Unpacking the Proposed 2027 CMS Physician Fee Schedule: A Conversation with Jason Lee

To help healthcare leaders make sense of the proposed 2027 Medicare Physician Fee Schedule, we spoke with Jason Lee, VP of Growth at Simpliphy. Jason brings 25 years of healthcare experience spanning consulting, physician compensation, strategy, implementation, and technology.

Every year, the Centers for Medicare and Medicaid Services proposes updates to the Medicare Physician Fee Schedule. For physician compensation teams and physician enterprise leaders, understanding what CMS may change is only the first step.

Organizations must also evaluate what those changes could mean for reimbursement, physician productivity, compensation expense, specialty performance, operational workflows, and physician communication. Even a change that appears straightforward at the policy level may carry very different implications across specialties, compensation arrangements, and sites of care.

A: Every year, there is a debate and negotiation around the total aggregate budget for medical group and physician reimbursement. This year is no different. CMS has made changes both to groups of CPT codes and to overall reimbursement. 

Analysis indicates a slight aggregate drop in total reimbursement across the entirety of the Medicare Physician Fee Schedule, by about 1.25% to 1.5% overall. As longtime industry insiders will recall, this has been a battle. There have been minor adjustments, giant cliffs that were averted, and different  reimbursement models implemented over the years. I think we may have finally settled at a place where budgeting can be predicted and projected. Right now, the conversion factor is coming down just a little bit, and that will have an overall impact on medical group revenue. 

Another really interesting change that will affect various specialties is the adjustment to codes billed on the same day that another activity or procedure is performed. A lot of specialists and proceduralists see patients and end up doing some type of in-office or ambulatory procedure on the same day. That is going to be affected. 

From a reimbursement standpoint, medical groups would also be wise to look at how the practice-expense adjustment impacts them. The practice-expense component is going to impact rural, urban, and exurban markets differently.  

Since COVID, we have also seen a trend toward assessing patients remotely and doing more telehealth visits. Organizations have built that infrastructure, and some third-party entities are providing services including remote patient monitoring. Those services are affected negatively in this year’s schedule as well. 

Finally, there is continued growth and emphasis around quality and primary care alignment. Primary care, general practice, and family practice physicians are seeing some of the work they do to keep people well and populations healthy reimbursed and valued even more this year. And don’t forget about the OBGYN global reimbursement decoupling. 

A: Over time, physician practices have shifted in how they are aligned and what they are doing to maximize both the care they provide and the reimbursement medical groups receive. We have seen more independent, small, and single-specialty practices become part of larger multispecialty groups, whether those groups are physician owned or health system aligned. 

The CMS fee schedule drives reimbursement to the medical group. It is also used as a basis for how commercial and Medicaid payers reimburse medical groups. As both total RVU and work RVU factors are adjusted, those changes can flow through fee schedules used by different payer types. 

Ultimately, as the dollars coming in and the payments going out to physicians diverge, organizations have to do more analysis. Even if RVUs are stable for a particular specialty, the reimbursement coming in for those RVUs may be different. Medical groups need to understand how that affects the margin for a specialty such as orthopedics or cardiology compared with primary care. 

Should organizations evaluate the RVU component? Yes, because it affects many compensation structures. It also affects the dollars coming into the medical group and how much additional investment the medical group may need to make to keep those compensation structures whole. 

A: The CMS fee schedule will immediately affect the revenue the medical group receives from Medicare. Depending on the percentage of Medicare patients, that could affect the bottom line a little or a lot. 

In subsequent years, commercial payers will adjust how they reimburse activity tied to the MPFS schedule. That can have a slightly delayed impact, depending on how the medical group’s contracts are negotiated and how much reimbursement it receives from commercial payers. The same is true for Medicaid. 

Many, if not most, physician compensation models are based on RVUs or include RVUs as one of their components. Changes to RVUs can therefore affect survey data and how physicians are paid. As the industry and regulatory environment catch up, fair market value and other compliance standards will also be based on new data and trends associated with the fee schedule. 

