Dermatology, otolaryngology, orthopedic surgery and hand surgery face the steepest cuts under CMS’ final 2027 physician fee schedule, driven largely by a new payment reduction for evaluation and management visits billed on the same day as minor procedures.
CMS also estimates smaller decreases for ophthalmology, podiatry, audiologists, neurosurgery, portable X-ray suppliers and plastic surgeons. The final rule is scheduled for publication in the Federal Register on Nov. 9 and takes effect Jan. 1.
Those specialty-level cuts land on top of a lower baseline for everyone. The 2027 conversion factor for clinicians not in qualifying alternative payment models falls 2.31% to $32.6286, down from $33.4009. For qualifying APM participants, it drops 1.83% to $32.9548, down from $33.5675. The decline reflects the expiration of a one-year, 2.5% statutory increase that applied only to 2026, partially offset by statutory updates of 0.25% and 0.75%, respectively.
What’s driving the physician cuts
CMS attributed most of the specialty-level declines to two policies: a payment reduction tied to modifier 25 and the removal of the indirect practice cost index from practice expense calculations. Previously finalized code-level cuts, which are being phased in over several years, add to the decreases.
Modifier 25. CMS will cut payment by 20% for every service except the highest-paid one when a physician bills a separately identifiable office or outpatient E/M visit on the same day as a procedure with a zero-day global period. The policy applies to the same physician or a physician of the same specialty in the same group practice.
The final version is narrower than the proposal. CMS had proposed a 50% reduction that also covered 10- and 90-day global procedures, and it pulled back after what it described as an overwhelming response from commenters. CMS estimates that limiting the policy to zero-day globals alone softens specialty impacts by about 1%.
The agency said dermatology, otolaryngology and podiatry still take the largest hit from this change because they routinely bill E/M visits with modifier 25 alongside minor procedures. Most other specialties gain slightly as the savings are redistributed under budget neutrality.
The American Podiatric Medical Association condemned the decision in a Nov. 5 statement, calling the 20% cut arbitrary. APMA estimates podiatrists will see an overall payment decrease of about 3.2% in 2027 once the lower conversion factor and practice mix are factored in, though impacts will vary by practice.
“This policy will threaten access to care, particularly for underserved and rural populations,” APMA President Patrick DeHeer, DPM, said in the statement. The association said it will work with the Same Day Care Coalition to press Congress to halt the policy before it takes effect.
The stakes are large. AHIP, which backed the policy, told CMS that about 50 million of the 220 million office and outpatient E/M visits billed to Medicare in 2024 carried modifier 25, representing about $5.7 billion in allowed charges.
Practice expense overhaul. CMS finalized removing the indirect practice cost index, which MedPAC noted is calculated from practice expense survey data collected nearly two decades ago, over two years. Half of the change applies in 2027, and the index disappears entirely in 2028. A new 5% stabilization adjustment caps how much any single code’s practice expense value can move in a year, though it does not apply to new, revised or revalued codes.
Who gains. CMS projects the largest increases for clinical psychologists and clinical social workers, with smaller gains for physical and occupational therapists, interventional radiology and vascular surgery. The agency also replaced add-on code G2211 with a modifier worth 16% of the E/M visit’s value and created a second modifier, worth 32%, for E/M services furnished within an ACO.
Eye and GI procedures slip in ASCs
CMS’ final 2027 outpatient prospective payment system and ASC rule, raises ASC rates 2.3%. But two of the largest ASC specialties will still see aggregate payments fall, according to the agency’s impact estimates.
Eye procedures, the biggest ASC category at $2.12 billion in estimated 2026 Medicare payments, drop 1%. Gastrointestinal procedures, at $1.06 billion, also drop 1%. CMS attributed the declines to a reduction in the ASC weight scaler, to 0.814 from 0.872, which more than offsets the rate update for procedures that are not device-intensive.
Device-heavy specialties move the other way. Musculoskeletal and nervous system procedures each rise 6%, and cardiovascular procedures climb 5%.
At the code level:
- Cataract removal (CPT 66984), the highest-paid ASC procedure at $1.38 billion, falls 2%.
- Upper eyelid revision falls 5%.
- Carpal tunnel surgery and several lumbar injection and facet procedures each fall 3%.
- Colonoscopy with lesion removal and upper endoscopy with biopsy each fall 1%.
- Shoulder arthroscopy with rotator cuff repair rises 35%.
Botox injections and imaging face new limits
CMS finalized prior authorization for eight more botulinum toxin injection codes in hospital outpatient departments, starting July 1, 2027. The codes cover injections in the neck, larynx, extremities, trunk and salivary glands, used for conditions such as cervical dystonia and spasmodic dysphonia. CMS said claim volume for these codes grew 42.8% between 2017 and 2024, while total outpatient department claims fell 8.3%.
The agency will also pay excepted off-campus provider-based departments the physician fee schedule-equivalent rate for imaging without contrast, exempting rural sole community hospitals. CMS estimates the change cuts total payments by $260 million in 2027, including $190 million in Medicare spending and $70 million in beneficiary cost-sharing.
For specialty leaders, the rules arrive alongside a modifier 25 cut that is less than half the size CMS proposed, but now final. CMS invited the AMA’s RUC and others to flag specific misvalued codes through future rulemaking, which gives affected specialties a path to revisit the policy code by code. Comments on the outpatient rule are due Jan. 4.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
