The Centers for Medicare & Medicaid Services (CMS) has unveiled its proposed rule for the Calendar Year 2026 Medicare Physician Fee Schedule (MPFS). This proposed rule aims to refine payment accuracy, modernize outdated billing practices and technologies, and expand access to telehealth.

To do this, dramatic changes have been made to the conversion factor, practice expense methodology, and how CMS regards and handles telehealth services. By doing this, the agency says they will be more able to keep up with contemporary care practices while ensuring the sustainability of the Medicare program.

There’s a lot to go through in this proposed rule, so today, we’re going to break down some of the most important details that providers need to know.

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Dual Conversion Factors

One of the most-discussed changes in the 2026 MPFS proposed rule is the use of two conversion factors. Beginning in 2026, two separate conversation factors will exist for alternative payment model (APM) qualifying participants (QPs) and non-QPs. While it’s technically already true that there are two conversion factors, the proposed rule offers a clearer delineation between the two. 

For providers qualifying providers (“QPs), the proposed 2026 conversion factor is $33.59, representing a 3.83% increase over the current $32.35. This bump is composed of a statutory 0.75% increase under the Medicare Access and CHIP Reauthorization Act (MACRA); an increase of 2.5% from the Big Beautiful Bill Act; and a 0.55% adjustment for proposed RVU updates.

Non-QPs will see a conversion factor of $33.42, up 3.62% from 2025. This includes a 0.25% MACRA-mandated increase, plus the same 2.5% and 0.55% adjustments.

According to Chris Klomp, Deputy Administrator and Director of the Center for Medicare at CMS, this system is designed to “reward high-quality, efficient care; addressing the root causes of unique health challenges; and aligning health care spending with value so that new innovations help to deliver better quality at a lower price.”

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Practice Expense: A Long-Awaited Refresh

CMS is also proposing significant updates to the way it calculates practice expenses (PE). These are the costs associated with operating a medical practice, such as rent, staff, and equipment.

Industry experts have long complained that current PE methodology relies heavily on outdated data from the 2008 AMA Physician Practice Information (PPI) Survey. Unfortunately, it seems that this issue has not been resolved. Although CMS received updated PPI and Clinician Practice Information (CPI) Survey data from the AMA in early 2025, it has opted not to incorporate this new data for the 2026 rulemaking, citing low response rates and incomplete data submissions, among other issues.

Still, that doesn’t mean that they aren’t taking physician concerns into account. Notably, CMS plans to reduce the share of indirect PE allocated to facility-based services, recognizing not only the increasing integration of physicians into hospital systems, but also the declining number of independent private practices — and the greater indirect costs these independent practices might have.

CMS is further proposing to use routinely updated, auditable hospital data from the Medicare Outpatient Prospective Payment System (OPPS) to inform payment assumptions for some technical services; for example, the proposed rule lists radiation therapy and remote monitoring services. The goal, the rule says, is to enhance rate-setting predictability, increase transparency, and reduce reliance on flawed survey data.

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Telehealth: Streamlining and Modernizing Access

The 2026 proposed rule also introduces a suite of reforms to Medicare telehealth policies, many of which stem from lessons learned during the COVID-19 pandemic.

Key proposals include eliminating frequency limitations for subsequent inpatient and nursing facility visits, and critical care consultations; simplifying the Telehealth Services List review process by eliminating the distinction between provisional and permanent services; and expanding the definition of “direct supervision” to include real-time audio/video communication, except for services that have a global surgery indicator of 010 or 090.

This new definition of virtual supervision would apply to "incident-to" services under §410.26, diagnostic tests under §410.32, pulmonary rehab under §410.47, and cardiac rehab services under §410.49.

That said, CMS is not proposing to extend its temporary pandemic-era policy allowing virtual supervision by teaching physicians in metropolitan areas. Instead, it plans to revert to pre-PHE rules requiring in-person supervision, while maintaining exceptions for rural settings.

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Looking Ahead

While this article centers on conversion factors, practice expenses, and telehealth, the 2026 MPFS proposed rule also contains sweeping changes to ACO participation, chronic condition management, prevention and wellness, drug payment reform, and more.

In short, it’s clear that CMS has a vision with this rule — one that they say will mark a shift toward evidence-driven policymaking, increased transparency, and more adaptive payment structures that better reflect modern care delivery.

As always, the agency is currently soliciting public comment through September. As a provider, you should closely review these proposals and consider how these changes may affect your practice in the years ahead. We will keep you updated as the comments come in.