Some specialty-level changes can be significant. Medical groups have to decide how to incorporate those adjustments from a medical group, compensation, and fair market value standpoint. Do we trend them in over time? Do we apply them all at once? Or do we do something in between?

The final financial piece is continuing to monitor the difference between the professional fee reimbursement coming in and what is left at the end of the day to pay physicians. That will affect the group’s overall financial position and how much investment may be needed from the health system or medical group to continue paying physicians at contractually agreed-upon rates. 

A: That is everyone’s annual question because they want to know what the comp and production surveys are going to say in subsequent years. We did some analysis based on what we would consider an average practice mix for a given specialty and looked at how the proposed 2027 CMS fee schedule would affect work RVUs. 

The largest increases we saw were among several mental health providers. Clinical social work and clinical psychology could receive a significant increase, upward of double digits, or roughly 10% to 12% on average from a work RVU standpoint. That can have a significant impact on how they are paid. A medical group needs to think about whether it lets that flow directly through to employed providers or trends the change in over time. 

Other specialties with meaningful increases include interventional radiology and some allied health professionals in occupational and physical therapy. We project those specialties could experience roughly a 3% to 5% increase in overall work RVUs. That is significant enough that organizations need to think about whether to apply the CMS changes directly or use some type of trending or blending so the budget is not thrown out of alignment. 

As you move further down the list, the effects begin to fall into the low single digits. Those may not require significant action, but it is helpful to know where the changes may occur. Psychiatry, podiatry, general surgery, nephrology, primary care, and rheumatology are among the specialties where we saw smaller increases. 

These are average estimates. Any individual physician may experience something different because their patient and procedure mix may not be the same as the average used in the analysis. This is not gospel. It is directionally correct and helps organizations identify which specialties deserve a closer look. 

On the negative side, dermatology, ENT, and orthopedics are the specialties where we project a high-single-digit downward change in work RVUs, potentially around 7% to 9%. That is primarily due to the change affecting codes billed on the same day as a procedure. 

Previously, a dermatologist might see a patient earlier in the day, prepare the patient for a procedure later in the day, and receive full evaluation and management credit for the earlier visit. Under the proposal, that visit receives a lower value. That could disincentivize some physicians from seeing patients and performing procedures on the same day. It could also move scheduled visits earlier in the week or month, potentially creating an access backlog.

We project urology and gastroenterology may experience a mid-single-digit decrease, perhaps around 3% to 5%. Those physicians perform procedures, but they may not have the same schedule pattern as dermatology or ENT. Pain management, vascular surgery, cardiology, and obstetrics and gynecology may see smaller decreases because it is less common for them to see E&M visits and perform procedures on the same day. 

A: Medical groups should take a look at the current CPT code mix from probably the last 12 to 15 months for all physicians in the group and overlay the proposed 2027 CMS fee schedule. Holding practice patterns constant, calculate what would the work RVU impact be? 

That informs two things. First, it gives the group a view of how much reimbursement it may receive, primarily from Medicare, with the ability to estimate the commercial and Medicaid impact as well. Second, it shows what the work RVU profile could look like for physicians across the group. 

A medical group may have a lot of dermatologists and no interventional radiologists. Its RVUs could decline without a corresponding increase elsewhere. Industry-wide estimates assume that all physicians and specialties are represented across Medicare, but an individual group may have a very different specialty mix. 

Organizations should then take those work RVU changes and translate them into the compensation plan. Most groups do not have a direct reimbursement-to-compensation model. They have compensation structures built on work RVUs or with work RVUs as one variable component. The dollars coming into the medical group are not the same as the dollars used to pay physicians. Evaluating how much compensation could change is one of the key analyses every medical group should perform. 

A: Finance and analytical teams taking in practice management information help inform the CPT-code basis of the analysis. As they calculate RVUs, finance can validate projected reimbursement because that team is looking at managed care contracts and expected payment under Medicare, Medicaid, and commercial contracts. 

I would also recommend involving compliance. Compliance teams should look at which specialties and individual physicians may experience large increases or decreases in work RVUs because those changes can flow into compensation structures. 

