2027 Medicare physician fee schedule: what it means for your clinic's revenue
CMS released the CY2027 proposed rule (CMS-1848-P) on July 14, 2026: a proposed conversion factor of $32.84 for most practices, down 1.68% from 2026. Here is the verified baseline, the proposed numbers, and what they mean for your 2027 budget.
Where the conversion factor stands going into 2027
Start with the number that is already locked. The CY2026 PFS Final Rule (CMS-1832-F) split Medicare into two conversion factors for the first time: $33.5675 for clinicians who are qualifying participants in an Advanced Alternative Payment Model, and $33.4009 for everyone else. Both are up from the single CY2025 conversion factor of $32.3465 — a +3.77% and +3.26% increase respectively (CMS fact sheet).
The conversion factor is the single dollar amount multiplied by each service's total RVUs, so it sets the ceiling on every Medicare claim you submit. A clinic billing $1.2M in Medicare services moves roughly $12,000 for every 1% the factor changes, before any volume shift. That is why the 2027 number matters more than most owners realize.
Most outpatient practices are not qualifying APM participants, so the $33.4009 figure is your practical starting line. Confirm which conversion factor applies to your billing before you model anything.
The proposed rule is out: $32.84 for most practices
On July 14, 2026, CMS released the CY2027 PFS proposed rule (CMS-1848-P). The proposed conversion factors: $33.17 for qualifying APM participants (down $0.40, or 1.19%, from 2026) and $32.84 for everyone else (down $0.56, or 1.68%) (CMS fact sheet, AHA summary).
The math behind the cut is exactly the scenario this page has warned about since June: the statutory updates are positive (+0.75% QP, +0.25% non-QP, plus an estimated +0.53% from work RVU changes), but the one-year +2.50% congressional boost that propped up 2026 expires. The net is a lower dollar factor even with a nominal update.
These are proposed numbers, not final. Public comments run through September 14, 2026, and the final rule typically lands around November 1. Congress has also passed December patches in most recent years. Budget on the proposed figure; treat anything better as upside.
Why 2027 starts lower than 2026
Here is the part the headlines miss. A large share of the 2026 increase came from a one-time lift, not a permanent one. Under Section 71202 of the 2025 budget law (H.R.1), Congress added a one-year +2.50% increase for CY2026 only. It does not carry into 2027.
Absent new legislation, the automatic 2027 update reverts to the permanent statutory baseline set by MACRA: +0.75% for qualifying APM participants and +0.25% for everyone else. In plain terms, the headline update could fall from roughly +3.77% in 2026 to about +0.75% in 2027 — and that is before budget-neutrality adjustments, which have cut the factor in most recent years.
Congress has passed late patches to soften physician pay cuts in most of the last several years, usually in a December spending bill. Plan as if the patch does not come. If it does, you adjust upward, which is the easy direction to revise.
The efficiency adjustment still applies in 2027
CY2026 also introduced a new efficiency adjustment that cut work RVUs and intra-service time by 2.5% for most non-time-based codes — procedures, radiology, and diagnostic tests. It is a structural change, not a one-year item, so it carries into 2027.
Time-based services are excluded: E/M office visits, care management, behavioral health, services on the Medicare telehealth list, and maternity codes. CMS recalibrates the adjustment using the Medicare Economic Index every three years, with the next review around 2029.
The practical read: a procedure-heavy practice (dermatology, ophthalmology, GI, pain) absorbs the efficiency cut on top of a smaller conversion-factor update, while a visit-based practice (primary care, behavioral health) is more insulated. Your service mix decides how hard 2027 lands.
How to calculate your revenue impact
You do not need the final rule to start. Pull your top 20 CPT codes by Medicare volume from the last 12 months. These typically account for 70-80% of your Medicare revenue. For each code, multiply its total RVUs by the conversion factor you expect, then by your annual volume.
Model two conversion factors side by side: today's $33.4009 and the proposed 2027 figure of $32.84 ($33.17 if you are a qualifying APM participant). The gap between the two, summed across your top codes, is your exposure. This takes about 90 minutes with a billing report and a spreadsheet.
- Export your Medicare claims by CPT code for the trailing 12 months
- Flag which of your high-volume codes are non-time-based (they carry the efficiency cut)
- Calculate per-code revenue: total RVU x conversion factor x volume
- Run it twice — current factor vs. a baseline-only 2027 factor — and take the difference
- Factor in any volume growth or decline trends
Between the proposed and final rule
The proposed rule is out; comments run through September 14 and the final rule lands around November 1, effective January 1. Historically 10-15% of proposed changes move between the proposed and final versions, so treat July's numbers as a planning draft, not a verdict.
Build two 2027 budget scenarios now: baseline-only (no December patch) for cash-flow planning, and a softened version for growth decisions. If Medicare is more than 40% of your revenue, a flat or negative update compounds fast, and the offsets — commercial contract renegotiation, payer-mix shifts, overhead cuts — all take months. Starting in summer is the difference between adjusting on purpose and reacting in January.
What to do now
Confirm which conversion factor applies to your billing — $33.5675 (qualifying APM) or $33.4009 (everyone else).
Pull your top 20 Medicare CPT codes by volume and revenue from the last 12 months, and flag which are non-time-based (they carry the efficiency cut).
Model your 2027 revenue twice: at today's factor and at the proposed $32.84 ($33.17 for qualifying APM participants). Take the difference as your planning range.
Build two 2027 budget scenarios: baseline-only (no December patch) and a softened version.
Review your payer mix. If Medicare exceeds 40% of revenue, start evaluating commercial offsets now — they take months.
Comment on CMS-1848-P before September 14 if the cuts hit your specialty hard, and re-run your model when the final rule lands (~November 1) at CMS.gov.
Who this affects
Founder of Sorso and a CFA charterholder. Before Sorso, Stan spent 19 years in corporate finance at institutions including UniCredit and Société Générale — managing a $450M loan portfolio and making senior partner at a major mezzanine lender by 29 — then built a fractional CFO firm exclusively for outpatient healthcare clinics.
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