In the days after CMS finalized its 2026 physician fee schedule, dozens of physician organizations rebuked the rule and a 2.5% reduction the agency called an “efficiency adjustment.”
Reimbursement under Medicare will shrink for more than 7,000 physician services, or 95% of all services provided by physicians, according to the American Medical Association, which has advocated for an alternative payment structure.
Work relative value units and intra-service time for all non-time-based codes will see a 2.5% cut in 2026, with additional reductions expected every three years.
CMS said the adjustment recognizes some services, such as surgical procedures, likely become more efficient over time. The agency also listed diagnostic imaging interpretation, outpatient interventions, interventional pain management and orthopedic services under the efficiency adjustment.
“These changes address concerns about distorted payment values that have existed for years,” CMS said, adding that the overvaluation of certain procedures coincides with undervaluation of primary care services. “Left unaddressed, these gaps compound over time, especially as digital tools and automation accelerate efficiency gains in some specialties.”
The adjustment applies to all codes except time-based services, including evaluation and management, care management, behavioral health, telehealth services and maternity codes.
Craig Carmichael, senior vice president of Baltimore-based LifeBridge Health and COO and president of Northwest Hospital in Randallstown, Md., told Becker’s the rule will have significant effects and challenge hospitals on how to provide care with lower reimbursement.
Susan Huang, MD, chief physician executive for Renton, Wash.-based Providence, said the 51-hospital system is “deeply concerned” about the 2026 physician fee schedule.
“Physicians subject to the -2.5% efficiency adjustment will essentially not receive any payment increase from Medicare in 2026, which will further financially strain physicians and potentially limit Medicare access in communities,” Dr. Huang told Becker’s.
In a letter to Congressional leaders, 34 medical organizations said the recurring reduction in work RVUs “will have severe consequences for physician compensation” and the overall efficiency adjustment is “flawed.”
“While advances in medical technology and treatment protocols allow more patients to survive severe illnesses, these same patients often later require complex, high-risk procedural intervention,” the Nov. 3 letter said. “Highly experienced physicians may improve time efficiency, but undertake the most challenging cases, whereas newly trained or teaching physicians may treat less complicated patients but typically require more time. Valuation is based on time and complexity/intensity — not just time alone.”
The American College of Surgeons, the American Society for Metabolic and Bariatric Surgery and the American College of Obstetricians and Gynecologists were among the 34 groups who penned the letter.
In a separate statement, the Society for Cardiovascular Angiography and Interventions also pushed back on the efficiency adjustment, claiming it will impede care and create financial pressures for physicians and hospitals.
Dr. Huang echoed these concerns.
“[H]ospitals and health care systems such as Providence are grappling with rising costs of care delivery while facing increased challenges from insurers, who persistently decrease and delay payments,” she said. “These economic pressures threaten to compound existing trends of diminishing primary care providers and restricted access for patients, particularly those covered by Medicare and Medicaid.”
