New CMS Rule Could Reduce Medicare Payments in 2026
CMS Proposes New Efficiency Adjustment to Physician Work RVUs for 2026: What Healthcare Providers and Administrators Need to Know The Centers for Medicare & Medicaid Services (CMS) has proposed a new “efficiency adjustment” to physician work relative value units (RVUs) under the Medicare Physician Fee Schedule (PFS), set to take effect in Calendar Year (CY) 2026. This proposal, while intended to reflect productivity gains, could have wide-reaching implications for healthcare providers, billing teams, and anyone involved in medical reimbursement and practice operations. Understanding the Proposal At the core of this change is a 2.5% across-the-board reduction to work RVUs and intra-service time for non-time-based services. This adjustment is meant to account for increased efficiency that may occur over time as clinicians adopt new technologies, gain experience, and streamline workflows. The adjustment would: Take effect in CY 2026 Apply only to non-time-based services (e.g., procedures and technical services) Exclude time-based services such as evaluation and management (E/M) visits, behavioral health services, care management, maternity care, and Medicare telehealth services Be based on a five-year productivity measure from the Medicare Economic Index (MEI) Be updated and applied on a three-year cycle CMS’s Rationale CMS has expressed concerns about relying exclusively on physician survey data from the AMA/Specialty Society Relative Value Scale Update Committee (RUC) to determine RVUs. These surveys can suffer from low response rates and sampling bias, and they may not adequately capture ongoing productivity improvements between code reviews. Since many services go years—even decades—without reassessment, CMS believes these efficiency gains are currently going unrecognized. The proposed 2.5% adjustment is CMS’s way of standardizing recognition of these unmeasured gains. Key Differences from Hospital Payment Policies In hospital payment systems (like the Inpatient and Outpatient Prospective Payment Systems), productivity adjustments are applied to the conversion factor, which is updated annually to reflect inflation. In contrast, CMS is proposing to apply this adjustment directly to the valuation of individual services under the PFS. This distinction matters: reductions to work RVUs are permanent, and there is no built-in inflationary counterbalance in the PFS. While hospital payment systems get automatic market basket updates (such as 3.2% for CY 2026), the PFS is limited to much smaller annual increases (0.25% or 0.75%), which will not offset the impact of the proposed adjustment. What This Means for Providers and Practices If finalized, this policy could result in a long-term downward trend in physician payment—particularly for procedural and specialty services that rely on non-time-based coding. Since the adjustment is not linked to a nuanced review of individual codes, it may disproportionately impact services that are already under-compensated or under-reviewed. There’s also the risk that technological improvements may be misunderstood as reducing workload, when in fact they often increase complexity, demand greater precision, or come with steep learning curves. The assumption that reduced time equates to reduced work doesn’t necessarily hold true across all clinical scenarios. Implications for Billing, Admin, and RCM Teams Billing and revenue cycle teams will need to prepare for: Updates to charge capture systems to align with revised RVUs Shifts in reimbursement forecasts based on reduced values for certain services Documentation challenges, particularly in supporting intensity and complexity when time is no longer the primary metric Possible changes in provider productivity tracking, compensation models, and contract negotiations Greater scrutiny of low-volume codes, which CMS data shows are often reviewed far less frequently than high-volume ones Practices may need to be proactive in identifying which of their most-used codes will be affected, especially if they haven’t been reviewed by the RUC in over a decade. In CMS’s own analysis, low-volume services had an average lag of 23 years since last review, compared to only 11 years for the most commonly billed codes. What You Can Do CMS is currently accepting public comments on the CY 2026 PFS Proposed Rule through September 12, 2025. Providers, administrators, and advocacy organizations may want to consider submitting formal feedback, especially if they anticipate significant financial or operational impacts. In the meantime: Review your top-billed non-time-based services Model potential reimbursement changes under the proposed rule Monitor service mix and productivity metrics Stay informed about future reviews and revaluations from CMS or the RUC Final Thoughts This proposed efficiency adjustment may appear subtle at first glance, but it introduces a structural shift in how Medicare values physician work. Without an accompanying mechanism to account for inflation or nuanced clinical realities, it could set a precedent that steadily devalues complex, non-time-based services. Healthcare stakeholders—particularly those in high-tech specialties, surgical practices, or organizations dependent on procedure-based reimbursement—should pay close attention and consider speaking up during the comment period. Looking for hands-on help? Our team supports providers with coding, credentialing, and revenue cycle consulting—learn more here » Stay up to date with CMS new here!
