Policy changes ahead for primary care and ACOs

What the One Big Beautiful Bill Act and the 2026 Proposed Physician Fee Schedule means for your primary care organization

By Casey Korba, senior director of Policy

In this article, we cover:

• The impacts of the recently passed One Big Beautiful Bill Act (OBBB) and the proposed Physician Fee Schedule (PFS) on primary care payment for 2026
• What the Centers for Medicare and Medicaid Services (CMS) is proposing to change in the Medicare Shared Savings Program (MSSP)
• The proposal for a new ambulatory specialty model targeting heart failure and lower back pain 
• Welcome changes CMS is proposing to address sky-rocketing costs of skin substitutes
• Medicaid provisions taking effect in 2027

July was a busy time for primary care policy. Congress passed the OBBB which was signed into law July 4, and CMS released the proposed PFS July 14. 

Physician payment in 2026

In the bill, Congress included a 2.5% increase to the Medicare physician fee schedule for 2026 only. This is an increase over the 0.75% Advanced Alternative Payment Model (AAPM) participants were going to get (AAPMs include risk-taking accountable care organizations (ACOs)). However, there was no update provided for 2025, and the update will revert to 0.75% for AAPM participants in 2027 unless Congress acts again next year. In addition to implementing the conversion factor updates provided in the bill, CMS also proposed an efficiency adjustment to certain codes in the proposed PFS. Together, these changes translate to a 3.83% increase for AAPM participants and a 3.62% increase for AAPM non-participants. 

As for the future of physician payment in Medicare, Medicare Access and CHIP Reauthorization Act (MACRA) reform is still a topic of interest in Congress, and now that the budget reconciliation bill is behind us, it is possible those talks will return for 2026 and beyond. 

Diving Deeper on the Efficiency Adjustment

CMS proposed a new methodology for calculating how efficiency gains over time are reflected in the payment rates for non-time based services in the Medicare fee schedule. The efficiency adjustment would take into account efficiencies gained in procedures (mostly done by specialists) over the years. This would apply annually to all codes except time-based codes, such as evaluation and management (E/M) services, care management services, behavioral health services and services on the Medicare telehealth list. CMS's proposed methodology yields an adjustment of negative 2.5% to the work component of these codes for 2026.  The value of these Relative Value Unit (RVU) reductions would then generate an increase to the overall fee schedule conversion factor applicable to all services due to the budget neutrality requirements under the law. (The proposed policy would generate a 0.55% increase in 2026.)  CMS is also proposing that the methodology be reviewed every three years.

CMS proposes changes to help practices undergoing a change in ownership, and encourage ACOs to take on downside risk faster

The administration did not have a lot of time to make big changes to the flagship ACO program in this year's proposed PFS. One nuance CMS did propose includes ideas to create avenues for practices undergoing a change in ownership (CHOW) and smaller ACOs. Some practices that undergo a CHOW mid-year would be able to add the new entity to the ACO mid-year rather than waiting until next year. The other change would be that ACOs would be allowed to have less than 5,000 beneficiaries in some years, but would be subject to more limited financial opportunities. 

CMS is also making some changes to encourage practices to take on risk faster. Currently, inexperienced, low-revenue (physician-led) ACOs can stay in a one-sided risk for seven years and slowly progress to BASIC level E over 10 years. CMS is proposing requiring one five year contract in upside only risk, while the subsequent contract would require them to take on some level of downside risk.

Housekeeping updates in quality and attribution

CMS is proposing to remove the health equity adjustment starting in performance year 2025 on the basis that the existing incentives, including the electronic Clinical Quality Measure (eCQM) / Merit-based Incentive Payment System (MIPS) CQM reporting incentive and the Complex Organization Adjustment, are duplicative. It is possible that in 2027, ACOs with more complex patient populations could have more challenges meeting quality thresholds. The ACO community will likely advocate and work with CMS to come up with a solution before 2027. Other changes in the proposed rule include canceling the social drivers of health screening measure which was to take effect in 2028, and allowing the CAHPS survey which measures patient experience to be web-based in addition to mail and phone-based.

CMS periodically proposes changes in codes that can be used in MSSP assignment. For next year, the definition of primary care services would be expanded to include Enhanced Care Model Management Services (HCPCS codes GPCM1, GPCM2 and GPCM3), while Social Determinants of Health Risk Assessment Services (HCPCS code G0136) are proposed for deletion from this definition. This aligns with proposed changes in Medicare Fee Schedule payment policy and CMS' emphasis on comprehensive care management. 

New Ambulatory Speciality Model focused on heart failure, lower back pain

A new model for specialists including cardiologists who treat heart failure and specialists, such as orthopedic surgeons and others who treat lower back pain is set to start in 2027, if finalized. Specialists in certain parts of the country who treat at least 20 patients experiencing these conditions a year would qualify for this mandatory model, which CMS hopes will find ways to reduce the $21 billion in spend each year in these two categories. CMS is proposing to put 9% of the money they pay these specialists at risk, growing to 12% by 2031. The challenges to this type of model is that it is difficult to reliably measure cost and quality on clinicians that have a small number of patients with these conditions. 

CMS targets the explosion in spend on skin substitutes 

Spending on skin substitutes in Medicare Part B grew from $256 million in 2019, to $10 billion in 2024, largely due to a combination of new, costly products, changes in utilization as well as some fraud and abuse. Skin substitutes are currently classified as biologicals, but CMS is proposing to reclassify them as "incident to" supply. This change will allow CMS to set a price for the products, and the agency estimates it will cut spending by 90%. While ACOs are marginally protected against these kinds of price explosions because the benchmark is based on trends, we are pleased to see CMS taking this cost growth on through this proposal. 

What was not in the PFS will likely be addressed in the coming months

The proposed PFS is always at least 2,000 pages of regulation, and a new administration doesn't typically have time to make major changes in the first year. But MSSP is a growing, evolving program and we expect and will continue to advocate for evolving the benchmark and other fundamentals. We will also join the ACO and primary care community to continue discussions on longer term Medicare payment reform, and ensure communities have access to primary care and ways we might reduce churn in Medicaid.  

Special note from the OBBB: Medicaid provisions will take effect in 2027 and will vary by state

The OBBB made some major changes to Medicaid that will take effect in 2027 and will vary by state. These changes include restrictions in the provider tax currently used by states to get more federal funding for Medicaid. This means states will either have to make up for the loss of funds in other ways or they will cut Medicaid spend in various ways. All states are mandated to implement work requirements beginning in 2027, though states will have discretion on how to implement them. There will also be more frequent eligibility checks (every 6 months).

Finally, the bill made a change to the State and Local Tax Deduction which might impact private practices who are set up as pass through entities. We recommend these practices talk to their accountants to find out the tax implications for your practice moving forward.

Watch our deep dive on the proposed PFS for 2026 here.