The Regulator

Medicare’s 2027 physician pay rate drops 1.83% to $32.95 per unit for doctors in advanced payment models, and 2.31% to $32.63 for everyone else, in the final fee schedule CMS released yesterday. The Centers for Medicare & Medicaid Services (CMS) final Physician Fee Schedule rule takes effect January 1, 2027. The conversion factor is the dollar amount Medicare multiplies by each service’s relative value to set payment. The cut comes because the one-year 2.50% boost from Public Law 119-21 expires, which CMS says “effectively means that current law requires” a 2.50% reduction; statutory updates of 0.75% and 0.25% soften it. Who it hits: every clinician billing Medicare, with the steepest loss for practices outside advanced payment models. So what: CMS narrowed its duplicate-billing proposal. When an office visit and a minor procedure happen the same day, the lower-cost service is now cut 20% and only for 0-day global procedures, instead of the 50% cut proposed. CMS also says a change to incentive payments prevents an estimated $2.38 billion in “unintended windfall payments” over ten years. Confidence: High on the conversion factors, which come from CMS’s own fact sheet; Med on the $2.38 billion, a CMS estimate. Sources: CMS press release, CMS fact sheet on the final rule.

UPDATE: The final 2027 hospital outpatient rule cuts 340B drug payments, with CMS estimating $5.45 billion less drug spending in 2027 alone. The 340B program lets safety-net hospitals buy outpatient drugs at deep discounts. CMS says it will align Medicare payment with hospitals’ acquisition cost, saving Original Medicare patients an estimated $1.1 billion and taxpayers another $4.35 billion, an average of $900 per beneficiary. Who it hits: 340B hospitals, which lose the gap between the discounted price and Medicare’s payment. So what: the rule also moves payment for imaging without contrast at off-campus provider-based departments to the physician fee schedule rate, saving an estimated $260 million in 2027 and more than $9 billion through 2036. CMS adds eight botulinum toxin codes to prior authorization, citing a 42.8% rise in those claims from 2017 to 2024. The release states no effective date or overall payment update percentage. Confidence: High that CMS announced these figures; Low on hospital-level impact, which the release does not give. Sources: CMS press release on the outpatient final rule, CMS fact sheet, CMS-1850-F.

UPDATE: Home health agencies get a 2.4% payment increase worth $415 million in 2027, but a 3.0% base-rate cut continues. The CMS final home health rule (CMS-1844-F) combines a 2.1% payment update ($365 million) with a 0.3% bump from an updated outlier threshold ($50 million). A temporary 3.0% reduction to the base rate stays in place to recoup overpayments for 2020 through 2025. Who it hits: home health agencies, hospices and equipment suppliers. So what: all enrollment revocation grounds become retroactive, and hospices, agencies and suppliers must re-enroll after certain majority ownership changes. Coverage of infusion pumps and drugs expands April 1, 2027, for drugs infused at least 12 times a year. Confidence: High on the figures. Sources: CMS fact sheet, CMS-1844-F.

Accountable care organizations (ACOs) in the Medicare Shared Savings Program get richer sharing rates and a November 6 to 12 window to change tracks. The final rule projects $5.5 billion in additional net federal savings over ten years and $1.1 billion more in shared savings net of losses, both with wide uncertainty ranges. The BASIC Level E sharing rate rises from 50% to 60%, and starting April 1, 2027, approved ACOs may reduce or eliminate Part B cost-sharing, except for durable equipment and drugs. Who it hits: ACOs applying for a January 1, 2027 start, which can change track selection until noon Eastern on November 12. So what: from 2028, ACOs receive quarterly advance payments of $45 per beneficiary who is low-income, dual-eligible or rural, and $25 per other beneficiary, capped at 10,000 beneficiaries. CMS says 75% of 476 ACOs earned $4.1 billion in shared savings in 2024. Confidence: High on figures, which come from CMS; Med on the savings projections. Sources: CMS fact sheet on the Shared Savings Program provisions, CMS-1848-F.

FDA classifies three more devices into class II today, including artificial intelligence software that reads cervical cytology slides. Three final rules in today’s Federal Register classify a digital cervical cytology slide imaging system with an AI algorithm, prognostic assessment software for mild cognitive impairment, and a wearable vibration device for orthopedic use. Class II means the Food and Drug Administration (FDA) sets special controls instead of requiring full premarket approval. Who it hits: makers of similar devices, which can now use the 510(k) clearance path against these classifications. So what: the dollar impact is not stated in the summaries. The full text could not be read this run, so effective dates and the specific controls are unconfirmed. Confidence: High that the classifications were published; Low on their terms. Sources: Federal Register FDA final rule 2026-22593, Federal Register FDA final rule 2026-22590, Federal Register FDA final rule 2026-22589.