How Does the 2027 Medicare Proposed Rule Affect Payer Contracts?
As of July 14, 2026, CMS has proposed a 2027 Medicare Physician Fee Schedule that would cut the conversion factor by 1.68% for non-APM participants and reduce same-day E/M payments billed alongside procedures by 50%. These changes directly lower the Medicare benchmark that most commercial payers use when setting their own reimbursement rates, which means existing payer contracts may pay less in 2027 even if the contract terms do not change.
- Conversion factor impact: The non-APM conversion factor would drop from $33.40 to $32.84, a 1.68% decrease driven by the expiration of the temporary 2.5% increase Congress provided for 2026.
- Same-day E/M change: CMS proposes paying only 50% for E/M visits billed with modifier -25 alongside procedures with a 0-day or 10-day global period. Practices performing procedures with same-day visits will see the largest revenue impact.
- Why contracts matter now: Commercial payers often benchmark their rates as a percentage of Medicare. When Medicare drops, the dollar value of your existing contract drops with it unless your contract locks rates independently of Medicare movement.
What the 2027 Proposed Rule Changes
CMS released the CY 2027 Medicare Physician Fee Schedule proposed rule (CMS-1848-P) on July 14, 2026. The comment period closes September 14, 2026, and the final rule is expected in November. If finalized as written, the changes take effect January 1, 2027.
The conversion factor reduction is the headline, but it is not the only provision that affects contract value. CMS also proposes replacing G2211 (the complex visit add-on code) with a percentage-based modifier, restricting remote patient monitoring to direct employees only, and applying a 50% payment reduction to E/M visits billed on the same day as a procedure. Each of these changes narrows the revenue a practice generates under Medicare, and because commercial payers often tie their rates to Medicare, the downstream effect on private contracts can be larger than the Medicare cut itself.
In our experience negotiating payer contracts, the practices that lose the most money during a Medicare fee schedule change are the ones that signed contracts pegged to a percentage of Medicare without a rate floor. When Medicare drops, their commercial reimbursement drops automatically, and there is no renegotiation trigger in the contract. For a deeper look at how payer contracts are structured and what terms to watch for, see our guide to health insurance contracts with providers.
2026 vs. 2027: Key Payment Provisions
The table below summarizes the provisions most likely to affect the value of your payer contracts.
| Provision | CY 2026 (Current) | CY 2027 (Proposed) |
|---|---|---|
| Conversion factor (non-APM) | $33.40 | $32.84 (-1.68%) |
| Same-day E/M with procedure | Paid at 100% with modifier -25 | Paid at 50% (proposed) |
| G2211 complex visit add-on | Flat-rate HCPCS code | Replaced by MOD1 (16% of E/M value) |
| RPM/RTM staffing | Third-party staff allowed | Direct employees only |
Source: CMS CY 2027 MPFS Proposed Rule (CMS-1848-P), released July 14, 2026.
Which Practices Need to Review Their Payer Contracts Now?
Every practice with commercial payer contracts that reference Medicare rates should review those agreements before January 1, 2027. The practices at the highest risk are those whose contracts use a percentage-of-Medicare reimbursement model without a rate floor or escalation clause.
Procedure-heavy specialties face the largest exposure. Dermatology, orthopedics, pain management, urology, ophthalmology, and ENT practices that routinely bill same-day E/M visits alongside procedures will see the 50% modifier -25 reduction compound on top of the conversion factor cut. A practice billing 200 same-day E/M visits per month under modifier -25 could lose $3,000 to $8,000 per month on the Medicare side alone, with additional losses on any commercial contract benchmarked to Medicare.
Practices with flat-rate or fixed-fee contracts are less exposed, but should still verify that their existing rates remain competitive once the 2027 Medicare rates publish. A contract that paid 130% of Medicare in 2026 pays 130% of a smaller number in 2027.
What to Do Before the 2027 Rule Takes Effect
The comment period is still open through September 14, 2026. But regardless of whether the final rule mirrors the proposal, practices should take these steps now.
- Pull every active payer contract and identify how each one calculates reimbursement. Flag any contract that pegs rates to a percentage of Medicare without a floor.
- Model the revenue impact of the conversion factor reduction on each contract. Calculate what 130% of $32.84 looks like versus 130% of $33.40 across your full claims volume.
- Quantify your modifier -25 exposure. Pull claims data for every encounter where modifier -25 was billed alongside a 0-day or 10-day global code. Calculate the annualized revenue loss at 50% of the E/M component.
