Late on October 31, 2025, the Centers for Medicare & Medicaid Services (CMS) issued the 2026 Medicare Physician Fee Schedule (MPFS) final rule, finalizing payment rates and policies for services beginning January 1, 2026.
Compared to 2025 payment, PM&R physicians are expected to see an impact on 2026 ranging from an estimated 6 percent increase in the non-facility setting to a 9 percent decrease in the facility setting. These payment differences are closely tied to the efficiency adjustment and practice expense policies described in further detail below.
Conversion Factor
CMS finalized an increased conversion factor for 2026, primarily due to the H.R. 1 legislation which resulted in a one-year conversion factor increase of 2.5 percent. Most physicians will be paid under a conversion factor of $33.4009, which is a 3.26 percent increase over the 2025 conversion factor. However, due to requirements under the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015, physicians who are qualified participants of advanced alternative payment models will be paid under a higher conversion factor of $33.5675, which is a 3.77 percent increase over the 2025 conversion factor. While AAPM&R is relieved to see an increase to the conversion factor this year, much of the increase will expire at the end of 2026. We also note that a portion of the increase comes as a result of budget neutrality stemming from the efficiency adjustment policy described below, which we continue to oppose.
Efficiency Adjustment
CMS finalized a 2.5 percent efficiency adjustment (decrease) to many work relative value units (RVUs) for non-time-based services that CMS believes are being provided more efficiently over time. AAPM&R strongly opposed this proposed policy in our September 2025 comments to CMS. While we are discouraged that CMS chose to move forward with the efficiency adjustment, we were relieved to see that CMS was persuaded to exempt codes that are new for CY 2026 from the efficiency adjustment. On November 3, AAPM&R joined a coalition of 34 specialties in a request to Congress to stop implementation of the efficiency adjustment.
Practice Expense
CMS finalized its proposal to update indirect practice expense methodology, such that some indirect practice costs from facility-based services are redistributed to non-facility-based services, resulting in a shift in payment between different sites of service. We anticipate this may be particularly impactful for physicians providing procedures in facilities such as ambulatory surgical centers. AAPM&R expressed concerns about the negative impact of this proposed policy in our September 2025 comments to CMS.
Telehealth
Current restrictions around coverage for telehealth services are due to the government shutdown, rather than policy in the MPFS. In the rule, CMS finalized several proposals related to telehealth coverage. The impact of some of these policies depends on extension of telehealth flexibilities, which remains an Academy advocacy priority.
CMS finalized lifting frequency limits on telehealth services for patients in hospitals and skilled nursing facilities. Further, CMS agreed to permanently allow for virtual direct supervision of most services that require supervision. Finally, CMS is continuing its current policy allowing teaching physicians to provide virtual supervision to residents providing telehealth services in all training sites.
Quality Program Updates and Ambulatory Specialty Model for Low Back Pain
CMS finalized updates to the Merit-Based Incentive Payment System (MIPS) program for the 2026 performance year. CMS also finalized the Ambulatory Specialty Model (ASM) for low back pain. The model, which is anticipated to be mandatory for specialists who treat low back pain within a selected group of geographic areas, is set for implementation in 2027. AAPM&R expressed concerns about this model in our September 2025 comments to CMS.
AAPM&R will continue to analyze the rule in the coming weeks and provide additional information, including an updated payment chart with details on national payment rates for PM&R services.