The Centers for Medicare and Medicaid Services (CMS) recently released the CY 2026 Physician Fee Schedule (PFS) Proposed Rule, which includes updates to the Quality Payment Program (QPP), the Merit-based Incentive Payment System (MIPS), practice expense methodology, telehealth reimbursement, and more.
The following summary highlights how key changes in the proposed rule will impact hospitalists and their practices.
Physician Fee Schedule
For the first time in six years, the Conversion Factor (CF) could increase. The proposed CY 2026 CF is $33.4209 for most physicians, which represents a 3.3% increase over 2025. New this year, CMS is proposing a separate CF of $33.5875 for physicians participating in Advanced Alternative Payment Models (APMs), which is 3.8% more than the 2025 rate.
The increases are based on three factors:
- A statutory increase in the Medicare Access and CHIP Reauthorization Act (MACRA) of 0.25% for non-APMs and 0.75% for qualifying APMs
- A 0.55% positive budget neutrality adjustment
- A 2.5% one-time payment boost from the One Big Beautiful Bill Act
Efficiency Adjustment
A proposed -2.5% efficiency adjustment for non-time-based services is likely to offset some of the CF benefits for Hospital Medicine providers and groups. CMS believes that current reimbursement rates may not reflect efficiencies gained by recent technological and operational improvements in care delivery. The proposed efficiency adjustment, based on a five-year review of Medicare Economic Index (MEI) productivity data, is intended to correct for the issue by lowering work RVUs and making corresponding updates to the intraservice portion of physician time inputs for certain services. CMS proposes to apply the efficiency adjustment to work RVUs every three years, which will further decrease work RVUs cumulatively over time.
Practice Expense Methodology
Proposed changes to the Practice Expense (PE) portion of RVUs will also likely impact revenue for hospitalists and other facility-based physicians. CMS is proposing to change the way it allocates indirect PE RVUs, which reflect the administrative overhead of running a practice. (Direct PE RVUs were already calculated differently for facility-based physicians.) CMS believes the current methodology of allocating the same indirect PEs to both facility-based and non-facility-based physicians is outdated and doesn’t factor in the rise in employed physicians. The CY 2026 proposed rule would reduce PE RVUs in the facility setting to half those for the non-facility setting.
This change obviously impacts reimbursement for hospitalists. Critically, it will also impact compensation for practices that pay clinicians based on total RVUs, as a reduction in PE RVUs will bring down total RVUs.
The Cumulative Effect on Revenue
We expect the overall effect of these changes to negatively impact revenue for Hospital Medicine. The benefit hospitalists and groups will get from the general CF increase will likely be offset by both the efficiency adjustment and the rebalancing of PE RVUs.
QPP and MIPS
CMS remains committed to the Quality Payment Program (QPP) and the Merit-based Incentive Program (MIPS), and they are making few substantive changes to the program.
Here’s what hospitalists need to know:
Performance Thresholds and Category Weighting
- The MIPS performance threshold is proposed to remain at 75 points through CY 2028.
- The data completeness threshold is proposed to remain at 75% for the MIPS Quality Performance Category through the CY 2028 performance period, possibly rising to 80% in CY 2029.
- There are no expected overall changes to the 2026 weighting of the four reporting categories: Quality, Improvement Activities, Cost, and Promoting Interoperability. However, qualifying for a Special Status (small, non-patient-facing, etc.) will continue to affect the weighting of categories for individuals or groups. Check your Special Status when it becomes available in December 2026 to see what may be re-weighted.
- Eligibility criteria for individuals are expected to remain the same for 2026.
Quality Category Update
CMS re-evaluates the list of quality measures annually. Although the proposed list for 2026 makes several changes relevant for other specialties, the list remains unchanged for Hospital Medicine and includes just four measures:
- QID5: Heart failure (HF): Angiotensin-Converting Enzyme (ACE) Inhibitor or Angiotensin receptor Blocker (ARB) or Angiotensin Receptor Neprilysin Inhibitor (ARNI) Therapy for Left Ventricular Systolic Dysfunction (LVSD)
- QID8: Heart Failure (HF): Beta Blocker Therapy for Left Ventricular Systolic Dysfunction (LVSD)
- QID47: Advance Care Plan
- QID130: Documentation of Current Medications in the Medical Record
In addition to these measures, Ventra recommends that clients also report on the following:
- HCPR24: Appropriate Utilization of Vancomycin for Cellulitis
- HCPR29: Avoidance of DVT Ultrasound for Patient Diagnosed with Cellulitis
Cost Category Updates
A proposed change to the Total Per Capita Cost (TPCC) measure’s attribution rules may positively impact facility-based groups with nurse practitioners (NPs) and physician assistants (PAs). Historically, groups with a Special Status that exempted them from this Cost measure were seeing negative impacts when an NP or PA that didn’t qualify for Special Status inadvertently triggered the Cost measure for the whole group.
CMS is intending to change that. Moving forward, NPs and PAs who are part of a group where the rest of the clinicians are exempt from the measure will now also be exempt. (CMS should automatically make this change, and no additional work will be required during reporting.) Further, CMS proposes to implement a new two-year feedback-only period for new Cost measures, which will allow clinicians to review and improve without penalty before the measure officially kicks in.
Promoting Interoperability
PI is voluntary for most hospital-based physicians and groups, and their categories are automatically re-weighted to omit PI. However, PI scores are typically high and can offset lower Quality measures when contributed toward your final score. We recommend contacting hospital IT to request a PI report for 2026, ideally by September 2026.
MIPS Value Pathways (MVPs)
CMS is signaling that MIPS Value Pathways (MVPs) will be important in the future, with six new MVPs proposed for 2026: Diagnostic Radiology, Interventional Radiology, Neuropsychology, Pathology, Podiatry, and Vascular Surgery.
While there is still no Hospital Medicine MVP at this time, there are disease-specific MVPs that hospitalists and groups may elect to report on. Your reporting partner can help you evaluate and select your best options.
Telehealth Reimbursement
CMS proposes to permanently add ED E/M codes (99281-99285), Critical Care, and Observation services to the Medicare Telehealth Services List. Frequency limits on telehealth for inpatient, nursing facilities, and critical care visits would be permanently removed. Virtual (audio-video) supervision would be permanently allowed for services requiring direct oversight.
Teaching Physician Supervision
CMS plans to end virtual supervision policies in urban areas after December 31, 2025, requiring teaching physicians to be physically present with residents during key parts of care. Exceptions will continue for some rural areas.
Next Steps
CMS is collecting feedback on the proposed rule and will release the final rule later this fall. As always, the Ventra Health team will be monitoring the changes and planning for all issues that will impact our clients. We are committed to providing the support and guidance you need to make the best decisions for your practice.
Additional information and resources are available here in our recent overview of the CY 2026 Physician Fee Schedule Proposed Rule. If you have any questions about how these changes will impact your Hospital Medicine group, please don’t hesitate to reach out to our team.
