Medicare Physician Fee Schedule Conversion Factor

The conversion factor converts relative value units into dollars. Medicare prices a service by adding its three geographically adjusted RVU components and multiplying the total by the conversion factor:

Payment = (Work RVU x Work GPCI + Practice Expense RVU x PE GPCI + Malpractice RVU x MP GPCI) x Conversion Factor

Because the conversion factor sits outside the parentheses, it scales every service a practice bills to Medicare simultaneously. A 2.83% cut to the conversion factor is a 2.83% cut to the Medicare line of a cardiology practice, a physical therapy clinic, and a pediatric group alike, before any RVU redistribution is considered.

Two distinctions matter when reading any conversion factor figure, and most published summaries collapse them:

1. The rule value versus the in-effect value. CMS publishes a conversion factor in each year's final rule, typically in early November. In five of the last six years, Congress then changed it before or during the payment year. The number in the rule and the number that actually paid claims are frequently not the same.
2. The two-decimal value versus the four-decimal value. CMS fact sheets print $33.57; the Federal Register regulatory impact analysis prints 33.5675. Contract and fee-schedule modelling should use the four-decimal figure.

The table separates the two values described above. Where Congress did not legislate an in-year change, the two are identical.

Four-decimal values from the rule text, for fee-schedule modelling: CY2020 36.0896, CY2021 32.4085, CY2022 33.5983, CY2023 33.0607, CY2024 32.7442, CY2025 32.3465, CY2026 33.5675 (qualifying APM) and 33.4009 (nonqualifying).

Reading the pattern. The conversion factor CMS finalized fell in five of the six years from CY2020 to CY2025, and the in-effect figure fell every single year across that span, from $36.09 to $32.35 — a decline of $3.74, or 10.4%, in nominal dollars before accounting for any inflation. CY2026 is the first increase in the series. It is also the first year in which the increase is partly temporary: the 2.50% component applies to CY2026 only.

Sources: CMS final rule fact sheets for CY2020, CY2022, CY2023, CY2024, CY2025 and CY2026; four-decimal values from the Federal Register rule text via GPO. The CY2024 two-period split is stated on the CMS Physician Fee Schedule page.

CY2026 is the first year the Medicare Access and CHIP Reauthorization Act's differential update schedule takes effect. From CY2026 onward, statute sets a higher annual update for qualifying alternative payment model participants than for everyone else.

The CY2026 increase is built from four separate components:

1. +0.75% statutory update for qualifying APM participants, or +0.25% for everyone else. This is the permanent differential.
2. +2.50% one-year increase enacted in the One Big Beautiful Bill Act, applying to CY2026 only.
3. +0.49% budget-neutrality adjustment.

Combined, CMS states the result as $33.57 for qualifying APM participants (+3.77%) and $33.40 for everyone else (+3.26%).

A discrepancy inside the published rule. The CY2026 final rule's own preamble, in the Summary of Costs and Benefits, states the conversion factor increase as "$0.39 (1.2 percent)" and "$0.23 (0.7 percent)" — figures that contradict both the same rule's regulatory impact analysis (33.5675 and 33.4009) and the CMS fact sheet (+3.77% and +3.26%). The preamble numbers are consistent with omitting the statutory 2.50% one-year increase. Neither of the two CY2026 correction notices altered them. Use +3.77% / +3.26% and the $33.57 / $33.40 values, which are what the impact analysis and the fact sheet both support.

Anesthesia is a separate conversion factor. Anesthesia services are priced on their own multiplier, not the physician conversion factor: 20.5998 for qualifying APM participants and 20.4976 for everyone else in CY2026, up from 20.3178 in CY2025.

For most specialties, two policy changes in the CY2026 rule redistribute more revenue than the 3.26-3.77% conversion factor increase adds back.

The efficiency adjustment: -2.5% to work RVUs. CMS finalized a negative 2.5% adjustment to the work RVU and the intraservice portion of physician time for non-time-based services. Exempt from it: evaluation and management services, care management, behavioral health, services on the telehealth list, and maternity codes with global periods. CMS intends to apply the adjustment every three years using a five-year look-back at Medicare Economic Index productivity. Notably, CMS states its more recent Bureau of Labor Statistics total-factor-productivity data would have supported a 3.6% adjustment; it chose the more conservative 2.5%.

The site-of-service differential. When work RVUs are used to allocate indirect practice expense to facility RVUs, CMS now assigns them at one-half the amount allocated to non-facility practice expense RVUs for the same service. The aggregate effect across all specialties is a +4% practice-expense impact in non-facility settings and -7% in facility settings, netting to 0% overall.

The practical consequence: where a service is performed now changes its payment more than it used to. A practice that performs a procedure in its own office is favoured relative to the same procedure performed in a hospital outpatient department. Groups with mixed site-of-service patterns should model both settings before assuming the CY2026 increase is a net gain.

The figures below are CMS's own estimates from the CY2026 final rule impact table (Table 92, printed as Table D-B7 in the display copy). These are RVU redistribution effects only — they exclude the conversion factor change. A specialty showing 0% is not flat overall; it is flat on redistribution and still receives the conversion factor increase.

