Latest Update: CMS finalized the 2026 Medicare Physician Fee Schedule, implementing the controversial -2.5% efficiency adjustment, facility-based payment reductions, and Medicare Advantage plan exits. This article reflects the final rule with actionable RCM strategies for healthcare providers. Executive Summary (TL;DR):
The 2026 Medicare Physician Fee Schedule includes significant cuts to specialty care—particularly surgical procedures, interventional services, and high-technology procedures. CMS finalized a 2.5% “efficiency adjustment” affecting 7,000+ CPT codes, plus additional reductions for facility-based services. Medicare Part B premiums will increase nearly 10% to $202.90/month, with deductibles rising to $283. Simultaneously, UnitedHealthcare is exiting 109 counties, affecting 180,000 Medicare Advantage enrollees. Healthcare providers must immediately implement proactive Revenue Cycle Management (RCM) strategies—denial prevention, charge capture optimization, and alternative revenue models—to preserve cash flow and protect patient access. A2Z Billings helps practices offset Medicare reimbursement losses through expert billing accuracy and denial management.
The 2026 Medicare Reductions: What Providers Must Know Right Now
Effective January 1, 2026, the Centers for Medicare & Medicaid Services (CMS) is implementing one of the most consequential changes to physician reimbursement in recent history. After months of proposals and stakeholder pushback, CMS finalized its 2026 Medicare Physician Fee Schedule on November 3, 2025—and the impact will be immediate and substantial for healthcare providers nationwide.
This isn’t a modest adjustment. This is a structural realignment of Medicare reimbursement that will force healthcare organizations to rethink operational efficiency, patient volume, and revenue cycle management strategies. Let’s break down exactly what’s changing, who’s affected most, and how to protect your practice.
CRITICAL TIMELINE: Healthcare providers have less than 4 weeks to audit current billing workflows, update coding systems, and implement denial prevention strategies before the 2026 rules take effect January 1, 2026. Delays in preparation will result in immediate revenue loss and claim rejections.The Efficiency Adjustment: -2.5% Cut to 7,000+ Procedure Codes
What CMS Changed
CMS introduced a new “efficiency adjustment“ that reduces reimbursement for 2.5% across non-time-based CPT codes. This applies to surgical procedures, diagnostic imaging interpretation, outpatient interventions, orthopedic procedures, pain management injections, and interventional services. According to medical societies, this cut will affect 95% of all services provided by physicians.
The justification from CMS is straightforward: technology and workflow improvements have made these procedures more efficient over time, so Medicare is overpaying for them. CMS argues that surgeons and specialists should be doing these procedures faster and with fewer resources now than they did decades ago, and reimbursement should reflect that reality.
Impact by Specialty
| Specialty | Primary Affected Services | Estimated Impact | Pressure Level |
|---|---|---|---|
| Orthopedic Surgery | Joint arthroplasties, arthroscopy, fracture repair | -7% to -12% | CRITICAL |
| Interventional Radiology | Vascular procedures, biopsies, ablations | -5% to -15% | CRITICAL |
| Cardiology (Interventional) | Stent placement, catheterizations | -4% to -8% | HIGH |
| Pain Management | Joint injections, epidural procedures | -2.5% to -8% | HIGH |
| General Surgery | Surgical procedures, oncology | -3% to -10% | HIGH |
| Radiology | MRI, CT, ultrasound interpretation | -2% to -6% | MODERATE |
| Primary Care (E/M) | Office visits, evaluation & management | +0% (protected) | ✓ SAFE |
As shown above, time-based codes (evaluation and management services, behavioral health, care management) are protected and will see no efficiency adjustment. This further incentivizes a shift from procedural care to primary care management—a deliberate policy goal by CMS.
Medicare Part B Premium & Deductible Increases: A Compounding Crisis
As if the efficiency adjustment wasn’t enough, seniors will also face higher out-of-pocket costs, which indirectly pressures providers to absorb more uncompensated care.