Compliance and fair market value teams will be concerned about whether total compensation changes significantly and whether there is a change in the rate, dollar amount, or relationship between what the organization pays physicians, what they produce, and the value they bring to the organization. 

Finance, practice management, IT, physician compensation, and compliance all have a part to play in evaluating the medical group impact, the potential compensation impact, and whether adjustments to the compensation structure may be needed. 

Physicians may also hear through their trade associations that CMS changes will affect their specialty. They may come to medical group administration and say, ‘We heard our RVUs are going to increase significantly. How will that affect my compensation?’ Conversely, they may hear their RVUs are going down and ask how the organization plans to mitigate the change. 

A: I strongly recommend that medical groups without a good communication plan create one that gives them enough time and runway to inform physicians about what is happening. 

A good governance structure, whether that is a compensation committee or a series of meetings with key physician leaders, creates a forum and timeline for communication. That helps prevent ad hoc questions and one-off answers. The organization should have a clear FAQ describing what it believes the aggregate impact will be across the group. 

That information should then filter down to directors and physician leaders because they are going to receive questions from individual physicians. Physicians will want to know not only what will happen to their specialty, but what will happen to them individually. 

The medical group’s administrative or analytics team should have a projection of what each physician may experience. It may be able to tell physicians that 89% of the doctors in the group are projected to see an impact within plus or minus 2%, so the day-to-day effect should be modest. For specialties projected to experience a greater change, the organization needs to be able to move down to the physician level and speak with those doctors individually. 

Whether the information is distributed through Excel, an automated email process, or a platform that transparently shares the data, the goal is to communicate with physicians and lower the temperature around potential changes. 

Physicians should know that the medical group understands the issue and is not going into the change without a plan. 

A: Many organizations may already be doing this, but they should look at the CPT-code level and compare the current 2026 values with the proposed 2027 fee schedule. What will the work RVU difference be? They should then aggregate those differences at the physician and specialty levels. 

Organizations should perform two separate calculations. The first is the reimbursement calculation: What do we anticipate the dollars coming into the medical group will look like? The second is the compensation projection. 

Medical groups should have a modeling or projection tool, or a third-party platform, that allows them to sandbox and project what those changes could mean for compensation. That information can then be shared with physicians, medical group leadership, and, when the medical group is part of a larger system, health system leadership. 

This happens every year, but this is a bigger year than most in terms of the overall changes by specialty. 

There are a lot of advantages to being able to automate and simplify these steps. The last thing organizations want is to spend a lot of time manually assessing the implications. 

A tool like Simpliphy can automate some of the calculation and comparison steps allowing teams to think through the strategic implications for the group. You do not want to spend 30 or 40 hours just getting the numbers right. You want the numbers within minutes of ingesting the new fee schedule.

That gives the organization time to create the communication plan. It will know which specialties are significantly affected, and which individual physicians may experience an impact. Leaders then must decide how to incorporate that impact into the compensation model. 

The time saved on calculations can be used to develop the communication and response plan. Addressing the calculations quickly gives the organization time and space to create a more cogent strategic response to physicians. 

That builds trust and reflects well on the medical group’s administrative team. Physicians may have less skepticism and anxiety about how the practices are being run and how compensation is being administered. That creates goodwill throughout the process. 

I highly recommend automating these processes so the medical group is not using a tremendous amount of time and manpower to complete the calculations. Use that time to think through how to respond, how to communicate, and how to prepare strategically for the changes.

Medical groups may have already started this process, but they should certainly evaluate the impact of this year’s fee schedule because it is quite different for a number of specialties. Some specialties could be affected on a double-digit basis. For a particular medical group, the change could be even greater if many physicians follow the affected practice patterns. 

Evaluate the impact and incorporate the outputs across the finance and compensation teams. Do not forget compliance and fair market value, because any effect on physicians should be evaluated from an FMV standpoint as well. 

If you are going through the process manually, look at the tools that can help automate it, such as Simpliphy. That will save time and headaches and give the team an opportunity to think at a higher, more strategic level. It will also give the organization more confidence as it works through these discussions with physicians.