Removing health equity advancement from quality improvement activities, removing the Screening for Social Drivers of Health measure, and eliminating the health equity adjustment scoring will unravel years of work which embedded equity-related activities into quality programs. One study found that integration of health equity adjustment scoring into value based payment models will significantly redistribute payments, benefiting safety net hospitals, high-proportion Black hospitals, public hospitals, rural hospitals, and Southern hospitals. Health equity adjustment scoring practices have been an important strategy in value-based payment systems for mitigating the unfair penalization of resource-constrained hospitals that serve disadvantaged populations.
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Summary
CMS released the CY2026 Physician Fee Schedule (PFS) proposed rule on July 14, 2025. It proposes four conversion factors and would overall increase physician payments for the first time in six years. However, new efficiency adjustments would reduce the code values for thousands of non-timed codes (with exceptions for evaluation, care management, behavioral health, and maternity codes) and changes to practice expense allocations for clinicians working in facilities will offset the conversion factor increases and lead to lower reimbursement for some physicians. Other proposals impact telehealth flexibilities, specialty care models, the Medicare Shared Savings Program (MSSP), and the Quality Payment Program (QPP). In terms of telehealth, it proposes that federally quality health centers (FQHCs) and rural health clinics can bill for telehealth through 2026, but also proposes to not extend billing flexibility for virtually present teaching physicians. CMS proposes to mandate the Ambulatory Specialty Model (ASM) which intends to improve chronic disease management for beneficiaries with heart failure and low back pain. ASM would hold individual specialists responsible for performance on targets for quality, cost, care coordination, and use of electronic health records. CMS also proposes optional add-on codes for Advanced Primary Care services which would enable practitioners to bill complementary behavioral health integration and psychiatric Collaborative Care Model services. The proposals for MSSP which change quality performance standards and requirements for the 477 participating ACOs, including: limiting the time an ACO is able to participate in the BASIC model, modifying beneficiary-related eligibility requirements, removing the health equity adjustment scoring for ACOs, removing the Screening for Social Drivers of Health measure, and allowing for web-based administration of Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys. In terms of the QPP, strategies are proposed to simplify and transform the Merit-based Incentive Payment System. Five new measures, the removal of 10 measures, and significant changes to 32 proposed measures are proposed for the APP Plus quality measure set. Additionally, a new improvement activity section for “Advancing Health and Wellness” is suggested and the “Achieving Health Equity” section eliminated.
Impact Analysis
Legal Challenges
N/A
Take Institutional Action
Organizations affected by any of the proposals should participate in the comment period. Commenters should highlight the potentially adverse effects of removing health equity adjustment scoring and the Screening for Social Drivers of Health measure. Entities which have benefitted from increased payments as a result of health equity adjustment scoring should comment and outline the financial landscape and possibilities of such resource redistribution practices. If possible, these entities should also point out any potential increases in costs that could result from removal of health equity adjustments.
Associated or Derivative Policies
OBBB, H.R. 1 - temporary, one-year 2.5% update in conversion factors
Policy Prior to 2025
CMS CY2025 PFS Final Rule (https://www.cms.gov/medicare/payment/fee-schedules/physician/federal-regulation-notices/cms-1807-f)
Additional Resources
Digesting a giant reg: the CY 2026 Medicare Physician Fee Schedule proposed rule - McDermott+ (https://www.mcdermottplus.com/blog/regs-eggs/digesting-a-giant-reg-the-cy-2026-medicare-physician-fee-schedule-proposed-rule/)
