Every fall, CMS finalizes the Medicare Physician Fee Schedule for the coming year, and every fall, “the conversion factor” briefly becomes the most important number in medical billing. For 2026, the headline is actually good news — both conversion factors went up — but a separate, less-publicized adjustment means several common code families are paying less per unit even as the topline number rises. Here’s what actually changed and what to check in your fee schedule before claims start going out under the new rates.
The two 2026 conversion factors, and why there are two
CMS finalized two separate conversion factors for calendar year 2026, effective January 1, 2026:
- Qualifying APM Participants (QPs): $33.57 — up $1.22 (+3.77%) from the 2025 rate of $32.35.
- Non-qualifying APM participants (everyone else): $33.40 — up $1.05 (+3.26%) from the same 2025 base.
The split exists because of MACRA’s Alternative Payment Model incentive structure: clinicians who meet CMS’s thresholds for participation in an Advanced APM get a slightly higher conversion factor than those who don’t. If your practice bills under a QP-designated APM arrangement, double-check which rate your clearinghouse or PM system is actually applying — a $0.17 difference per RVU sounds small until it’s multiplied across a full year of claims.
Per CMS’s own fact sheet, the increase breaks down into two pieces: a flat +2.50% increase required by statute for 2026, plus an estimated +0.49% adjustment to account for finalized changes in work RVUs across the fee schedule. Neither of those numbers tells you what any individual code is actually worth this year, though — that’s where the next section matters more than the conversion factor itself.
The efficiency adjustment: where the real cut is hiding
Alongside the conversion factor increase, CMS finalized a ‑2.5% “efficiency adjustment” applied directly to the work RVUs of non-time-based services. In plain terms: for a defined set of codes, CMS assumes clinicians have gotten more efficient at performing them over time, and reduced the RVU value accordingly — independent of, and on top of, the conversion factor change.
The adjustment specifically excludes E/M codes, care management services, behavioral health services, telehealth services, and maternity/global OB codes. That means the codes actually absorbing the ‑2.5% RVU cut are concentrated in procedural and surgical specialties — the same specialties that tend to bill higher-RVU codes to begin with, so the dollar impact compounds. If your practice bills primarily E/M and care-management codes, the net effect of 2026’s changes is close to the full conversion-factor increase. If you bill a heavy mix of procedural CPT codes, run your top 20 codes through the new fee schedule before assuming this year is a straightforward raise.
Don’t rely on last year’s percentage change as a shortcut. Pull your practice’s actual 2026 Medicare Physician Fee Schedule file (available from CMS or your MAC) and re-run your top-billed codes against it directly — the conversion factor increase and the efficiency adjustment move in opposite directions on the same codes, so only a real recalculation shows the net effect.
Telehealth and behavioral health: rules loosened, not tightened
Several 2026 changes make telehealth and behavioral health billing more flexible rather than more restrictive, which is a break from the pattern of the last few years:
- CMS finalized a streamlined process for adding new services to the Medicare telehealth list, rather than requiring a full annual rulemaking cycle for every addition.
- Frequency limitations were permanently removed for inpatient and nursing facility telehealth visits and for critical care telehealth consultations — previously these were capped at a set number of visits per patient per time period.
- Virtual direct supervision is now permitted for applicable services, meaning the supervising clinician no longer has to be physically on-site for every service that requires direct supervision.
- New add-on codes were finalized for Advanced Primary Care Management services that include integrated behavioral health, alongside continued support for Collaborative Care Model billing.
For practices already tracking our 2026 telehealth billing guide or managing behavioral health session limits, these changes are worth a direct read-through against your existing workflows — some documentation shortcuts that weren’t allowed in 2025 are permitted now.
Skin substitutes: a quiet but real billing change
CMS reclassified skin substitute products as incident-to supplies under the Physician Fee Schedule rather than billing them as separate, individually-priced products, and set a single unified payment rate of approximately $127.28 per unit. Practices that bill skin substitute applications — commonly wound care, podiatry, and dermatology — should confirm their coding and documentation workflows reflect the new incident-to structure before claims go out, since billing these under the old product-specific logic will likely trigger denials under the new rule.
Takeaway
The 2026 Physician Fee Schedule is a net increase on paper — both conversion factors are up 3%+ over 2025 — but “the conversion factor went up” is not the same statement as “my reimbursement went up.” The ‑2.5% efficiency adjustment on non-time-based codes means the real answer depends entirely on your practice’s code mix. Pull your actual top-billed codes against the new 2026 fee schedule, confirm which conversion factor applies to your practice, and flag the skin-substitute and telehealth changes to anyone on your team who touches those claims directly.