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What’s Next in Quality: CMS Conference Highlights and Stakeholder Imperatives
This week, our In Focus section covers the 2025 CMS Quality Conference. The event convened healthcare leaders, clinicians, researchers, and patient advocates to explore strategies for improving outcomes and modernizing service delivery. Centers for Medicare & Medicaid Services (CMS) Administrator Dr. Mehmet Oz and senior CMS officials emphasized the agency’s evolving priorities under the Trump Administration, with a strong focus on digital transformation, patient empowerment, and fraud prevention.
In this article, Health Management Associates (HMA) experts highlight key themes from the conference. We note where these themes align with the agency’s recent proposed rules and requests for information (RFIs), including several RFIs included in the 2026 Medicare Physician Fee Schedule (PFS) proposed rule, with comments due September 12, 2025. Finally, they advise healthcare organizations of the immediate need to evaluate their risks and opportunities in this digital health ecosystem.
Key Themes of the Conference
Empower Patients with Data
CMS leaders shared a vision for enabling Medicare beneficiaries to experience healthcare technology in the same way that they use in banking and streaming services. Within a year, CMS committed to enabling real-time digital communication with beneficiaries, becoming the nation’s “best payer.” Notably, a patient safety advocate challenged CMS to think about bi-directional data exchange where patients should be able to share data with CMS.
Subsequent to the conference, Administration officials announced elements of the Health Technology Ecosystem infrastructure, including conversational AI tools, diabetes and obesity management platforms, and efforts to “kill the clipboard” by simplifying data access for patients and providers.
Reducing Waste and Tackling Fraud
The conference coincided with the federal government’s multi-billion dollar healthcare fraud takedown, underscoring CMS’ commitment to curbing waste. CMS officials highlighted several aspects of CMS’ work, including application of predictive algorithms dubbed “the Netflix model” to identify suspicious billing patterns. They also talked about the new CMS Innovation Center model—the Wasteful and Inappropriate Service Reduction (WISeR) Model—to engage technology companies to improve prior authorization processes in traditional Medicare, particularly for high-risk items like skin and tissue substitutes.
Focusing on Prevention
CMS tied the Make American Healthy Again (MAHA) agenda to quality measurement reform. CMS officials encouraged moving to two distinct sets of quality measures: one for treating illness and another for maintaining health. These measures could focus on preventing or delaying onset of disease and on measuring outcomes.
Moving to Digital Quality
CMS also emphasized its commitments to digital quality measurement and interoperability through the adoption of Fast Healthcare Interoperability Resources (FHIR®) application programming interface (API) technology. For example, CMS’ Center for Clinical Quality and Standards is testing a FHIR-based assessment tool for inpatient psychiatric hospitals. Separately, the Centers for Disease Control and Prevention (CDC) is transitioning National Healthcare Safety Network’s measures to FHIR.
Policy Connections: From Conference Themes to Federal Action
The conference themes reflect and preview broader federal policy changes including:
- The 2026 Medicare Physician Fee Schedule (PFS) proposed rule includes multiple requests for input on streamlining quality measures, enhancing chronic disease management, and expanding digital infrastructure.
- On July 30, CMS announced an updated voluntary blueprint for modern health data exchange, which encourages healthcare organizations to become CMS-aligned networks. The agency’s Interoperability Framework describes the voluntary criteria for CMS-aligned in areas of Patient Access & Empowerment, Provider Access & Delegation, Data Availability & Standards Compliance, Network Connectivity & Transparency, and Identity, Security & Trust.
The Road Ahead for Healthcare Organizations
Healthcare organizations need to prepare for a future regulatory environment that is significantly more digital, interoperable, and chronic disease–focused. CMS is building the highway that will enable healthcare organizations to build and maintain the technology necessary for these new initiatives.
This will require state and local government, healthcare organizations, and other partners to retool their infrastructure and workflows to optimize needed operational transformations. All entities should have a strategic roadmap for obtaining and using interoperable clinical data for care management, population health and quality, among other use cases.
