Every year, the Centers for Medicare & Medicaid Services (CMS) publishes the Medicare Physician Fee Schedule (PFS). It sets what Medicare pays for more than 10,000 services, and many commercial and Medicaid contracts are tied to it. For an independent practice, it can raise or lower reimbursement for your most common codes, even if you don't see many Medicare patients.
This plain-language guide explains how the fee schedule works and the changes most likely to affect your reimbursements each year.
How the annual cycle works
CMS usually releases a proposed rule in early summer, accepts public comments and publishes the final rule around November. The new rates take effect on January 1. Congress sometimes changes the final numbers afterward, so it's worth checking for updates early in the year.
How payment is calculated
Each service has relative value units (RVUs) for physician work, practice expense and malpractice. Those RVUs are adjusted for your location by geographic practice cost indices (GPCIs) and then multiplied by the conversion factor, a dollar amount set each year. A change to the conversion factor affects nearly every code you bill. Under the MACRA law, starting in 2026 there are two conversion factors: a slightly higher one for qualifying participants in advanced alternative payment models and another for everyone else.
Changes that most often affect independent practices
The conversion factor
Because of budget neutrality rules, increases in payment for some services must be offset by decreases elsewhere. Check the final conversion factor first; it sets the direction for your overall reimbursement.
Revaluations of specific codes
CMS regularly revalues groups of codes. If your specialty depends on a small set of procedures, a change to their RVUs can matter more than the conversion factor.
E/M and add-on codes
Office visits make up a large share of revenue for many practices. Watch for changes to E/M values and add-on codes such as G2211, which recognizes the complexity of ongoing longitudinal care.
Telehealth and virtual care
The fee schedule updates the list of services Medicare covers by telehealth, along with related rules on place of service and supervision. See our guide to telehealth CPT codes and place-of-service rules.
Quality Payment Program
The same rule updates MIPS measures, scoring and performance thresholds, which determine future payment adjustments for many clinicians.
What to do each year
- Model your top 20 codes. Multiply each code's new rate by your annual volume to estimate the impact on revenue.
- Review payer contracts that are tied to a percentage of Medicare rates.
- Update your fee schedule so your charges stay above what any payer allows.
- Train providers and coders on new or changed codes before January 1.
- Check MIPS requirements for the coming performance year.
The bottom line
The fee schedule changes every year, but its effect on your practice can be measured and planned for. If you'd like help estimating what this year's rule means for your revenue, our billing consulting team can model the impact using your own claims data.
