Physician pay drops, ACOs gain under CMS’ 2027 proposal: 8 things to know

CMS dropped a proposed rule July 14 that would let Medicare physician pay fall next year, along with an overhaul of how accountable care organizations earn savings and a phaseout of the government’s decade-old clinician quality-reporting program. The agency is accepting comments through Sept. 14 on the 2027 physician fee schedule, with most provisions taking effect Jan. 1, 2027. CMS historically finalizes the fee schedule in early November. Eight things to know: 1. Physician pay would fall CMS framed the proposed rule as one of “transformational reforms” and modernization of physician payment. Base rates for 2027 would drop 1.19% to $33.17 for clinicians in advanced payment models and 1.68% to $32.84 for all other clinicians. A one-time 2.5% pay increase Congress approved for 2026 expires at the end of this year. Without that bump, and with only the modest updates required under law to partly offset it, rates would fall next year. 2. CMS wants to pay less where it thinks it pays twice. Several proposals target what CMS views as duplicative or inflated payment: When a physician performs a procedure and bills a separate office visit for the same patient on the same day, CMS would pay the most expensive service in full and cut the others to 50%. Surgical specialties and proceduralists would feel this most. The office-visit complexity add-on that physicians began billing in 2025 would convert from a flat fee to a modifier that raises the underlying visit payment by 16%. CMS would tighten billing for remote monitoring, requiring an initiating visit, banning billing when the work is done by contractors rather than practice staff, and lowering the assumed cost of monitoring devices. It would also limit some of these services to established patients. CMS also proposed a multiyear overhaul of how it calculates practice-expense payments, moving away from physician surveys toward what it called “an approach that relies on more objective, routinely updated and auditable cost data.” As part of that, the agency is asking whether it should keep paying physicians less for services delivered in hospital outpatient settings than in independent offices, a difference that would financially impact hospital-employed physicians. 3. A bigger carrot for accountable care. CMS is trying to make ACOs more attractive, particularly for smaller, rural and physician-led groups. Proposed changes to the Medicare Shared Savings Program would raise the savings rate for one of the program’s risk tracks from 50% to 60%, trim a benchmarking advantage that has favored the highest-risk track, and add a new adjustment that rewards ACOs for bringing in clinicians and patients that are new to value-based care models. Starting April 1, 2027, ACOs could apply to reduce or eliminate Part B cost sharing for their patients, excluding drugs and durable medical equipment. CMS separately proposed a new office-visit modifier that would raise pay 32% for ACO clinicians to reflect the added work of coordinating care for the same patients over time. In addition, the agency wants to drop a rarely used prepaid savings option and rework upfront investment payments to steer more money toward rural ACOs. 4. The end of traditional MIPS is now on the calendar. For the first time, CMS has proposed a firm end date for traditional MIPS, the Merit-based Incentive Payment System that has been Medicare’s main pay-for-performance track for clinicians since 2017. Under the proposed rule, the traditional version would sunset after the 2028 performance year. Beginning in 2029, most clinicians would report only through MIPS Value Pathways (the condition- and specialty-specific measure sets CMS has spent years building) unless they qualify through an Advanced APM. Three reporting options would narrow to two. And the wind-down begins sooner. Beginning with the 2027 performance period, CMS proposes a new “MIPS core measure” designation, the elimination of the high-priority measure designation, and that clinicians report at least one core measure or attest that none applies. (Small practices, defined as those billing with 15 or fewer eligible clinicians, would be exempt from that attestation.) CMS is also adding improvement activities under a new “Advancing Health and Wellness” subcategory tied to the administration’s Making America Healthy Again initiative, with new diabetic disease and hypertension MVPs built around chronic-disease prevention. A 2029 sunset may sound distant, but the operational runway is shorter than it looks. Systems still leaning on traditional MIPS – picking measures from the full inventory and optimizing across a fragmented set – have roughly two more full performance years to move their employed clinicians onto MVPs or the APP.  5. 340B drug data becomes a mandatory – and enforceable – report.  