Payers will benefit from initiatives such as:
- Exploring strategic partnerships to help accelerate technology advancement, such as digital identity providers and specialists in digital quality measurement
- Exploring ways to increase focus on prevention, such as increasing uptake of the Medicare Annual Wellness Visit or considering new payment approaches for services like medically tailored meals
- Staying current on AI tools and predictive analytics that identify individuals at risk for preventable conditions and working with their provider networks to intervene early
States can take steps to prepare, including:
- Exploring strategic partnerships to help accelerate technology advancement, such as digital identity providers and specialists in digital quality measurement
- Assessing the reach and impact of existing primary prevention programs to understand how they can use their levers to incentivize healthy lifestyles, encourage culturally responsive health education, and address root causes of preventable illness and disease
- Identifying opportunities for aligned efforts and referral pathways, including with community organizations, to address upstream health factors
Health systems and providers will need to reimagine the care experience by:
- Exploring early adoption of AI tools for medical documentation to improve both patient experience of care interactions and coding accuracy to support digital quality measurement
- Developing age-tailored checklists to ensure face-to-face time with patients to identify and support top primary prevention goals
- Evaluating and working with their patients to use digital tools that support chronic disease prevention, such as diabetes and obesity management platforms
Connect with Us
The CMS Quality Conference signaled a substantial shift toward streamlined regulatory approaches and expanded standard data exchange, digital quality reporting and measurement, and AI deployment in care settings and by payers. Stakeholders should anticipate additional federal guidance updates, including in the Medicare Physician Fee Schedule final rule in the fall.
HMA works with state agencies, payers, health systems, and providers to assess and implement digital health, quality systems, and information technology. We can help stakeholders develop cross-sector alliances, and organizations plan for and implement changes needed to react to these new initiatives. To discuss the implications of the Administration’s efforts in prevention, healthcare quality, and interoperability, contact our featured experts below.
August 6, 2025
What’s Next in Quality: CMS Conference Highlights and Stakeholder Imperatives
Webinar Replay – Work That Works: Creating Sustainable Employment Pathways for Medicaid-Enrolled Communities
This webinar was held on August 14, 2025.
As Medicaid increasingly intersects with the social drivers of health, states have a unique opportunity to strengthen economic mobility for Medicaid-enrolled populations through strategic localized employment initiatives in partnership with municipalities, healthcare systems, and managed care providers. This webinar explored how state Medicaid agencies can lead and support the development of workforce pathways that are sustainable, inclusive, and tailored to the needs of underserved communities.
Learning Objectives:
- Learn how collaboration and partnerships reduce employment barriers.
- Explore how data-driven design improves health outcomes.
- Identify ways to integrate workforce development into Medicaid.
Reference-based pricing – a tool to improve consumer behavioral health access and affordability
Reference-based pricing is a tool that can help to address growing healthcare costs and ultimately improve healthcare affordability, especially for consumers with private health coverage. Two states —Oregon and Montana—have already implemented reference-based pricing (RBP), and several others have considered it or are in the process of implementation. RBP can be implemented in two ways- either through setting limitations on what insurers can reimburse for health services or by setting limitations on what providers can charge for services. The “reference price,” usually a percentage of what Medicare pays, can also function as a floor for provider payments. This is especially important to combat issues of access to behavioral health services, where payments are notoriously low, and workforce shortages and limited network participation issues are a significant barrier to patients seeking care.
Oregon has demonstrated significant savings since implementing caps in 2019 on what insurers can pay providers- $107.5 million over 27 months- and recently demonstrated reductions in out-of-pocket spending without unintended consequences such as hospital network disruptions or price hikes. `
In Washington, reference-based pricing was evaluated as a possible policy intervention in two reports prepared by Health Management Associates (HMA). The reports were produced for the Office of the Insurance Commissioner (OIC) to address healthcare affordability in 2023 and 2024. The first report included a landscape of the healthcare system in Washington as well as an overview of several policies for consideration, while the second report involved actuarial and economic analyses of selected policies to understand their potential impacts they might have in lowering healthcare costs and improving healthcare affordability for consumers.
