Proposed Medicare Physician Fee Schedule Threatens Patient Care, Physician Practices

The Arizona Medical Association and other physician organizations are calling on the Centers for Medicare & Medicaid Services to withdraw or revise key provisions in the proposed CY2027 Medicare Physician Fee Schedule. Together, the undersigned groups represent thousands of physicians who care for Medicare beneficiaries in Arizona's urban, rural, and underserved communities.

CMS must ensure Medicare payments accurately reflect the resources required to provide care. But several proposals in the CY2027 rule would significantly reduce physician payments, destabilize practices, and threaten timely access to care for Medicare beneficiaries — especially independent and office-based practices already absorbing rising costs for staff, supplies, technology, and compliance.

Here's where Arizona physicians stand.

1. Withdraw the 50% Cut to Same-Day Modifier 25 Services

CMS proposes that when a separately identifiable office or outpatient evaluation and management (E/M) service is furnished the same day as a procedure with a 0-, 10- or 90-day global period, only the highest-valued service would be paid at 100%. Every other service on the claim — including a legitimately billed Modifier 25 E/M service — would be cut by 50%.

Arizona physicians strongly oppose this proposal because:

• Modifier 25 already has guardrails. It requires the E/M service to be significant, separately identifiable and medically necessary beyond the procedure itself. An across-the-board cut penalizes legitimate, distinct patient care rather than targeting inappropriate billing.
• CMS hasn't shown its math. The proposed rule calls potential overlap between services "likely" but never quantifies the duplication, identifies which resources overlap, or proves current payment overstates the work involved. A 50% reduction touching thousands of codes across numerous specialties demands evidence, not assumption.
• It undermines patient-centered care. Same-day evaluation and treatment lets a patient get a new symptom assessed and a necessary procedure done in one visit. For an Arizona senior or rural patient traveling long distances to see a specialist, forcing separate appointments means more travel, longer waits, delayed care and higher cost-sharing.
• It could pay less than the cost of care. CMS's own examples show that for some procedures, a 50% cut could push payment below the direct cost of clinical staff, supplies and equipment — before physician work is even factored in. That threatens the viability of office-based practices and risks accelerating the very consolidation CMS says it wants to avoid.

Duplicative work is already addressed through the AMA/Specialty Society RVS Update Committee (RUC) and CMS's own valuation process, which specifically excludes work tied to a distinct Modifier 25 E/M service and is reviewed annually. If CMS believes overlap remains in specific services, those services should go through that established process — not a uniform, across-the-board cut.

Send your Congressperson a pre-drafted letter urging them to stand up for patient care and physician practices before the rule is finalized. Speaking up today takes less than 3 minutes.

2. Reverse the Unsustainable Decline in the Conversion Factor

CMS proposes a CY 2027 conversion factor of $32.8409 for physicians not participating in a qualifying Alternative Payment Model — a 1.68% decrease from CY 2026 — and $33.1693 for qualifying APM participants, a 1.19% decrease.

These cuts arrive as practices face mounting costs for clinical and administrative staff, rent, supplies, technology, insurance, and regulatory compliance. Payment has increasingly fallen behind the Medicare Economic Index and the real cost of running a medical practice. Combined with the specialty-specific reductions below, further cuts are not sustainable.

Arizona physicians are urging CMS to work with Congress and use its administrative authority to deliver a positive payment update that reflects the true, inflation-adjusted cost of care.

3. Pause Changes to the Practice Expense Methodology

CMS is proposing major changes to how practice expense is calculated, including phasing down — and eliminating by CY 2028 — the Indirect Practice Cost Index, while reallocating indirect practice expense using code-level inputs. CMS itself acknowledges this would redistribute practice expense RVUs among specialties, hitting office-based specialties particularly hard.

Independent and specialty practices have limited ability to absorb sudden, methodology-driven payment swings. While CMS proposes a stabilization adjustment to limit annual changes, that safeguard doesn't prevent substantial cumulative losses as the new methodology phases in.

Arizona physicians are asking CMS to pause elimination of the Indirect Practice Cost Index and the broader methodology overhaul until it incorporates meaningful, specialty-specific physician feedback and validates the underlying cost data.

The Compounding Impact on Arizona Specialties

These three proposals don't exist in isolation — the conversion factor cut, the Modifier 25 reduction, and the practice expense changes compound one another, creating significant payment pressure for individual practices.

CMS projects the following approximate RVU reductions for specialties represented in this effort:

• Dermatology: -9%
• Biopsies, lesion destruction, excisions, injections, and chronic skin condition management frequently involve a same-day, separately identifiable E/M service.
• Otolaryngology: -9%
• Nasal endoscopy, flexible laryngoscopy, cerumen removal, biopsies, and epistaxis treatment commonly follow a medically necessary same-visit evaluation.
• Orthopedic surgery: -7%
• Joint injections, aspirations, fracture care, and casting frequently accompany evaluation and management of complex musculoskeletal conditions.

For these specialties, the proposed policies could mean multiple reductions hitting the same practice — and sometimes the same patient encounter.

What's at Stake for Arizona Patients

Arizona has significant rural and medically underserved regions where patients already travel substantial distances for specialty care. Independent practices across the state provide comprehensive evaluation and treatment in a single visit because it's more convenient and efficient for their patients.

When Medicare payment policy makes that same-day, comprehensive care financially unworkable, practices may be forced to:

• Reduce clinical support staff
• Limit the services offered during a single visit
• Defer investments in their practices
• Split evaluation and procedures into multiple appointments

The result: more visits, more travel, longer wait times, delayed diagnoses and treatment, and potentially higher costs for both beneficiaries and the Medicare program.

Moving Forward, Together

Arizona physicians share CMS's goal of ensuring Medicare payment accurately reflects the resources needed to deliver high-quality care. But taken together, these proposals risk undermining that very goal by piling financial pressure onto the practices Medicare beneficiaries depend on.

Arizona physician organizations are urging CMS to withdraw or substantially revise these proposals and to work collaboratively with physicians and other healthcare professionals on targeted, evidence-based approaches — ones that protect both the sustainability of physician practices and Arizona patients' access to care.

Send your Congressperson a pre-drafted letter urging them to stand up for patient care and physician practices before the rule is finalized. Speaking up today takes less than 3 minutes.