposed MPFS, removal of the IPO list, the Ambulatory Specialty Model, the WiseR Model, and site neutrality rule represent major Medicare payment changes affecting spine surgeons. Surgeons should track these policies, evaluate their impact, and adjust strategies to maintain quality care and competitiveness for Medicare patients.

Additional Reference

Abelson R, Rosenbluth T. Medicare Will Require Prior Approval for Certain Procedures. The New York Times. August 28, 2025. Accessed September 12, 2025.