The Service Line

Medicare blinked on the knee and hip, but only halfway. The final calendar year 2027 physician fee schedule, released today, sets the surgeon work relative value unit (RVU) for total knee replacement (CPT 27447) and total hip replacement (CPT 27130) at 16.70, per Medical Economics, above the 15.94 and 15.37 the Centers for Medicare and Medicaid Services (CMS) proposed in July but still down from 19.11 today. The CMS final rule fact sheet sets the conversion factor, the dollar multiplier on every RVU, at $32.63 for most physicians, down 2.31 percent from $33.40, worse than the 1.68 percent cut proposed, because the one-year 2.5 percent bump for 2026 expires. The proposed 50 percent payment for a same-day office visit billed with a surgical procedure shrinks to 80 percent, and now applies only to 0-day global procedures, not the 10 and 90-day globals that cover joint replacement. Medical Economics reports CMS still projects significant orthopedic and hand surgery decreases, driven by that policy and the phase-out of the indirect practice cost index. This continues our October coverage of the American Academy of Orthopaedic Surgeons (AAOS) fight; the new development is that the numbers are now final and effective January 1. Confidence: High on the conversion factors and the 80 percent same-day rate, which CMS confirms; Medium on the 16.70 RVU values, which we read in Medical Economics and did not find in the CMS fact sheet; Medium on the same-specialty narrowing, which only the trade report states. Sources: CY 2027 Physician Fee Schedule final rule fact sheet, CMS, Final 2027 fee schedule, Medical Economics.

Reimbursement

The ambulatory surgery center (ASC) rate update for 2027 is 2.3 percent, and the outpatient rule’s musculoskeletal footprint is thin. CMS finalized the calendar year 2027 hospital outpatient and ASC payment rule today with a 2.3 percent update for ASCs that meet quality reporting, which is the 3.2 percent market basket less a 0.9 point productivity adjustment, affecting about 6,400 centers, per the CMS final rule press release. Year two of the inpatient-only list phase-out removes 637 services, but the clinical families CMS lists do not include musculoskeletal, and the ASC covered procedures list grows by what CMS calls several hundred procedures without naming joint codes. In July, trade reporting found all ten of the highest-volume ASC procedures were proposed for lower payment despite the average increase, because of a lower weight scalar; we did not find the final scalar or the final rate for 27447 this run. Who it hits: any group running an ASC joint program whose margin depends on the facility fee. Confidence: High on the 2.3 percent and the 637 removals per CMS; Low on final joint-specific ASC rates, which we could not confirm. Sources: CY 2027 OPPS and ASC final rule fact sheet, CMS, 10 top ASC procedures face proposed 2027 pay cuts, Becker’s ASC Review.

Enforcement

We found no new federal orthopedic enforcement action in this window, so the live exposure is the August audit of sacroiliac joint injections. The Office of Inspector General (OIG) report OAS-25-09-021 estimated Medicare improperly paid physicians $15.2 million for sacroiliac joint injections from October 2023 through September 2024. Of 100 sampled sessions, 72 failed Medicare requirements, and OIG says physicians billed an estimated 46,711 sessions as therapeutic injections when they should have been billed as diagnostic. The audit extrapolates to 134,526 improperly paid sessions of 186,842. This is the latest in OIG’s series on spinal pain procedures after facet joint and epidural audits, and it is the template for a records request to any practice that bills these codes at volume. Practical step: audit your own 27096 billing for diagnostic versus therapeutic documentation before a contractor does. The Missouri surgeon sentencing in the SpineFrontier kickback case, which we covered October 25, remains the most recent criminal action. Confidence: High on the figures per OIG; Medium on how any single practice is affected, since the audit reports an extrapolated estimate, not a practice-level finding. Source: Medicare Improperly Paid Physicians an Estimated $15.2 Million for Sacroiliac Joint Injections, HHS OIG.

Who’s Buying

Advisers call orthopedics a seller’s market, and the buyer list is widening past private equity. Physician Growth Partners’ 2026 orthopedics market update, published July 30 and updated in August, lists 16 announced transactions closed between January 2025 and June 2026, including the Optum-owned SCA Health purchase of OrthoAlliance for a reported $1.4 billion, which it calls the first major second-bite exit, and the May 2026 combination of two Connecticut groups under the platform HOPCo. It describes equity rollover as common, add-on and second-bite activity as growing, and payer-aligned strategics, health systems and non-PE physician-led platforms taking share from classic private equity buyers. The page gives no multiples by size tier. Today’s fee schedule matters for the next round of diligence: buyers will underwrite 2027 Medicare knee and hip revenue at the final values, not the 2026 ones. Physician Growth Partners is an adviser that earns fees on deals, so treat this as a labeled supplement. Confidence: Medium; the deal table is the firm’s own and we did not independently confirm each transaction. Source: 2026 Orthopedics Market Update, Physician Growth Partners.

Clinical Policy

CMS paused the surgical follow-up visit data collection, says paid visits “are not occurring,” and starts a low back pain payment model on January 1. The CMS final rule fact sheet pauses the Medicare Access and CHIP Reauthorization Act (MACRA) section 523 global surgery visit reporting, says several years of data show post-operative visits in the global period are not occurring though they are paid, and posts a public file of imputed RVUs for 10 and 90-day visits that CMS may use for future revaluation. The same rule finalizes refinements to the Ambulatory Specialty Model, which launches January 1 and covers heart failure and low back pain. For orthopedic and spine groups, two actions follow: report CPT 99024 on every post-operative encounter so you hold your own visit evidence, and check whether your practice sits in a selected region for the low back pain track. Confidence: High on the pause and the January 1 launch per CMS; Low on when CMS reprices global packages, since the fact sheet gives no schedule. Source: CY 2027 Physician Fee Schedule final rule fact sheet, CMS.

The Operator Metric

The number to track this week: about $93, the surgeon work value lost on each Medicare total knee or hip at final values. Using the 2026 work RVU of 19.11 at the 2026 conversion factor of $33.40 gives about $638. The final 16.70 at $32.63 gives about $545. The difference is roughly $93, or 14.6 percent. On the same basis, the proposal would have cost about $115 (15.94 at $32.84), so the final rule recovers about $22 a case. The $104 we printed October 21 held the conversion factor at the proposed level and counted only the RVU cut, so use $93 as the working figure. This is our arithmetic on work RVUs only, before geographic adjustment, practice expense and malpractice changes. Multiply it by your own Medicare knee and hip volume and reprice surgeon compensation and ASC contracts before January 1. Confidence: High on the arithmetic from the stated inputs; Medium on the 16.70 value, which comes from a trade report, not the CMS fact sheet. Sources: CY 2027 Physician Fee Schedule final rule fact sheet, CMS, Final 2027 fee schedule, Medical Economics.