What the 2026 Medicare Physician Fee Schedule Proposed Rule Means for PALTmed Members

The Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2026 Physician Fee Schedule (PFS) Proposed Rule, outlining changes that will significantly affect clinicians delivering care in PALTC settings, including a dual conversion factor system and major changes to the practice expense (PE) methodology. Below is a summary of the key proposed changes and their potential implications for PALTmed members.

Dual Conversion Factors for 2026: APM vs. Non-APM

In a major shift, CMS is proposing two different conversion factors (CFs) for 2026:

• $33.4209 for clinicians not participating in a qualifying Advanced Alternative Payment Model (APM)
• $33.5875 for those who do qualify as APM participants

This new structure replaces the APM bonus and reflects CMS' continued efforts to incentivize value-based care. The proposed CF update is primarily based on three factors:

1. A statutory update in the Medicare Access and CHIP Reauthorization Act (MACRA): 0.75% increase for APMs and 0.25% increase for non-APMs
2. A 0.55% RVU positive budget neutrality adjustment
3. A 2.5% one-year payment increase due to the budget reconciliation legislation (OBBA)

Compared to the CY 2025 conversion factor of $32.35, this represents a 3.8% increase for APM participants and 3.3% for non-APMs.

Major Shift in Practice Expense RVUs: Facility vs. Non-Facility

A key change in the 2026 proposed rule is CMS’ redistribution of indirect Practice Expense (PE) RVUs between facility and non-facility settings. CMS says, “for each service valued in the facility setting under the PFS, we are proposing to reduce the portion of the facility PE RVUs allocated based on work RVUs to half the amount allocated to non-facility PE RVUs beginning in CY 2026.” This change in PE methodology results in a major shift in payment between sites of service.

Historically, nursing home codes have had identical facility and non-facility PE RVUs. According to CMS' Medicare Claims Processing Manual, skilled nursing facilities (POS 31) are classified as facility settings, while nursing facilities (POS 32) are considered non-facility settings. Under the proposed changes, however, this distinction would have a significant impact. For example, CPT code 99309, the most commonly used code in nursing homes, would see an estimated 6% payment reduction if calculated using facility PE RVUs with POS 31. In contrast, when billed using non-facility PE RVUs with POS 32, reimbursement for the same service would increase by approximately 10%.

Why Is CMS Doing This?

CMS states that this change aligns payments with actual cost responsibilities and argues that because some physicians share resources with facilities and many don’t maintain separate practices, reimbursing the same indirect costs twice leads to overpayment.

This redistribution is budget-neutral; CMS is not reducing the total PE dollars system-wide but is shifting payments from facility-based to non-facility-based care.

PALTmed’s Concern

PALTmed is deeply concerned that the proposed changes to PE RVUs will create a significant and unwarranted payment differential between Skilled Nursing Facilities (SNFs) (POS 31) and Nursing Facilities (NFs) (POS 32). PALTmed strongly opposes any approach that would assign divergent PE RVUs based solely on the POS code and will urge CMS to ensure that services furnished using the same CPT codes in POS 31 and 32 are not faced with any reduction in the final payment methodology.

PALTmed believes that any reduction in payment for nursing home services, whether in SNFs or NFs, will severely jeopardize access to care and undermine efforts to improve quality and generate savings within the Medicare program. Substantial evidence shows that consistent clinician presence in these settings reduces avoidable hospitalizations and costly health outcomes.

CMS Distinction for Home/Residence and Assisted Living Settings

For E/M codes used in the home or residence (assisted living setting) (e.g., CPT 99341–99350), CMS considers these non-facility settings and therefore only assigns non-facility PE RVUs. No facility PE RVUs were developed for these services.

This means that services billed from a patient's private home, independent living apartment, or assisted living facility will receive the higher PE RVUs associated with non-facility care.\

Nursing Home Codes Exempt from Efficiency Adjustment

CMS also proposes an efficiency adjustment, which reduces work RVUs by 2.5%, to reward cost-effective service delivery. However, CMS has stated that E/M codes are exempt from this adjustment, including:

• Nursing Facility Visit Codes (99304–99316, G0317)
• Home and Residence Visit Codes (99341–99350)
• Advance Care Planning Codes (99497–99498)

This exemption provides some protection for clinicians delivering PALTC care and ensures that these services won’t face additional RVU cuts beyond the proposed PE redistribution.

Proposed 2026 Code Values: A Preview

Below are approximate estimated values for nursing home and home-residence-based codes. They are based on the two new conversion factors (APM and Non-APM) as well as the new PE RVUs (Facility and Non-Facility). (Please note that these are just estimates and could change once the final rule is published in November.)

Nursing Home Codes

Non-APM, Facility

Non-APM, Non-Facility

APM, Facility

APM, Non-Facility

Home/ Residence Visits (Assisted Living)

Non-APM, Non-Facility*

APM, Non-Facility*

*CMS indicated that facility PE RVUs were not applicable in this setting.

Expanded Use of G2211 Add-On Code to Home and Residence Visits

In the CY 2024 PFS final rule, CMS reaffirmed the intent behind HCPCS code G2211, an add-on code meant to account for the additional resources involved in providing ongoing, longitudinal care. Until now, G2211 could only be billed with office and outpatient (O/O) E/M services.

CMS is now proposing to expand the use of G2211 to include home and residence-based E/M visits, recognizing that these services often involve similar longitudinal care relationships. These visits frequently occur monthly, or even weekly, for patients with serious or complex conditions, and involve the development and execution of a longitudinal care plan that addresses all the patient’s medical needs. CMS notes that follow-through based on a trusting practitioner/patient relationship is critical to keeping patients stable and preventing exacerbations.

If finalized, practitioners would be able to report G2211 in addition to the following E/M codes for home or residence visits: 99341, 99342, 99344, 99345, 99347, 99348, 99349, and 99350.

Proposed G2211 Descriptor:

“Visit complexity inherent to evaluation and management associated with medical care services that serve as the continuing focal point for all needed health care services and/or with medical care services that are part of ongoing care related to a patient's single, serious condition or a complex condition. (Add-on code, list separately in addition to home or residence or office/outpatient evaluation and management service, new or established.)”

PALTmed will submit formal comments to CMS regarding the proposed changes to the PFS to urge no reduction in payments. It will also provide guidance for members on how to submit their own comments to CMS, ensuring that their voices are heard as part of this critical policy discussion.