2026 Medicare Part B Changes
- Standard Monthly Premium: Rising 9.7% from $185 (2025) to $202.90 (2026)
- Annual Deductible: Increasing 10.1% from $257 (2025) to $283 (2026)
- Part A Deductible (Inpatient): Rising 3.6% to $1,736 (2026)
Income-Related Monthly Adjustment Amount (IRMAA) Changes
Higher-income Medicare beneficiaries will pay significantly more. The 2026 IRMAA thresholds increase from $106,000/$212,000 (individual/couple) to $109,000/$218,000, and those above these limits face tiered premium surcharges.
| Income Level (Single) | Income Level (Couple) | 2026 Part B Premium | 2026 Part D Surcharge |
|---|---|---|---|
| ≤$109,000 | ≤$218,000 | $202.90 | $0.00 |
| $109,000–$137,000 | $218,000–$274,000 | $284.10 | +$13.70 |
| $137,000–$171,000 | $274,000–$342,000 | $405.80 | +$35.30 |
| $500,000+ | $750,000+ | $689.90 | +$85.80 |
What this means: Millions of Medicare beneficiaries will have less disposable income to pay co-pays and deductibles at the point of care. Expect increased bad debt and charity care burden on your practice’s shoulders—losses that CMS won’t reimburse.
UnitedHealthcare’s Exit from 109 Counties: The Medicare Advantage Crisis
The Situation
In October 2025, UnitedHealthcare announced it would exit Medicare Advantage plans in 109 U.S. counties effective 2026, impacting approximately 180,000 beneficiaries. This is the largest Medicare Advantage plan withdrawal in recent years, and it signals broader financial stress in the MA program.
According to UnitedHealthcare’s leadership, the company faces rising medical costs, higher-than-expected emergency room utilization, increasing prescription drug expenses, and anticipated Medicare funding cuts of ~20% in 2026 compared to 2023 levels. The company also warned that CMS payment reductions for certain conditions could pose a $4 billion risk to insurance profits in 2026.
Provider Impact: UnitedHealthcare’s exit, combined with similar considerations by other insurers (Mayo Clinic and Johns Hopkins have already dropped or severely limited MA contracts), will force millions of seniors to either switch to Original Medicare or find alternative MA plans mid-year. This creates administrative chaos for providers managing complex patient rosters.States Most Affected
- Vermont: Complete state exit—all UHC MA plans discontinued
- Minnesota: Significant service area reductions
- Multiple other states: County-by-county reductions across 109 counties nationwide
Beneficiaries losing coverage have limited windows to switch: April 5 – June 30, 2025 for Early Retiree Plans, and October 15 – December 31, 2025 for standard Medicare Advantage disenrollment (transitioning to Original Medicare effective January 1, 2026).
Facility-Based Payment Reductions: Hospital & ASC Impact
The Practice Expense Change
CMS also revised how it calculates “practice expense” (PE) RVUs for facility-based services. Under the new methodology, payments for procedures performed in hospitals, ambulatory surgery centers (ASCs), and other facilities will decrease approximately 7%, while non-facility, office-based services will see roughly 4% increases.
The agency justified this by noting that facility settings (hospitals, ASCs) have lower overhead costs than private practices, so they shouldn’t receive the same reimbursement. However, this policy overlooks the fact that many independent physicians perform procedures in hospital-owned or rented facilities, and they absor’t realize the cost savings that hospitals do.
Which Services Are Protected? Time-Based Care Models Gain
Winners in the 2026 Rules
While procedure-based codes face cuts, time-based services are protected and will see modest increases:
- Evaluation & Management (E/M): Office visits, consultations—NO efficiency adjustment
- Chronic Care Management (CCM): Monthly care coordination services—increase of 2.5%
- Remote Patient Monitoring (RPM): Telehealth monitoring—increase + new CPT codes
- Behavioral Health Integration: Mental health services—protected
- Care Management for Heart Failure & Low Back Pain: New mandatory model with guaranteed reimbursement
CMS’s message is crystal clear: shift from procedural volume to chronic disease management, preventive care, and care coordination. Providers who successfully pivot to these models will be better positioned financially than those who remain dependent on procedure-based reimbursement.
The Larger Trend: 30 Years of Medicare Reimbursement Decline
The 2026 efficiency adjustment doesn’t happen in isolation. It’s part of a three-decade erosion of Medicare physician payments. Consider these facts:
- From 2001 to 2025: Medicare reimbursement to physicians has declined 33% when adjusted for inflation in practice costs (per AMA analysis)
- Ongoing trend: For five consecutive years (2021-2025), CMS proposed cuts that Congress had to intervene to prevent, except in 2025, when Congress failed to prevent a 2.9% cut
- 2026 outlook: Even with the one-time 2.5% Congressional payment increase approved by the “One Big Beautiful Bill,” the efficiency adjustment and facility payment reductions wipe out that gain for most specialists
For specialties like orthopedic surgery, the cumulative effect is devastating. A physician who performed total knee arthroplasties (CPT 27447) in 2001 was paid roughly $1,800 per procedure in inflation-adjusted dollars; in 2026, they’ll be paid approximately $900–950—a 47% reduction in real purchasing power over 25 years.
