The Service Line

One CMS rulemaking season is now reshaping cardiology, radiology, orthopedics, and hospital medicine at the same time, and the throughline is where Medicare wants care to happen. Three federal proposed rules published within two weeks of each other this month, the Calendar Year (CY) 2027 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) rule (July 7), the fiscal year (FY) 2027 Inpatient Prospective Payment System (IPPS) rule (proposed in April, expected final around August 2), and the CY2027 Medicare Physician Fee Schedule rule (July 14), together propose stripping roughly half of what remains on the inpatient-only list, including cardiovascular procedures, by 2028, cutting hospital pay for off-campus imaging to 40 percent of the normal outpatient rate, folding spinal fusion into a mandatory hospital bundled-payment model, and retiring the decade-old MIPS quality reporting system in favor of mandatory, specialty-built tracks. Two of these four rules are expected to finalize within the next three weeks. This issue is our first Week in Review: five items a cross-specialty operator cannot afford to have missed this week, plus what actually connects them. Confidence: High on rule substance and dates; Medium on final provisions surviving comment untouched. Sources: Calendar Year 2027 Hospital OPPS/ASC Proposed Rule fact sheet, CMS, CMS Publishes FY 2027 IPPS Proposed Rule, Hall Render, Calendar Year (CY) 2027 Medicare Physician Fee Schedule Proposed Rule, CMS.

Cardiology: mandatory Medicare risk lands for roughly 8,600 heart failure specialists

CMS confirmed this week that its Ambulatory Specialty Model (ASM) proceeds as a mandatory, five year program: physicians assigned a cardiology specialty code who routinely treat Original Medicare heart failure patients in outpatient settings within CMS selected regions, covering roughly a quarter of the country’s core based statistical areas and an estimated 8,600 physicians, must participate starting January 1, 2027, with no opt out and payment adjustments of negative 9 percent to positive 9 percent on future Medicare Part B claims through 2031. CMS’s July 13 CY2027 Physician Fee Schedule proposal adds a technical fix awarding rural participants bonus scoring points, but the mandatory structure itself is untouched. Any cardiology group that has not modeled its downside exposure under the regional risk adjustment should treat that modeling as overdue, not optional. Confidence: High. Sources: ASM, CMS, CMS Launches Mandatory Two-Sided Risk Model, Bass Berry & Sims.

Radiology: the site-neutral imaging cut is confirmed, and the window to fight it is open through August

CMS’s CY2027 OPPS/ASC rule confirmed the site-neutral cut first flagged this week: hospitals will be paid only 40 percent of the normal outpatient rate, the Physician Fee Schedule equivalent rate, for basic CT, MRI, and ultrasound studies without contrast performed at excepted off campus provider based imaging departments, with rural sole community hospitals exempted. CMS estimates the change cuts total imaging spending by 260 million dollars, 190 million dollars in Medicare payments and 70 million dollars in beneficiary copayments. The public comment period runs through August 31, 2026, and any hospital system that built an off campus imaging strategy around the current rate has roughly six weeks to get its objection, or its contingency plan, on record. Confidence: High on the proposal; Medium on whether the final rate holds at 40 percent unchanged. Sources: Calendar Year 2027 Hospital OPPS/ASC Proposed Rule fact sheet, CMS, CY 2027 OPPS/ASC Proposed Rule Summary, HFMA.

Orthopedics: spinal fusion’s move into mandatory bundled risk is close to final

The FY2027 IPPS proposed rule’s plan to add three spinal fusion MS-DRGs, codes 523, 524, and 525, to the mandatory Transforming Episode Accountability Model (TEAM) is heading toward finalization fast: industry forecasters now expect CMS to release the final FY2027 IPPS rule around August 2, 2026, roughly two weeks from this issue, ahead of the proposed October 1 start. TEAM already runs mandatory episode risk on lower extremity joint replacement and hip fracture cases in 188 selected regions since January 1, 2026; adding spinal fusion would extend that same two sided financial exposure to hospitals and their affiliated spine surgeons with no separate opt out available. Any hospital or spine group in a TEAM market should have target price modeling for fusion cases finished before the final rule drops, not after. Confidence: Medium on the exact finalization date; High on the substance of the proposal. Sources: CMS Publishes FY 2027 IPPS Proposed Rule, Hall Render, TEAM Methodology Updates, DataGen.