HMA and Wakely, an HMA Company, worked closely with the OIC and other partners to select and model the impact of various policies. The process for developing a model to evaluate reference-based pricing involved Wakely accessing the state’s All Payer Claims Database (APCD), and included a review of claims from the state’s commercial and Medicaid health plans. To establish a baseline, Wakely compared different sets of healthcare services to what Medicare reimburses for that category of services, on average. This data showed vast differences in how much was being reimbursed by private plans relative to Medicare depending on service category- ranging from a high of 348% of Medicare for outpatient anesthesiology services to a low of 88% of Medicare for outpatient behavioral health services.
Recognizing the value of access to primary care services, Washington’s legislature established a goal in 2021 that 12% of healthcare dollars should be spent on primary care. Ever since, the state’s Healthcare Cost Transparency Board has been focused on tracking progress towards this goal. There had not been a similar focus on establishing targets for behavioral health services until this analysis. The low reimbursement rate for outpatient behavioral health services was not surprising and confirmed what had long been suspected as a contributor to challenges accessing outpatient behavioral health services for those with private insurance. Poor access to behavioral health services also contributes to healthcare affordability issues for consumers with private insurance, who end up going without, or paying for care out-of-pocket when they can’t find behavioral health providers that take private insurance. An analysis by the Kaiser Family Foundation found that privately insured adults who had a diagnosed mental health condition had twice as much out-of-pocket expense compared with those who did not have an identified mental health condition and that employers reported narrower networks for mental healthcare than their overall provider networks.
These findings, combined with the data from the APCD about low reimbursement rates, were catalysts for how Washington approached legislation to apply reference-based pricing for its public and school employee health plans in the 2025 legislative session. Recognizing that reference-based pricing could be used not only as a tool to improve affordability, but also to potentially increase access to important services, Senate Bill 5083, signed into law in May 2025, sets caps on how much insurers can pay providers for specific sets of services, but establishes floors for how much insurers must reimburse for primary care and outpatient behavioral health services to 150% of Medicare. Notably, Colorado was considering similar legislation, but it did not pass.
Healthcare affordability and access to behavioral health services are two persistent problems that contribute to poor health outcomes for many Americans and the relationship between the two is complex. It will be important to track how Washington’s new law impacts both of these issues to better understand and explore other questions, such as how expanded access to outpatient behavioral health services could improve overall healthcare affordability by addressing behavioral health issues before they become critical and/or emergent? Will it avoid or reduce traumatic and expensive trips to emergency room and crisis services? Washington’s new law offers an opportunity to closely evaluate and understand these types of questions and offers a potential model to address these intertwined and persistent problems.
HMA’s work on reference-based pricing was supported in part by Arnold Ventures.
As states struggles to address healthcare costs and invest in behavioral health, reference-based pricing and supporting analytics are one tool that HMA can offer to organizations. Contact us to learn more.
60 Years of Medicaid and Medicare Impact: From Milestones to Momentum
This week, the nation celebrates two major milestones: the 60th anniversary of the Medicaid and Medicare programs and 40 years of Health Management Associates’ (HMA’s) commitment to advancing healthcare and improving lives. As we look ahead, HMA is investing in human-centered strategies, digital tools, and analytics to help our clients and partners build a healthier future—all topics that will be discussed at the 2025 HMA National Conference, October 14‒16 in New Orleans, LA.
October 14–16 | New Orleans
Early Bird Registration Ends July 31
The HMA National Conference is a three-day immersive experience designed to equip healthcare leaders with the insights and tools to adapt and lead in a changing landscape.
As new federal priorities unfold, this year’s conference, Adapting for Success in a Changing Healthcare Landscape, will feature insights from healthcare leaders on how organizations can respond to change, align with new expectations, and strengthen their impact. With early‑bird registration ending Thursday, July 31, 2025, here’s our “Weekly Roundup” of what we’ve shared so far—and why you won’t want to miss the HMA National Conference in New Orleans.
HMA’s National Conference offers an immersive, three‑day experience that combines strategic insight, peer collaboration, and interactive learning.
