The 2026 Medicare Physician Fee Schedule and the new TEAM model mark a pivotal shift in reimbursement.
Is your organization prepared?
The Centers for Medicare & Medicaid Services’ (CMS) 2026 Medicare Physician Fee Schedule (MPFS) and the introduction of the Transforming Episode Accountability Model (TEAM) signal one of the most significant shifts in provider reimbursement in recent years. After six years without an increase, the MPFS conversion factor will rise in 2026.
However, this relief is tempered by a new, ongoing efficiency adjustment that reduces work RVUs for non-time-based services—disproportionately affecting specialties with high-volume, short-duration procedures.
At the same time, TEAM expands bundled payment accountability to more than 700 hospitals, tying cost and quality performance to major surgical episodes.
Together, these changes mark a pivotal moment for health care organizations as they navigate mounting financial pressure, evolving value-based models, and the need for strategic, forward-looking compensation planning.
Here’s an overview:
Medicare PFS Conversion Factor
- The proposed 2026 conversion factor has increased to $33.57 for alternative payment methods and $33.40 for non-alternative payment methods.
- The increase accounts for the required 2.5% adjustment detailed in the Big Beautiful Bill Act and additional adjustments to account for changes to RVU values.
- CMS has historically relied on the AMA Relative Value Scale Update Committee (AMA RUC) to estimate practitioner time, work intensity, and practice expense
- To reflect medical practice changes, CMS will apply an efficiency adjustment to non-time-based services, cutting work RVUs by 2.5% in 2026 and every 3 years thereafter, with no stated floor
- Specialties with high-volume, short-duration procedures are likely to be hit hardest
- Learn more from the Centers for Medicare and Medicaid Services
Efficiency Adjustment Impact Analysis
- Specialties with limited E&M activity are expected to experience the greatest impact from CMS’ efficiency adjustments.
- Modeled wRVU reductions could drive productivity and reimbursement shifts, especially for high-volume, short-duration procedural specialties.
- While the conversion factor increase offers some relief, the broader implications could heighten financial complexity and pressure on productivity-based compensation models.
Potential wRVU Impact by Specialty
- Hospital-Based specialties will experience the greatest changes in wRVUs based on the efficiency adjustment
- Primary Care specialties will experience little to no change
- Specialties providing predominantly procedural services will be impacted the most – this includes Radiology Services, Pathology Services, and Surgical Services
Transforming Episode Accountability Model (TEAM)
- Beginning January 1, 2026, the new TEAM Model will expand procedure bundle accountability to over 700 acute care hospitals
- The program ties quality and cost performance to five high-volume surgical episodes, reinforcing the shift toward value-based care and shared financial responsibility
- Focuses on 5 costly, high-volume surgical episoes including lower joint replacement, hip fracture replacement, spinal fusion, coronary artery bypass graft, major bowel procedures
- Holds acute care hospitals accountable for quality and spending during inpatient/ outpatient encounters and the 30-day post-procedure period
- Over 700 acute care hospitals in designated Core-Based Statistical Areas (CBSAs) required to participate
- Bundled payment covers full episode, including physician services
- Financial risk/reward: penalties if costs exceed the CMS target; shared savings if below
- Physicians paid via Medicare physician fee schedule; hospitals receive first shared savings distribution in mid-2027