Emergency Medicine and Hospital Medicine: traditional MIPS starts its three year sunset

CMS’s CY2027 Medicare Physician Fee Schedule rule, released July 14, confirmed plans to sunset traditional Merit based Incentive Payment System (MIPS) reporting after the CY2028 performance period, making the MIPS Value Pathway framework the only MIPS reporting option starting the CY2029 performance period for clinicians outside a MIPS Alternative Payment Model. Hospital medicine gets its first dedicated Value Pathway, one of only three new such tracks proposed for 2027, alongside a fee schedule conversion factor cut of 1.19 percent for alternative payment model clinicians and 1.68 percent for everyone else once a temporary 2026 bump expires. Once finalized across specialties, roughly 98 percent of specialties would have a purpose built reporting option, meaning this is not a hospital medicine story alone, it is the reporting system every Medicare-billing physician group will eventually have to migrate onto. Comments close September 14, 2026. Confidence: High on the conversion factor math and the sunset timeline; Medium on final MVP assignments surviving comment. Sources: Calendar Year (CY) 2027 Medicare Physician Fee Schedule Proposed Rule, CMS, CMS proposes major Medicare reforms to shift physician pay, phase out MIPS and expand ACO participation, Fierce Healthcare.

Pharmacy and PBM: three separate federal actions now converge on the same pay model

Three distinct federal actions are now landing on pharmacy benefit manager (PBM) compensation in the same window: the Consolidated Appropriations Act (CAA) of 2026, signed February 3, bars PBMs from earning Part D compensation tied to a drug’s price and mandates full rebate pass through to plan sponsors; the Department of Labor’s companion proposed rule, whose comment period closed April 15 with 564 submissions and a final rule still pending, would require PBMs to produce claim level, machine readable proof of the gap between what a self funded plan paid and what the pharmacy was reimbursed; and the Federal Trade Commission’s February 4 settlement with Express Scripts, already in force, bars favoring high list price drugs on standard formularies and is projected to save patients up to 7 billion dollars in insulin costs over a decade. Three different effective clocks, one direction: PBM compensation is being forced into the open, and an operator’s exposure now depends on which of the three actions governs a given book of business. Confidence: High on what each mandate requires; Medium on final Department of Labor rule timing. Sources: Consolidated Appropriations Act of 2026, Morgan Lewis, DOL’s Proposed PBM Fee Disclosure Rule, Mintz.

Connective Tissue: the same capital is buying every specialty covered this week, and states are starting to require notice

Private equity or PE style capital touched every specialty in this Week in Review. Close to half of private practice cardiology groups are now inside a private equity portfolio, per a MedAxiom survey. Independent orthopedic and physical therapy platforms are trading at 8 to 12 times EBITDA. RadNet has spent more than 340 million dollars on 2026 acquisitions, including a 270 million dollar radiology artificial intelligence deal. And an affiliate of Peak Rock Capital closed its purchase of specialty pharmacy infrastructure company Asembia the same month Warburg Pincus, partnered with the Abu Dhabi Investment Authority, is finalizing a deal exceeding 7 billion dollars for PANTHERx Rare. Four specialties, one buyer profile. States are starting to build guardrails around it: California’s AB-1415, effective January 1, 2026, requires private equity, hedge fund, and management services organization buyers to notify the state’s Office of Health Care Affordability before certain deals close; Rhode Island now requires 60 day attorney general notice for material change transactions; and Maine’s new law, effective January 1, 2027, goes furthest yet, giving the state’s health department up to roughly seven months of review and outright approval, conditional approval, or disapproval power over private equity, hedge fund, and management services organization acquisitions of health care entities. An operator running a sale process anywhere in 2026 or 2027 should check the target state’s transaction review law before signing a letter of intent, not after. Confidence: High on the deal figures, which are the acquirers’ own disclosures; Medium High on the state law scope and effective dates, verified against primary state sources this run. Sources: 2026 starts with a flurry of state activity on private equity and healthcare, Nixon Peabody, Maine Health Care Transactions, Foley & Lardner, Private Equity Firms Own Half of Cardiology Practices, TCTMD, RadNet acquires radiology AI firm Gleamer for up to $270M, Radiology Business, Peak Rock Capital affiliate completes acquisition of Asembia, PR Newswire.

This Week’s Operator Metrics, At a Glance

• Cardiology: 112,475 dollars, the pay gap between hospital employed and private practice cardiologists.
• Radiology: 12,940, the annual wRVU workload where a radiologist’s odds of quitting start climbing fastest.
• Orthopedics: 80 percent, the share of musculoskeletal prior authorization denials overturned on appeal.
• Emergency medicine: 45 percent, the ED’s share of federal No Surprises Act dispute determinations, with the filing fee now 15 dollars, down from 115.
• Pharmacy: 60 percent, the share of employer drug spend now going to specialty drugs, GLP-1s foremost.