Networking & Community
- Welcome Reception at a landmark New Orleans venue
- Facilitated breakfast discussions, coffee conversations, and evening receptions
- Networking lunch and dedicated breaks to keep ideas flowing
Big Picture Plenary Sessions
- Opening keynote Asa Hutchinson, Arkansas’ 46th Governor, on policy, politics, and a vision for healthier communities
- Expert panels unpacking transformative shifts in Medicaid and Medicare, value‑based care, behavioral health innovation, and cross‑sector population health strategies
- A closing conversation on government’s evolving role in healthcare innovation with nationally recognized leaders Dr. Bechara Choucair, Executive Vice President and Chief Community Health Officer, Kaiser Permanente, and Bruce Greenstein, Secretary, Louisiana Department of Health
Workshops
- Policy & Trends: Medicare Advantage reforms, Medicaid work requirements, digital health guardrails, and 988 crisis care expansion
- Use Cases & Responses: Operational strategies for payment reform, community resilience investments, digital health success stories, and coordinated care solutions for complex behavioral health needs
Register today at: https://conference.healthmanagement.com/
Streamlining Healthcare with AI: The Administration’s Plan and What Comes Next
On July 23, 2025, the Trump Administration released Winning the Race: America’s AI Action Plan, a comprehensive federal strategy designed to position the United States as the global leader in artificial intelligence (AI). The plan, developed in accordance with Executive Order 14179, outlines over 90 policy initiatives across three strategic pillars: Accelerating Innovation, Building AI Infrastructure, and Leading International AI Diplomacy.
Healthcare and Medicaid Impacts
CMS AI-Enabled Prior Authorization Pilot
The AI Action Plan explains the Centers for Medicare & Medicaid Services (CMS) plan to launch a six-year pilot to improve, streamline, and where possible, automate prior authorizations using AI. Consistent with the AI Action Plan, CMS on June 27, 2025, announced a new Innovation Center model, the Wasteful and Inappropriate Service Reduction (WISeR) Model. WISeR will test ways to improve the prior authorization process relative to Original Medicare’s existing processes. This initiative is expected to dramatically reduce approval times—from days to, potentially, minutes in some cases — while easing administrative burdens for providers and improving access to timely care for beneficiaries. CMS will evaluate the pilot using metrics such as efficiency gains, cost savings, satisfaction levels, and decision accuracy.
Enhanced Fraud Detection and Program Integrity
CMS will also expand its use of AI to detect and prevent fraud, waste, and abuse (FWA) in Medicaid and Medicare. By leveraging predictive analytics and real-time data, the agency aims to identify anomalies and improper payments before they occur—enhancing program integrity and public trust. CMS is also encouraging state Medicaid agencies to bolster its investments in FWA systems, and enhanced federal funding continues to be available for such investments.
Regulatory Streamlining and Innovation Incentives
The plan calls for removing outdated regulatory barriers to AI adoption in healthcare. Proposed measures include revising compliance requirements and offering financial incentives or preferential funding access to states that foster innovation-friendly environments. While specifics are pending, states are encouraged to modernize regulations to support AI adoption.
Key Differences from Prior Administration’s AI Policy
The following table outlines key differences between the Biden and Trump administrations’ approaches to AI policy:
Considerations for Healthcare Organizations and Partners
Medicaid agencies, healthcare providers, and industry stakeholders should track the next wave of federal actions to implement the AI Action Plan and the healthcare sector’s response. Data from pilot initiatives will inform future federal policy decisions on broader AI deployments within Medicaid administration. In addition, healthcare organizations will need to remain nimble as variability may emerge in how states pursue regulatory changes to align with federal incentives under the Action Plan.
Sector specific considerations include:
Health Plans: Plans should proactively pursue initiatives such as AI-driven prior authorization, claims adjudication, fraud detection, and member engagement to improve their operations, their position in the markets in which they operate, and ideally, their performance. This effort will require significant investments in information technology, new workflows, and continuous quality improvement initiatives, staff training, enhanced compliance protocols, and a culture that embraces AI. In addition, plans must implement robust AI oversight mechanisms that incorporate the necessary level of transparency, avoid bias, and are appropriate across all functions that use AI, including population health analytics, member engagement, care management, prior authorization management, claims processing, and fraud detection.
