2026 Final Medicare Physician Fee Schedule

CMS finalized a nominal increase in physician payment rates in the 2026 Medicare Physician Fee Schedule (MPFS) Final Rule. While this update helps avert another payment reduction, the adjustment remains inadequate to keep pace with escalating practice costs and inflation. The AADA continues to advocate for comprehensive Medicare payment reform to ensure the long-term sustainability of physician practices and to protect patient access to dermatologic care.

Conversion factors

Beginning Jan. 1, 2026, Medicare will apply two separate conversion factors (CF) as required by statute — one for qualifying participants (QPs) in an Alternative Payment Model (APM) and one for all other clinicians. Most dermatologists will be reimbursed under the non-QP CF.

• Non-QP CF: $33.40 (+3.26 % from 2025)

• QP CF: $33.57 (+3.77 % from 2025)

To qualify as a QP, a clinician must receive at least 50% of Medicare payments or treat 35% of Medicare patients through an Advanced APM during the 2024 performance period. You can check your QP status by entering your NPI number on the CMS Quality Payment Program website.

In our comment letter to CMS, the AADA opposed the dual conversion factors and urged the agency to adopt a single, uniform update for all physicians until broader APM opportunities are available.

The final conversion factor also reflects the following components:

• A temporary 2.5% statutory increase for 2026 under the One Big Beautiful Bill Act.

• A MACRA update of +0.75% for QPs and +0.25% for non-QPs.

• A +0.49% budget-neutrality adjustment

Overall impact on dermatology

The Academy estimates that average Medicare payments to dermatologists in office-based settings will rise by approximately 1-2%. Precise impacts will vary by case mix, service volume, and site of care. As the mix of services furnished in facility settings increases, total payments are expected to decline, with practices solely furnishing services in facility settings expected to see a significant overall reduction in payments of up to 13% in 2026.

Efficiency adjustment

CMS finalized a –2.5 % reduction to work RVUs and intra-service time for non-time-based services beginning in 2026.

• Time-based codes, telehealth services, and new CY 2026 codes are exempt.

• CMS intends to reapply this adjustment every 3 years and may consider future refinements.

The AADA strongly opposed this policy, arguing that it is based on a flawed assumption of physician efficiency and distorts relative values within the MPFS. At the same time, because dermatology payment is weighted more heavily toward practice expense (PE) RVUs, CMS projects no direct impact on dermatology reimbursement in 2026.

Practice expense methodology changes

CMS finalized a reduction in indirect PE RVUs for all services furnished in facility settings, citing growth in hospital-employed physicians and potential “duplicative payments.” CMS estimates a 13% payment reduction for dermatology services performed in facility settings. Approximately one-quarter of dermatologists practice in such settings.

The AADA opposed this policy, noting the absence of supporting evidence and the risk of reduced access to facility-based dermatologic care.

Payment for skin substitutes

Beginning in 2026, CMS will pay for most skin substitutes as incident-to supplies under the MPFS, with a single payment rate of $127.28 in 2026. In future years, CMS intends to establish differentiated rates by product type.

The AADA opposed this policy, emphasizing that folding skin substitutes into the MPFS could undermine budget neutrality and lead to future across-the-board payment reductions. The Academy urged CMS to maintain a separate payment structure to preserve transparency and stability.

Other policies of interest

• AMA Physician Practice Information (PPI) Survey: CMS declined to adopt new AMA cost data, opting to retain 2006-based MEI weights. This decision avoids cuts to dermatology payments that would have occurred under the new PPI data.

• Global surgical codes: CMS requested feedback on improving valuation accuracy but did not propose specific changes. In the final rule, CMS did not provide any direction on future policy and stated only that it would consider the feedback in future rulemaking. The Academy continues to closely monitor these discussions.

• Superficial radiation therapy (SRT): CMS finalized four new CPT codes that cover planning, simulation, and treatment delivery, reflecting how SRT is typically performed — primarily by dermatologists — and includes both professional and technical components.
  
  With the introduction of these new codes, CPT 77401 and 0394T will be deleted, and CMS will also eliminate HCPCS code G6001, which is currently used to report ultrasound guidance for radiation field placement.
  
  CMS adopted a new methodology for valuing the practice expense RVUs of radiation therapy services, including the new SRT codes. Instead of relying on direct PE inputs, CMS used the relative weights from the Hospital Outpatient Prospective Payment System (OPPS) Ambulatory Payment Classifications (APCs) to calculate PE RVUs. This represents a significant departure from CMS’s standard methodology. As a result, SRT treatment delivery will see a substantial increase in payment.

• Telehealth: CMS finalized a permanent virtual direct supervision policy and extended teaching physician virtual presence flexibility for services furnished virtually. It also provided educational resources to suppress personal information (such as home address) in telehealth enrollment records.

Related Academy resources