Are You Using HCPCS Modifiers JW and JZ Correctly? Here’s a Quick Refresher
Hello fellow coders and billers — quick question:Are you correctly applying the JW and JZ modifiers when billing Medicare for drugs from single-use vials? If not, or if you’re unsure, here’s a simple breakdown of what you need to know: Medicare (through CMS and Noridian) requires specific reporting when there’s drug wastage from single-dose vials. They want to make sure billing accurately reflects what was administered to the patient and what was discarded. Modifier Breakdown JW Modifier Use JW when there is leftover medication that must be discarded after administering the appropriate dose. You bill the administered amount on one claim line (no modifier). You bill the discarded amount separately with the JW modifier. Important: This only applies to single-use vials — multi-use vials are not eligible for wastage billing. Document the dose given, the amount discarded, and the total vial amount clearly in the patient’s record. JZ Modifier Use JZ when no medication is wasted — the entire contents of the vial were administered. Bill it on a single claim line with the JZ modifier. Medicare started requiring JZ reporting effective July 1, 2023, so if you haven’t incorporated this yet, now’s the time! Quick Billing Examples: If there’s waste (JW) Line 1: HCPCS code for amount administered (no modifier) Line 2: HCPCS code for amount discarded + JW modifier If there’s no waste (JZ) One line: HCPCS code for amount administered + JZ modifier Watch Out: Do not apply the JW modifier if the entire billing unit covers both what was administered and discarded. Always check the HCPCS code’s long descriptor to calculate correct units! Chart documentation must align with what is reported on the claim—include both the administered amount and the discarded amount when applicable. Protect Your Practice: Apply JW and JZ Correctly Are you currently applying JW and JZ modifiers correctly on your claims? If not — now’s the perfect time to update your workflow. It protects your practice, ensures compliance, and prevents billing errors. Let’s keep each other sharp! Have you run into any challenges with JW/JZ billing? Drop your thoughts below! ResourceLink(s): CMS – Billing and Coding: JW and JZ Modifier Billing Guidelines MLN MM13056: New JZ Claims Modifier for Certain Medicare Part B Drugs Did you find this post helpful? Please share our post or leave a comment with your thoughts! We’d love to hear from you!
Medicare Physician Payments: A Growing Concern for 2025
Medicare physician payments decreased by 2.83% in 2025, as of January 1. This marked the fifth consecutive year of payment reductions, leaving many healthcare providers grappling with the financial implications. Understanding the Cuts The reduction stems from two key factors: Conversion Factor Decrease: The conversion factor dropped from $33.29 in 2024 to $32.35 in 2025. Expiration of Temporary Payment Increase: A temporary 2.93% payment increase in 2024 expired, further contributing to the overall reduction. Notably, these cuts were implemented despite a projected 3.5% increase in the Medicare Economic Index (MEI), which measures the cost of delivering care. This disconnect highlights the challenges practices face as they try to maintain quality care amid rising operational expenses. Impact on Medical Practices These payment cuts have far-reaching consequences, including: Increased Financial Pressures: Many practices are struggling to balance their budgets, threatening their overall financial stability. Challenges with QPP Qualification: Clinicians are finding it harder to meet the criteria for certain tracks of the Quality Payment Program (QPP). Jeopardized Patient Access: The financial strain has the potential to reduce access to quality care for Medicare beneficiaries, a critical concern for an aging population. Advocacy for Change The medical community is pushing back against these cuts: The American Medical Association (AMA) has urged Congress to reverse these reductions to ensure the sustainability of medical practices. (Read more here) Congressman Greg Murphy has introduced a bill in the House of Representatives proposing a 4.7% payment update for 2025. (Learn more about it here) What Does This Mean for Your Practice? These payment changes underscore the importance of optimizing your revenue cycle to mitigate financial risks. At PICK Management LLC, we specialize in revenue cycle assessments to help clinics refine their billing practices, enhance compliance, and maximize revenue. How do you think these changes will impact your practice or access to care? Let us know your thoughts below. And if you’d like to ensure your practice is prepared to navigate these challenges, reach out to us at PICK Management for a comprehensive revenue cycle assessment.