RCM Strategies to Offset Medicare Reductions in 2026
With Medicare reimbursement continuing to decline, healthcare providers cannot simply absorb these cuts. Instead, practices must implement sophisticated Revenue Cycle Management (RCM) strategies to maximize reimbursement from every patient encounter. Here are the critical tactics A2Z Billings recommends:
1. Maximize Charge Capture & Documentation Precision
Many practices leave 15–20% of potential revenue on the table due to missed charges, unbilled services, and under-coding. In 2026, every dollar matters. Implement:
- Detailed operative notes: Ensure surgeons document exact work effort, time, and complexity—documentation that supports RVU billing
- Ancillary service capture: Blood work, imaging, supplies, and equipment used during procedures must be captured as separate billable line items
- Modifier accuracy: Proper use of modifiers (25, 59, 76, 77, etc.) can legally separate distinct services and preserve reimbursement
- Facility vs. non-facility distinction: Understand whether you’re billing at facility or non-facility rates—this now impacts RVUs significantly
2. Strengthen Denial Prevention & Appeal Management
Denied claims represent pure revenue loss. With tighter Medicare budgets, denials are likely to increase. Implement proactive denial prevention:
- Real-time claim scrubbing: Validate claims before submission using automated compliance checks (NCCI edits, payer-specific rules)
- Eligibility verification at point of care: Confirm patient Medicare coverage and authorization requirements before the appointment
- Denial tracking & pattern analysis: Categorize denials by code, payer, reason. Identify systemic issues (e.g., documentation deficiencies, coding errors)
- Appealing efficiency adjustment denials: Expect denials related to the new efficiency adjustment; prepare appeals with clinical documentation supporting the complexity and time investment of procedures
3. Diversify Revenue Streams Away From Medicare Procedure-BASED CODES
Time-based and care management codes are protected. Shift volume strategically:
- Expand CCM (Chronic Care Management): Bill monthly for care coordination services for complex patients (diabetes, heart failure, etc.)
- Launch Remote Patient Monitoring (RPM): CMS expanded RPM codes and payment in 2026. Biomonitoring devices (BP cuffs, scales, glucose monitors) enable billing for virtual monitoring
- Enroll in Alternative Payment Models (APMs): APM participants receive higher conversion factors (3.77% increase vs. 3.26% for non-APM clinicians in 2026)
- Increase E/M visit volume & intensity: While procedure codes face cuts, comprehensive E/M services are protected and reimbursement is stable
4. Optimize Medicare Advantage (MA) Contracting & Non-Medicare Revenue
With Medicare fee-for-service reimbursement under pressure, negotiating stronger MA contracts becomes critical. Also:
- Renegotiate MA contracts: Use CMS’s finalized fee schedule as leverage to request rates that more closely align with your cost structure
- Diversify payer mix: Increase commercial insurance patient volume. Commercial payers typically reimburse 20–40% higher than Medicare
- Offer cash-pay options: For high-deductible Medicare patients, offer transparent cash pricing for procedures—you may compete favorably with traditional Medicare billing
- Evaluate patient population composition: If possible, focus marketing on commercially-insured populations to reduce Medicare revenue dependency
5. Implement Specialty-Specific Cost Management
As reimbursement declines, operational efficiency becomes non-negotiable:
- Orthopedic/Surgical Practices: Negotiate implant costs and supplier contracts. With 7–12% reimbursement cuts, shaving 5% off implant costs preserves margin.
- Interventional/Radiology Practices: Optimize staff scheduling and equipment utilization. Procedure time decreases should translate to operational efficiency gains.
- Primary Care Practices: Since E/M codes are protected, maximize visit productivity and consider panel expansion to offset reduced per-visit reimbursement pressure from upstream specialties.
