Medicare Payment Cuts for Surgeries and Procedures
- Starting January 1, 2026, Medicare will reduce payments for certain physician services deemed capable of more efficient delivery, marking a meaningful shift in how the agency prices procedures...
- For decades,Medicare physician payments have largely been based on the Resource-Based relative Value Scale (RVS),which assigns values to procedures based on physician work,practice expense,and malpractice insurance.
- The Centers for Medicare & Medicaid Services (CMS) initially proposed this change in July 2025, following years of advocacy from primary care physicians and organizations arguing for a...
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Medicare to Implement Efficiency Adjustments to Physician Payments in 2026
Table of Contents
Starting January 1, 2026, Medicare will reduce payments for certain physician services deemed capable of more efficient delivery, marking a meaningful shift in how the agency prices procedures and potentially reshaping physician compensation structures.
Background: The Shift Towards Value and Efficiency
For decades,Medicare physician payments have largely been based on the Resource-Based relative Value Scale (RVS),which assigns values to procedures based on physician work,practice expense,and malpractice insurance. This system, established in 1992, has been criticized for favoring procedures over time-based care and contributing to payment disparities according to a 2023 HHS Office of Inspector General report. the new efficiency adjustments represent a move towards recognizing advancements in medical technology and standardized workflows that have reduced the cost and time required for certain procedures.
The Centers for Medicare & Medicaid Services (CMS) initially proposed this change in July 2025, following years of advocacy from primary care physicians and organizations arguing for a more equitable payment system as reported by STAT News. The final rule, released on Friday, confirms the implementation of a 2.5% reduction for services identified as potentially more efficient.
Which Services Are Affected?
The 2.5% reduction will apply to a broad range of physician services,primarily those involving procedures and outpatient services. Specifically, the adjustment targets services where CMS believes technological advancements and standardized processes have led to increased efficiency. Crucially, services based on time, such as office visits, behavioral health therapy, and certain cognitive services, will be exempt from the cut.
While a extensive list is available in the final rule, examples of services likely to be affected include certain surgical procedures, diagnostic tests, and other outpatient services. Telehealth services are also included,though the impact will vary depending on the specific service provided according to the CMS press release. The agency estimates that approximately 30% of physician services will be subject to the adjustment.
| Service Category | Impact of Efficiency Adjustment |
|---|---|
| Surgical procedures | 2.5% Payment Reduction |
| Outpatient Diagnostic Tests | 2.5% Payment Reduction |
| Office Visits | No Payment Reduction |
| Behavioral Health Therapy | No Payment Reduction |
| Telehealth (Specific Services) | 2.5% Payment Reduction (depending on service) |
Impact on Physicians and Healthcare Organizations
The efficiency adjustments are expected to have a significant impact on physician revenue, notably for specialists who perform a high volume of procedures. the American Medical Association (AMA) has strongly opposed the rule, arguing that it will disproportionately harm physicians and potentially limit access to care as stated in an AMA press release. Specialty physician groups have voiced similar concerns.
Primary care physicians, on the other hand, are generally expected to benefit from the rule, as their services are largely time-based and exempt from the cuts. This could help to address the long-standing payment disparities between primary care and specialty care, potentially incentivizing more physicians to enter