CMS Proposes Physician Payment Rule to Cut Spending, Enhance Quality Measures, and Improve Chronic Disease Management for People with Medicare

The Centers for Medicare & Medicaid Services (CMS) has issued a proposed rule to increase quality care for Medicare recipients while significantly reducing unnecessary spending. The calendar year (CY) 2026 Medicare Physician Fee Schedule (PFS) proposed rule advances primary care management through new quality measures, reduces waste and unnecessary use of skin substitutes, and introduces a new payment model focused on improving care for chronic disease management.

Key Takeaways:

• The proposed rule aims to reduce spending on skin substitutes by nearly 90% by changing the payment classification from biologicals to incident-to supplies.
• The rule proposes to pay for skin substitutes as incident-to supplies, which could lead to billions in savings for Medicare and taxpayers.
• The proposed rule introduces a new payment model, the Ambulatory Specialty Model (ASM), focused on specialty care for beneficiaries with heart failure and low back pain.
• The ASM aims to enhance the quality of care and reduce low-value care by improving upstream chronic disease management.
• CMS is also proposing to reduce payment differentials for physicians across settings of care by leveraging hospital data to calculate more accurate payment rates for certain services.
• The proposed rule includes a Request for Information (RFI) to gather recommendations on improving wellness, prevention, and chronic disease management, including input on nutrition counseling and physical activity.
• The 60-day comment period for the CY 2026 PFS proposed rule ends on September 12, 2025.

Statistics:

• Medicare spending on skin substitutes has grown from $256 million in 2019 to over $10 billion in 2024.
• The proposed rule aims to reduce spending on skin substitutes by nearly 90%.
• The proposed Ambulatory Specialty Model (ASM) aims to reward specialists who detect signs of worsening chronic conditions early and enhance patients' function.
• The deployment of the ASM will begin in January 2027 and run for five performance years through December 2031.
• The CY 2026 qualifying APM conversion factor represents a projected increase of $1.24 (3.83%) from the current conversion factor of $32.35, for a total of $33.59.
• The CY 2026 nonqualifying APM conversion factor represents a projected increase of $1.17 (3.62%) from the current conversion factor of $32.35, for a total of $33.42.

Sources:

• Medicare Physician Fee Schedule (PFS) proposed rule (CMS-1832 P).
• Medicare Part B claims data.
• Centers for Medicare & Medicaid Services (CMS).