Medicare Advantage Plan Exits: Preparing Your Practice
Immediate Action Items
With UnitedHealthcare’s exit (and potential similar moves by other insurers), practices need to prepare for patient disruption:
- Identify affected patients: Pull a report of all patients covered by UnitedHealthcare MA plans in exiting counties
- Notify beneficiaries early: Send letters explaining the plan exit, enrollment deadlines, and your practice’s commitment to continuing care
- Explain transition options: Help patients understand Original Medicare vs. alternative MA plans available in their area
- Verify new coverage: Once patients switch, verify their new plan coverage and billing requirements in your EHR
- Update credentialing: Confirm your practice remains credentialed with alternative MA plans patients may select
Specialty-Specific Impact & Adaptation Strategies
Orthopedic Surgery Practices
Orthopedic surgeons face among the largest cuts. CPT codes for knee arthroplasty (27447) and hip arthroplasty (27130) will see approximately 7% reductions. To adapt:
- Increase surgical volume if possible (though this is a risky strategy given market limits)
- Expand post-operative care management billing (CCM, physical therapy coordination)
- Negotiate implant pricing aggressively with suppliers
- Consider value-based contracts that incentivize outcomes (fewer complications, faster recovery)
Interventional Radiology & Cardiology Practices
Diagnostic imaging interpretation and percutaneous interventions face significant efficiency adjustments. These practices should:
- Emphasize high-complexity cases that command higher RVU values
- Implement radiation safety and quality management programs to support value-based payments
- Negotiate facility contracts to ensure clarity on which party bears the facility fee burden
Pain Management & Anesthesia Practices
With joint injection codes facing -2.5% to -8% cuts depending on complexity, these practices should explore:
- Expanding telehealth consultations (protected codes)
- Developing chronic pain management programs with CCM billing
- Pursuing advanced certifications in regenerative medicine or other specialized injections with higher RVU values
Primary Care Practices
Primary care is the clear winner in 2026, with E/M services protected and priority in CMS’s chronic disease focus. Growth strategies include:
- Expanding CCM and complex care management services
- Implementing RPM for chronically ill patient populations
- Increasing patient panel size to maximize visit-based reimbursement
- Becoming an “accountable care organization” (ACO) participant to qualify for APM conversion factors
Frequently Asked Questions: Medicare Cuts 2026
Work with your billing software vendor or RCM partner to:
- Pull your top 50 CPT codes by volume and revenue
- Apply the 2026 conversion factors and RVU adjustments (efficiency + facility changes)
- Model the revenue impact month-by-month
- Identify which codes face the largest reductions and prioritize mitigation strategies
A2Z Billings offers free Medicare impact analyses for orthopedic, surgical, interventional, and specialty practices.
You cannot appeal the efficiency adjustment itself—it’s a regulatory change, not a payer-specific policy. However, you can:
- Appeal denials if coding/documentation is inappropriate or inconsistent
- Submit medical complexity arguments if CMS’s efficiency assumptions don’t apply to your patient population
- Advocate through professional societies for future legislative changes
With caution. While increasing surgical or procedural volume sounds intuitive, it’s risky:
- Staff burnout: Driving higher volume without additional resources increases burnout risk
- Quality concerns: Quality suffers when staff is overextended, risking compliance issues and patient outcomes
- Market limits: Your patient base has natural limits; you can’t grow volume indefinitely
Instead, focus on revenue optimization through better charge capture, denial prevention, and shifting to protected care models (CCM, RPM).
You’ll be particularly affected by the facility payment reduction (-7% for facility-based services). You have several options:
- Negotiate a higher rate supplement from the hospital to offset the Medicare reduction
- Seek office-based surgery options (though this requires significant infrastructure investment)
- Accelerate transition to hospital employment (though this may come with lower overall compensation)
- Diversify by expanding consulting, expert witness, or telemedicine services
Conclusion: The Path Forward for Healthcare Providers
The 2026 Medicare cuts represent a watershed moment for American healthcare. For the first time, CMS is using the fee schedule as a deliberate policy tool to reshape how providers practice medicine—favoring primary care and chronic disease management over procedural specialties, and hospital-based over independent models.
Practices that acknowledge this reality and adapt quickly will survive and thrive. Those that rely on hope, volume increases, or legislative intervention will struggle.
The strategies outlined here—charge capture optimization, denial prevention, care model diversification, and RCM automation—are not optional. They are survival imperatives. Start planning today. Your 2026 cash flow depends on it.
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The specialists at A2Z Billings understand the impact of 2026 Medicare cuts on your practice. We offer comprehensive RCM consulting, billing optimization audits, and denial management services tailored to surgical, orthopedic, interventional, and specialty practices.
Article Update Notice: This article will be updated quarterly to reflect any legislative changes, CMS guidance updates, or additional Medicare Advantage plan exits affecting 2026 payment policies.