CMS’ 2027 Medicare physician fee schedule final rule cuts the conversion factor by 2.31%, a deeper cut than the 1.68% CMS proposed in July. Alexander Vaccaro, MD, PhD, president of Philadelphia-based Rothman Orthopaedics, said the cut will fall hardest on independent practices and could speed consolidation.
He also said a new 20% payment cut for same-day evaluation and management services billed with Modifier 25 works against efficient care.
Dr. Vaccaro warned that the cumulative cuts could accelerate physician consolidation, push more care into higher-cost hospital settings and ultimately threaten patient access to specialty services. He also challenged the notion that reducing procedural reimbursement advances value-based care, pointing to spinal decompression and joint replacement as examples of high-value interventions that restore patients’ quality of life.
Editor’s note: Responses have been lightly edited for clarity and length.
Question: What stands out to you in the final rule, and what will it mean for your physicians, your organization or physician practices more broadly?
Dr. Alexander Vaccaro: The most troubling aspect of CMS’ 2027 physician fee schedule final rule is that the reduction in physician reimbursement is even greater than originally proposed. In July, CMS projected a 1.68% reduction in the conversion factor for most physicians. The final rule, however, reduces that conversion factor by 2.31%, from $33.40 to $32.63. Physicians participating in qualifying advanced alternative payment models will experience a somewhat smaller reduction of 1.83%. Much of this decline results from the scheduled expiration of the temporary 2.5% Medicare physician payment increase enacted for 2026. Nevertheless, the consequences for physicians and their patients remain significant.
These reductions follow CMS efficiency adjustments that have already lowered the work relative value units assigned to many surgical and procedural services. At the same time, physician practices continue to face rising expenses for staffing, medical supplies, technology, regulatory compliance and professional liability. Unlike many other Medicare payment systems, the physician fee schedule does not provide physicians with an automatic annual inflation adjustment tied to the actual cost of delivering care. As a result, the purchasing power of Medicare physician reimbursement has eroded substantially over time. We are asking physicians to deliver increasingly sophisticated care, meet expanding administrative requirements, and maintain high standards of quality while reimbursement fails to keep pace with the cost of providing those services.
Two additional provisions are particularly concerning for orthopedic practices and the older patients we serve. The first is the new 20% payment reduction involving certain evaluation and management services billed on the same day as a procedure using Modifier 25. Although CMS appropriately reduced its originally proposed 50% penalty and limited the final policy to zero-day global procedures, the remaining reduction is still problematic. Consider a 70-year-old patient with symptomatic knee osteoarthritis who undergoes a medically necessary evaluation and receives a corticosteroid injection during the same appointment. When the evaluation is significant and separately identifiable, providing both services during one visit is efficient, clinically appropriate and convenient for the patient. Medicare should encourage this coordinated approach rather than create financial disincentives for delivering it.
The second concern is CMS’ decision to phase out the indirect practice cost index over two years and modify the methodology used to allocate indirect practice expenses. Although CMS describes these changes as efforts to improve payment accuracy, their financial consequences may vary substantially across specialties and practice settings. Orthopedic practices maintain significant infrastructure, including clinical personnel, equipment, administrative support and facilities necessary to deliver complex musculoskeletal care. Any payment methodology that fails to recognize these expenses risks further undermining the financial viability of independent physician practices.
These policies also affect more than individual physician reimbursement. Large multispecialty organizations may be better positioned to absorb declining margins, but smaller independent practices often have fewer financial resources to withstand sustained payment pressure. Over time, inadequate reimbursement may accelerate physician consolidation and employment by hospitals, health systems or corporate entities. This could ultimately increase healthcare expenditures and reduce patient choice, particularly when services migrate from lower-cost physician offices to more expensive hospital-based settings.
I also disagree with the implication that reducing reimbursement for procedural care necessarily advances the transition from “volume to value.” A total hip replacement that restores mobility and independence or a spinal decompression that relieves disabling radicular pain represents some of the highest-value care in modern medicine. These interventions can dramatically improve quality of life, reduce disability, and allow patients to regain meaningful function. Value should be measured by patient outcomes, appropriateness of care, durability of benefit and total cost, not simply by whether a service is procedural or cognitive.
The fundamental problem is that Medicare physician payment remains disconnected from the economic realities of medical practice. Congress must act before Jan. 1, 2027, to prevent further erosion of physician reimbursement and establish a sustainable, inflation-sensitive payment framework. Protecting access to high-quality specialty care, preserving independent medical practice, and ensuring that Medicare beneficiaries can obtain timely treatment should be bipartisan priorities. Without meaningful reform, the cumulative effect of these policies threatens not only the physicians who provide care but also the patients who depend upon them.
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