CMS to increase physician payment in 2026

The 2026 Medicare Physician Fee Schedule (PFS) included a nominal payment increase for the first time in five years. While this is a step forward, other finalized policies will reduce physician payment in future years. Securing comprehensive Medicare payment reform with an annual, inflation-based update remains the Academy's top advocacy priority.

In the 2026 Medicare PFS Final Rule, CMS finalized two separate conversion factors: one that included a 0.75 percent base payment update for items and services furnished by Qualifying alternative payment model (APM) Participants (QPs) who meet certain thresholds for participation in an Advanced APM (A-APM), and a separate 0.25 percent base payment update for other items and services. Both conversion factors included a 2.5% increase for 2026 provided by the One Big Beautiful Bill Act.

The 2026 conversion factors are as follows:

• QPs in A-APMs: $33.57, which is an increase of $1.22 (3.77%) from 2025.
• Non-QPs: $33.40, which is an increase of $1.05 (3.26%) from 2025.

*Most dermatologists will be reimbursed under the Non-QP conversion factor. You can check your QP status using your NPI number here.

CMS also finalized its arbitrary “efficiency adjustment” policy reduction of -2.5%, which would reduce the work relative value units (RVUs) and intra-service times for non-time-based services. This negative adjustment, which AADA opposed, reflects the CMS assertion that time assumptions built into the valuation of many procedures and services are overinflated due to increases in physician efficiency and technological advances over time. CMS will exempt the following from the efficiency adjustment: evaluation and management codes, services on the CMS telehealth list, and new codes for 2026. The agency will apply the efficiency adjustment to the intraservice portion of physician time and work RVUs every 3 years.

Other finalized CMS Medicare PFS policies impacting dermatology include: 

• Finalized payment reductions for services provided in the facility setting based on CMS’s view that current allocations overstate facility costs.
• Maintained the current 2006-based Medicare Economic Index (MEI) cost share weights rather than applying newly submitted Physician Practice Information (PPI) survey data for 2026.
• Finalized a policy to separately reimburse certain skin substitutes as incident-to supplies, not drugs, starting in 2026.
• Adopted the RUC-recommended values for the two new CPT codes for superficial radiation therapy (SRT) that include physician work (77X05 and 77X09).

The AADA remains fully committed to securing meaningful Medicare physician payment reform that will meet the contemporary needs of the dermatology community. We continue to call on Congress to enact legislation that provides an inflation-based update and fixes the structural flaws in the Medicare payment system.

AADA staff are reviewing the final rule and will provide an in-depth analysis on AAD.org. For more information, please review the final rule, the CMS press release, and the Medicare Physician Fee Schedule fact sheet.