CMS released its proposed CY 2027 Medicare Physician Fee Schedule July 14, setting up another cycle of physician pay cuts at the same time the companion CY 2027 OPPS/ASC proposed rule moves facility payment rates in the opposite direction.
The divergence is drawing pushback from specialty societies and reinforces a structural fault line in Medicare payment policy: facilities and physicians are increasingly compensated under separate and conflicting formulas.
The conversion factor cuts
The proposal sets physician conversion factors at $33.1693 for clinicians in advanced alternative payment models and $32.8409 for all others — down 1.19% and 1.68%, respectively, from CY 2026 final rates.
The cuts are not CMS choosing to reduce physician pay outright. They largely reflect the expiration of a one-year 2.5% conversion factor boost Congress included in the Working Families Tax Cut legislation for CY 2026 only, according to a blog post from law firm King and Spalding. Without new legislation extending or replacing it, current law reverts to a reduction relative to 2026 rates. Specialty societies such as the American College of Surgeons, the Society of Thoracic Surgeons, and ASCO are already pressing Congress for another patch.
When adjusted for inflation, Medicare physician payments have declined 33% from 2001 to 2025, according to American Medical Association data. The proposed 2027 rates would extend that erosion into a fifth consecutive cycle of effective pay reductions.
ASC facility rates increase
The companion CY 2027 OPPS/ASC proposed rule increases facility payment rates by 2.4%. The proposed ASC conversion factor for quality-compliant facilities is $57.766, and approximately 618 procedures are proposed for addition to the ASC-covered procedures list, building on last year’s expansions of cardiac ablation, lumbar spinal fusion and vascular procedures.
“ASCA anticipated CMS would propose a lower physician conversion factor, because last year’s increase resulted from a temporary 2.5% payment boost,” Alex Taira, associate director of public and regulatory affairs at the Ambulatory Surgery Center Association, told Becker’s. “Congress has intervened to increase physician payments several times in recent years, but the conversion factor has declined in five of the past six years, so this is not an aberration. While the conversion factor may decrease, the impact on reimbursement will vary by procedure code.”
The directional split creates a specific tension for ASC-based physician groups. Facilities are being given more room to bring in higher-acuity cases just as the physicians performing those cases face another pay cut. For independent physician groups operating ASCs, the facility fee gain does not automatically offset the professional fee reduction. The two revenue streams flow to different entities under different formulas.
“As long as CMS continues to pay less than 20% of the provider’s actual compensation, ASCs will continue to subsidize anesthesia services,” Maher Kodsy, MD, chair of the department of anesthesiology at University Hospitals Elyria (Ohio) Medical Center, told Becker’s. “ASCs do not receive the same governmental financial assistance as hospitals and health systems nationwide. If they continue to offer subsidies for anesthesia services rendered, their profit margins will continue to decline.”
The structural problem
This is at least the fourth consecutive year CMS has proposed a physician conversion factor cut tied to expiring temporary relief. The AMA has consistently argued that annual patch legislation is not a solution rather a symptom of a payment system that lacks a mechanism to keep physician rates aligned with practice cost inflation.
“Reimbursement compression has become a structural reality in healthcare, not an isolated event,” Ed Tolentino, administrator of Wildwood-based Outpatient Surgery Center of Central Florida, told Becker’s. “While we anticipated continued pressure on physician payments and have planned accordingly, further reductions increase the importance of operational efficiency, physician alignment, and disciplined growth. The organizations that will succeed are those that consistently deliver high-quality care at a lower cost while maintaining strong clinical outcomes. From our perspective, these changes reinforce, not change our long-term strategy.”
HR 8622, the Medicare Physician Data-Driven Performance Payment System Act, represents one proposed structural fix. Whether that bill or similar legislation advances before the November final rule is published depends on congressional action that has historically been last-minute and uncertain.
The public comment period is open. Final rules are historically issued around November 1.
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