- Identify contracts coming up for renewal in Q4 2026 or Q1 2027. These are your leverage points. A contract renewing in January 2027 should be renegotiated with the new fee schedule in mind, not the old one.
- Request a fee schedule analysis for your top payer contracts. Understanding exactly where you stand relative to Medicare, and whether your rates will drop automatically, is the first step toward protecting revenue.
- Submit a comment to CMS by September 14, 2026, if the modifier -25 or conversion factor changes affect your practice. Comments can be filed at regulations.gov under file code CMS-1848-P.
Across the payer contracts we negotiate, the practices that protect their revenue during a Medicare fee schedule change are the ones that renegotiate before the new rates take effect, not after the first short payment arrives. Contracting Providers analyzes your payer contracts, identifies the Medicare-linked clauses, and negotiates terms that hold your rates steady.
Contract Clauses That Become Dangerous in 2027
The 2027 fee schedule change exposes several contract structures that work fine in stable payment years but create automatic revenue losses when Medicare drops. Our team reviews payer contracts daily, and these are the clauses that cause the most damage when the fee schedule shifts. For practices that want to understand how to push for better rates, see our payer contract negotiation services.
Percentage-of-Medicare without a floor. A contract paying 120% of Medicare automatically pays 120% of the new, lower conversion factor in 2027. Without a rate floor (for example, “rates shall not fall below 2026 levels”), your reimbursement drops without any payer action or notification.
Auto-renewal with rate-reset language. Contracts that auto-renew and reset rates to the current Medicare fee schedule on each renewal date will absorb the 2027 cut silently. The payer does not have to renegotiate. The contract does it for them.
No escalation clause. Contracts without an annual escalation (for example, a 2% to 3% annual rate increase) leave the practice absorbing rising costs on flat or declining revenue. The 2027 cut makes that gap wider.
Frequently Asked Questions
When does the 2027 proposed rule take effect?
If finalized, the rule takes effect January 1, 2027. CMS is expected to publish the final rule in November 2026. The current comment period closes September 14, 2026. Changes between the proposed and final versions are common based on submitted feedback.
Will the 2027 changes affect commercial payer contracts?
Yes, if your commercial contract bases reimbursement on a percentage of Medicare. When the Medicare conversion factor drops, the dollar value paid under a percentage-of-Medicare contract drops with it. Flat-rate contracts are less affected, but practices should still verify competitiveness.
What is the modifier -25 change in the 2027 proposed rule?
CMS proposes reducing payment for E/M visits billed with modifier -25 on the same day as a procedure with a 0-day or 10-day global period to 50% of the E/M value. This affects every specialty that routinely evaluates and treats in the same encounter, including dermatology, orthopedics, urology, and pain management.
Should I renegotiate my payer contracts before 2027?
Yes, especially if your contracts are pegged to Medicare rates without a floor. Renegotiating before the new fee schedule takes effect gives you leverage to lock in rates, add escalation clauses, or convert from percentage-of-Medicare to a fixed fee schedule.
How do I know if my contract is tied to Medicare rates?
Review the reimbursement section of each payer agreement. Look for language referencing “percentage of the current Medicare Physician Fee Schedule” or “based on the CMS fee schedule.” If the contract references Medicare by name, your rates move when Medicare moves.
Can Contracting Providers help with this?
Yes. Contracting Providers reviews and negotiates payer contracts for healthcare practices across all 50 states. Our team identifies Medicare-linked clauses, models the revenue impact of fee schedule changes, and negotiates terms that protect your rates. Our contract review portfolio starts at $5,000 and covers up to four payer contracts. See our provider contracting services for full details.
Next Steps
Want to understand how payer contracts are structured? Read our guide to health insurance contracts with providers.
Ready to renegotiate before the 2027 rates take effect? See our payer contract negotiation services.
Submit your comment to CMS before September 14, 2026, at regulations.gov under file code CMS-1848-P.
Need a contract review? Book a free consultation with Contracting Providers and find out exactly where your contracts stand before the 2027 fee schedule publishes.
The 2027 proposed rule creates a window to renegotiate payer contracts before the new fee schedule takes effect. Contracting Providers reviews your contracts, identifies the clauses that expose you to automatic rate cuts, and negotiates terms that hold your revenue steady. We serve practices across all 50 states, and the initial consultation is free.
