Workers' Compensation: Navigating Physician Payment Changes

The Centers for Medicare & Medicaid Services (CMS) has recently unveiled its proposed rule for the Calendar Year (CY) 2026 Medicare Physician Fee Schedule (PFS). This proposal outlines significant changes that will shape how physicians are reimbursed for their services going forward, and stakeholders will need to understand the potential implications.

CMS's Proposed Rule: A Glimpse into 2026 Physician Payments

After a period of stagnant or decreasing payment updates, the proposed rule brings some positive news: an overall increase in physician payments for 2026. This is largely due to a statutory update, a temporary one-year increase, and a positive budget neutrality adjustment. However, the picture is nuanced, with different impacts depending on a physician's practice model.

One of the most notable changes is the introduction of two separate conversion factors starting in CY 2026. Physicians who are "qualifying participants" in Alternative Payment Models (APMs) will see a slightly higher conversion factor increase (projected at +0.75%), leading to a larger reimbursement bump. For those not in qualifying APMs, the increase will be smaller (projected at +0.25%). This move underscores CMS's continued push towards value-based care and participation in APMs.

In a groundbreaking development, CMS is also proposing its first-ever efficiency adjustment. This adjustment will apply to the work Relative Value Unit (RVU) and the corresponding "intraservice" portion of physician time for non-time-based services. Specialties that rely heavily on procedural or diagnostic codes, such as radiology and some surgical fields, might see slight reductions in their RVUs as a result. Conversely, specialties that focus more on time-based codes, like family medicine and psychiatry, may experience small increases.

The proposed rule also addresses telehealth flexibilities, a crucial aspect of healthcare delivery that gained prominence during the public health emergency. CMS is proposing to permanently allow direct supervision via real-time audio and video for lower-risk services. Additionally, telehealth billing flexibilities for federally qualified health centers (FQHCs) and rural health clinics (RHCs) are proposed to be extended through 2026.

Key Takeaways:

Payment Increases Proposed: CMS is proposing an overall increase in physician payments for CY 2026, a welcome change after recent years of cuts.
Two Conversion Factors: Beginning in 2026, there will be separate conversion factors for physicians participating in qualifying Alternative Payment Models (APMs) and those who are not, with APM participants seeing a slightly higher increase.
Efficiency Adjustment Introduced: CMS is proposing its first-ever "efficiency adjustment," primarily impacting procedural and diagnostic specialties, potentially leading to slight reductions in their Relative Value Units (RVUs).
Telehealth Flexibilities Maintained: Some COVID-era telehealth flexibilities, like direct supervision via real-time audio/video for certain services, are proposed to become permanent or be extended.
Workers' Comp Impact Varies: The direct impact on workers' compensation systems depends on how each state's fee schedule incorporates Medicare's Physician Fee Schedule (PFS) rates.

Public Comments: Your Voice Matters

CMS actively solicits feedback from stakeholders on proposed rules, and the CY 2026 PFS proposed rule is no exception. The procedure for public comments involves submitting your feedback through the official channels outlined in the proposed rule. The comment period for the CY 2026 PFS proposed rule (CMS-1832-P) is set to close on September 12, 2025. This is a critical window for physicians, healthcare organizations, and other interested parties to provide their insights and concerns, which CMS will consider before issuing a final rule.

Workers' Compensation: A Distinct Landscape

Will these changes impact the provision of medical treatment for injured workers under workers' compensation systems that are based on fee schedules utilizing Medicare rates? The answer is: it depends.

Many state workers' compensation systems do, in fact, base their fee schedules, at least in part, on Medicare's PFS. This can involve adopting Medicare's Relative Value Units (RVUs) and then applying a state-specific conversion factor, or a percentage of Medicare rates. Therefore, changes to Medicare's conversion factors, RVU valuations, and even new codes can indirectly influence workers' compensation payments.

However, the degree of impact varies significantly by state. Some states closely mirror Medicare, while others have their own unique methodologies or only selectively incorporate Medicare updates. For example, some states may adopt updated RVUs but use their own conversion factors, potentially dampening or amplifying the Medicare changes. Additionally, legislative or regulatory action at the state level is often required to officially incorporate Medicare's annual updates into workers' compensation fee schedules.

In essence, while Medicare's proposed rule sets a significant benchmark for physician payments, its direct influence on workers' compensation systems will be filtered through each state's specific regulatory framework and the timeline for adopting such changes. Workers' compensation stakeholders will need to closely monitor their state's adoption of these Medicare updates to fully understand the impact on injured worker treatment and provider reimbursement.