By Joyce Frieden

Physicians would receive a 1.68% pay cut -- or a 1.19% pay cut for those participating in advanced alternative payment models -- in 2027 under the proposed Medicare Physician Fee Schedule released Tuesday by the Trump administration.

The proposal also includes a provision to sunset in 2029 the Merit-Based Incentive Payment System (MIPS), which rewards physicians for improvements on certain quality measures, and move clinicians "toward more clinically meaningful specialty-focused MIPS Value Pathways," CMS said in a press release. And it is proposing changes to encourage more physicians to join its most popular accountable care organization, the Medicare Shared Savings Program (MSSP).

"We're proposing some of the most significant Medicare reforms in recent years to strengthen primary care, expand accountable care, and modernize physician payment," said CMS Administrator Mehmet Oz, MD, MBA. "These changes would make it easier for clinicians to focus on prevention, improve coordination for patients, and ensure Medicare rewards better outcomes rather than more services."

In terms of changes to the fee schedule calculations -- which were not mentioned in the press release -- providers who participate in qualifying alternative payment models (APMs) would have seen a 0.75% increase next year in the "conversion factor" -- the multiplier that is used to determine the fee for a particular service or procedure -- while those who don't participate would have seen a 0.25% increase.

However, in 2026 physicians got a 2.50% 1-year increase in the conversion factor due to congressional legislation, and that increase is going away in 2027, which is one of the main factors contributing to the pay decrease. As it is now structured, those in qualifying APMs will see a conversion factor of $33.17, a $0.40 decrease from last year, while non-participants will receive a conversion factor of $32.84, a $0.56 decrease, under the proposal.

Regarding the proposed changes to the MSSP, the incentives include:

- Increase opportunities to share savings for certain participating ACOs.

- Create new financial incentives for organizations joining the program for the first time.

- Establish more predictable spending targets to improve planning and participation.

- Reduce administrative burden by simplifying technology requirements and streamlining patient notices.

- Allow ACOs with approved applications beginning April 1, 2027, to reduce or eliminate beneficiary out-of-pocket costs for certain items and services, "expanding a successful approach already adopted by many participants in the ACO REACH Model," the agency noted.

The proposed rule also seeks more information from clinicians on issues related to duplicate lab testing, especially related to tests that are "siloed" within different electronic health record systems. "We are issuing a Request For Information to gather input from stakeholders, including clinicians, laboratories, imaging healthcare providers, health systems, payers, health IT developers, and other interested parties, to inform potential actions aimed at addressing these interoperability and duplicate testing concerns," CMS said in a fact sheet.

Healthcare organizations generally reacted negatively to the proposed rule. "Caring for America's elderly demands a working, sustainable Medicare system, but this rule fails to deliver," William Harvey, MD, MSc, president of the American College of Rheumatology, said in a statement. "Rheumatologists and other physicians continue to do the best they can with declining payment, but we're reaching our breaking point."

Speaking for the American Medical Group Association, Jerry Penso, MD, MBA, president and chief executive officer, said "Once again, CMS has proposed conversion factor updates that fall well short of what it actually costs our members to deliver care. Last year's increase was only possible because Congress stepped in with a one-time, 1-year fix. That relief has expired, and the proposed rule reflects exactly what we were concerned about: a return to the bare statutory updates required under MACRA [the Medicare Access and CHIP Reauthorization Act], which do not come close to keeping pace with inflation or practice costs."

But some groups were a little more upbeat. The proposed rule "includes important provisions that can strengthen primary care by reducing barriers for patients and improving payment for the high-value care family physicians deliver," the American Academy of Family Physicians (AAFP) said in a statement. In particular, the organization singled out expansion of the primary care exception, "which would give teaching physicians more flexibility to supervise care ... and support the future primary care workforce," as well as provisions that "continue to improve valuation of physician services by reexamining potentially misvalued codes."

However, the AAFP panned the cut in the conversion factor and called for an annual Medicare payment increase instead. "Without a reliable annual inflationary update tied to the Medicare Economic Index, primary care practices will continue to face financial pressures that further strain the primary care workforce and threaten patient access to care," the statement said.

CMS is accepting comments on the proposed fee schedule through Sept. 14.