CMS wants to convert a reporting channel it built last year from voluntary to required. In the 2026 rule , the agency stood up the Medicare Part D Claims Data 340B Repository, a database where hospitals and other 340B covered entities could voluntarily submit claim-level data on drugs dispensed through the discount program; it is set to launch in fall 2026.  This new CMS proposal would make participation mandatory. Beginning with claims dated Jan. 1, 2027, covered entities would have to report a defined set of data elements for every 340B-discounted Part D claim – including drugs dispensed through contract pharmacies, in-house pharmacies and retrospective replenishment: date of service, prescription reference number, fill number, dispensing pharmacy NPI, the drug’s NDC-11, and the entity’s 340B ID. Reports would be due quarterly, one quarter after the period closes (so fourth-quarter 2027 claims would be due by March 31, 2028). CMS would make 340B reporting a condition of Medicare enrollment, and an entity that fails to report could have its enrollment revoked – for up to a year for each act of noncompliance. 6. Electronic prior authorization goes from optional to required. CMS has finalized several rules in the past nudging providers toward electronic prior authorization. The latest proposal shortens the on-ramp and, for the first time, puts a hard requirement on the near horizon. Within the MIPS Promoting Interoperability category, CMS proposes keeping the electronic prior auth measure optional for the 2027 performance period (worth 10 bonus points), then converting it to a required measure beginning with the 2028 performance period, which drives the 2030 payment year. A second, drug-focused measure would arrive at the same time. Beginning with the same 2028 performance period, CMS proposed adding electronic prior auth for prescription drugs as a required measure under the Health Information Exchange objective. Together, the two measures extend electronic prior auth from medical items and services to prescription drugs. The measure asks a clinician to submit at least one prior authorization request electronically, using certified EHR technology, through a payer’s prior auth application programming interface. That specificity ties the requirement directly to the payer-side APIs that CMS mandated in its 2024 interoperability and prior authorization final rule and to a separate proposal requiring electronic prior auth for all drugs that require it beginning Oct. 1, 2027. The same trajectory also appears in the Ambulatory Specialty Model. CMS proposed offering the electronic prior authorization measure to ASM participants as an optional, unscored measure in 2027, then requiring both the medical and prescription-drug measures in 2028. The same measures on the same timeline (optional in 2027, required in 2028) suggest CMS wants prior auth to work the same way across its programs. 7. CMS is tightening rules on who collects payment-model bonuses. In line with point No. 2, the agency continues to spot ways in which it might be overpaying, or paying the wrong recipient. CMS proposed changing how it decides which clinicians qualify for advanced payment-model bonuses, tying the determination to the specific practice a clinician bills under – identified by its taxpayer identification number, or TIN – rather than to the individual clinician, identified by a national provider identifier, or NPI. Under the current policy, once an eligible clinician earns qualifying APM participant status through one tax ID, that status (and its financial incentives) attaches to all of that clinician’s TIN/NPI relationships, including practices that never joined an Advanced APM. The proposal would confine qualifying participant status to the TIN that actually participates. CMS would apply QP and partial QP status strictly at the TIN/NPI level, and only to the tax ID participating in the Advanced APM. Both financial incentives would follow suit: the lump-sum APM Incentive Payment and the higher qualifying APM conversion factor would apply only to that clinician’s claims billed under the participating TIN. The agency says the current setup can send incentive dollars to practices not actually participating in a model, and estimated the fix would prevent nearly $2.4 billion in unwarranted payments over a decade.  8. Other proposed policies to watch CMS proposed new billing for group, or “shared,” medical appointments, a valuation bump for smoking-cessation and substance-use screening services, and an information request on redesigning primary care payments under the administration’s chronic-disease agenda. The rule would also make diabetes and nutrition counseling separately billable at rural health clinics and phase in laboratory payment cuts of up to 15% a year through 2029. Industry reactions National Association of Accountable Care Organizations “CMS projects that the proposed rules will bolster the impact ACOs have had by reducing Trust Fund expenditures by…