Additional confirmed rows from the same table: vascular surgery +5%, rheumatology +4%, clinical social worker +4%, clinical psychologist +3%, endocrinology +3%, podiatry +2%, nurse practitioner +1%, physician assistant +1%, urology 0%, emergency medicine -1%, dermatology -2%, ophthalmology -2%, general surgery -3%, critical care -4%, plastic surgery -4%, neurosurgery -5%, infectious disease -6%.

For contrast, CY2025 was nearly flat on redistribution for almost every specialty: cardiology 0%, orthopedic surgery -1%, physical/occupational therapy 0%, pediatrics 0%, gastroenterology 0%, psychiatry +1%, family practice 0%, internal medicine 0%, radiology 0%, anesthesiology +2%. The only notable CY2025 movers were behavioral health non-physician specialties — clinical psychologist +3% and clinical social worker +4%.

The pattern across both years is consistent: the specialties gaining are those delivering care in non-facility settings, and the specialties losing are those whose volume sits in hospital outpatient departments and ambulatory surgery centres.

Source: CMS CY2026 PFS final rule, Table 92, via the Federal Register public inspection display copy.

A conversion factor increase is not the same as a revenue increase, because it is measured against a cost base that moves independently.

The Medicare Economic Index tracks the cost of running a physician practice. According to the Medicare Payment Advisory Commission's March 2026 Report to the Congress, MEI growth slowed to 3.0 percent in 2024 and is projected to moderate further in the coming years — to 2.7 percent in 2025, 2.2 percent in 2026, and 2.1 percent in 2027.

The longer comparison is the one that matters for planning. MedPAC reports that from 2000 to 2024, the MEI increased cumulatively by 56 percent compared with 14 percent for fee schedule updates. MedPAC qualifies this in the surrounding text, and the qualification should travel with the figure: the commission also notes that measures of payment adequacy — beneficiary access, supply of clinicians, and volume of services — have generally remained stable.

MedPAC also confirms the temporary nature of the CY2026 relief: the 2026 increase is "a one-year increase of 2.5 percent that applies in 2026 only," with the 0.75 percent and 0.25 percent differential updates resuming in 2027.

The planning implication is straightforward. A practice modelling CY2027 on a CY2026 revenue base is modelling on a number that statute already removes. The 2.50% component should be treated as non-recurring.

Source: MedPAC March 2026 Report to the Congress, Chapter 4.

The calculation is mechanical once the RVU components are known. All RVU values come from the CMS Physician Fee Schedule Relative Value File; GPCI values come from the same release and vary by locality.

1. Look up the three RVU components for the CPT or HCPCS code: work, practice expense, and malpractice. Practice expense has two values — facility and non-facility. Pick the one matching where the service was performed.
2. Apply the geographic practice cost indices for the locality: multiply each RVU by its corresponding GPCI.
3. Add the three adjusted components to get the total adjusted RVU.
4. Multiply by the conversion factor — $33.57 or $33.40 for CY2026, depending on qualifying APM status.
5. Apply any modifier or policy adjustments — multiple procedure reduction, assistant-at-surgery percentage, bilateral adjustment, or the site-of-service differential.

The result is the Medicare allowed amount. Medicare pays 80% of it after the deductible is met; the remaining 20% is patient coinsurance or secondary payer responsibility.

The most common error in practice modelling is applying the conversion factor to unadjusted national RVUs and treating the result as expected payment. Geographic adjustment alone moves the figure by double-digit percentages between localities, and the facility versus non-facility practice expense choice moves it further — which is exactly the variable CY2026 made more consequential.

A conversion factor change is a fee-schedule event, and fee-schedule events fail quietly. The revenue loss from a mispriced fee schedule does not appear as a denial; it appears as claims that pay correctly against the wrong expected amount, so nobody notices until a year-end reconciliation.

Three operational checks belong in every January:

1. Reload the fee schedule and verify the loaded conversion factor. Confirm which of the two CY2026 conversion factors applies to each rendering provider based on qualifying APM status. A practice with mixed participation status has two expected-payment schedules, not one.
2. Re-baseline expected reimbursement before measuring collection performance. Net collection rate is measured against the contractually allowed amount. If the allowed amounts in the practice management system are stale, the net collection rate is computed against a wrong denominator and will read high. This is the mechanism by which a fee-schedule error hides a real collection problem — see net collection rate and the collection rate calculator.
3. Re-check the specialties with the largest redistribution. Gastroenterology at -4% and orthopedic surgery at -3% on RVU redistribution need their commercial contracts reviewed as well, since many commercial rates are expressed as a percentage of Medicare and inherit the change automatically.

Practices that outsource these checks should confirm their billing partner performs them on a stated schedule rather than on request. Our own cadence for fee-schedule reloads, payment-variance detection and monthly reporting is documented in the operating framework on our about page, and the underpayment-detection step specifically sits in payment posting. Where a practice wants the whole cycle owned end to end, that is revenue cycle management; where the concern is that past underpayments already went uncaught, a billing audit is the diagnostic.