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Why Providers Aren’t Happy with CMS’ Outpatient Medicare Physician Payment Proposal

CMS proposed a 2.4% Medicare payment increase for hospitals’ outpatient departments and ambulatory surgery centers in 2026, along with a new two-tiered physician reimbursement structure based on participation in value-based care models. Provider groups are welcoming the short-term boosts, but they fear the changes don’t go far enough to address their long-term financial pressures.

By Katie Adams on July 21, 2025 1:15 am

The Centers for Medicare & Medicaid Services unveiled a proposed rule that would raise Medicare outpatient payments next year, as well as introduce a key change to how physicians are reimbursed. Provider groups aren’t convinced that these changes would benefit them in the long run, though.

The rule, which was released last week, would raise Medicare payment rates for hospital outpatient services by a net 2.4% in 2026. The increase reflects a 3.2% market basket update, which CMS partially offset through a 0.8% productivity adjustment.

The agency proposed a 2.4% payment bump for ambulatory surgery centers in 2026 as well.

CMS’ proposal also introduced two distinct conversion factors for physician payment — one for clinicians participating in alternative payment models and another for those who aren’t. This change stems from a longstanding provision in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which is aimed to shift Medicare away from fee-for-service reimbursement and toward value-based care by encouraging providers to participate in risk-bearing payment models.

In other words, if CMS’ proposed rule takes effect, the agency will use two separate conversion factors when calculating physicians’ payment rates hinging on their participation in value-based care arrangements. The proposal’s conversion factor for doctors in alternative payment models is $33.59, which is a 3.8% year-over-year increase, and the conversion factor is $33.42 for doctors not in these models, which is a 3.6% hike.

The American Academy of Family Physicians said it is heartened by this payment boost — but worried it won’t be enough to help providers improve their margins in the long run.

“We are also encouraged that CMS proposed to increase the conversion factor for 2026 by 3.8% for qualifying alternative payment models and 3.6% for all other physicians. However, the majority of the increases for 2026 are temporary adjustments attributable to H.R. 1, which will expire at the end of the year. In 2027, practices will face another pay cut and struggle to keep pace with inflation,” the group said in a statement.

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The American Medical Group Association also voiced concern that these incremental increases fall short of keeping pace with inflation and rising practice costs — perpetuating a multiyear decline in physician reimbursement.

The group emphasized that emergency fixes are not enough and is advocating for a fundamental overhaul of the Medicare physician fee schedule.

“Health systems and medical groups continue to bear the brunt of an outdated and underfunded reimbursement model,” AMGA CEO Jerry Penso said in a statement. “Without systematic reform, Medicare’s current fee-for-service framework will remain misaligned with the shift toward high-value care.”

Unless CMS enacts comprehensive reforms, physician groups warn that temporary payment fixes won’t be enough to protect healthcare access or providers’ financial sustainability.

Photo: santima.studio, Getty Images