State Government: States will face pressure to modernize health and human services regulatory frameworks to align with federal requirements and access federal incentives. Moreover, states should proactively pursue initiatives that improve the operations of health and human services agencies with a particular focus on improving program design, oversight, and evaluation functions. In addition, agencies should assess current rules regarding AI and consider how to support AI adoption while safeguarding desired outcomes and accountability.
Health Systems and Providers: Providers can benefit from reduced administrative overhead, improved care delivery, and the use of AI to augment the ability of providers to diagnose and treat patients. Providers will have to adapt to new workflows that incorporate use of AI, ensure data quality, and monitor data for unintended consequences such as unintended bias. In addition, providers must incorporate AI literacy training to align with federal expectations and remain competitive in a deregulated, innovation-driven landscape. Providers will also have to implement robust compliance protocols.
Looking Ahead
The AI Action Plan signals a substantial shift toward streamlined regulatory approaches and expanded AI deployment in Medicaid and broader healthcare administration. Stakeholders should anticipate federal guidance updates, pilot program evaluations, and further clarifications regarding state incentives in the months ahead.
To discuss the implications of the AI Action Plan or for further policy analysis, contact Health Management Associates experts below.
CMS and Tech Leaders Unite to Build a Patient-Centric Digital Health Ecosystem
The White House and Centers for Medicare & Medicaid Services (CMS), on July 30, 2025, announced new commitments from leading technology firms—including Amazon, Apple, Google, OpenAI, and Anthropic—to create a smarter, more secure, and patient-centered digital health ecosystem. At the Make Health Tech Great Again event, CMS unveiled voluntary criteria for trusted data exchange across networks, electronic health records (EHR), and tech platforms, emphasizing interoperability, personalized tools, and reduced provider burden.
This announcement echoes many of the priorities laid out in Leavitt Partners’ Kill the Clipboard road map—a federal policy and industry blueprint for modernizing patient and provider access to health data. The priorities outlined at today’s White House event and the administration’s recent regulatory announcements closely reflect the multisector road map’s recommendations. A recent webinar hosted by Leavitt Partners, an HMA Company, explored how the recommendations are shaping federal policy and creating strategic opportunities for early adopters.
What’s Next
Health Management Associates (HMA) experts, including those with Leavitt Partners, will delve further into the new initiative and considerations for the healthcare industry in an upcoming Weekly Roundup.
July 30, 2025
CMS and Tech Leaders Unite to Build a Patient-Centric Digital Health Ecosystem
Strategic Planning for Healthcare Organizations in a time of Disruption
Why healthcare strategy is needed more than ever in times of rapid change
When thinking about strategy, most organizations have a strategic plan. But with the amount of change being thrust upon the healthcare industry, no one could have predicted the current landscape even one year ago.
The strategy function at a healthcare organization generates strategic plans, identifies growth initiatives and validates them. A core responsibility is monitoring the information and policies that inform those hypotheses. The best organizations are able to stay focused on their overall goals while keeping track of, adapting, and changing as new information surfaces.
The high pace of change related to technology, policy, and regulation, requires continual monitoring and reassessment. Not every healthcare organization has the competencies to track and manage these changes, and entities frequently come to HMA to either validate assumptions that are the basis of their plans, or to outsource components of the analysis or the implementation.
Organizations generally have a good handle on certain elements, including their own assets and competencies, the strength of relationships with their partners, and hopefully an understanding of what their customers want. But in times of rapid change, consultants can support monitoring external market factors and turbulence on the policy and regulatory front. They can assess changes on the technology side as well, including ways to integrate AI and other digital technologies to enable care delivery. Organizations see the potential for policy changes to disrupt the way they are doing business, but may need outside validation to ultimately communicate and operationalize new approaches within their business.
For more on this, listen to this month’s podcast Ready or Not: Implementing Strategy Amid Massive Healthcare Disruption where we discuss some of our thinking on ways companies can stay ahead of the game.
Ready to transform your organization?
If your organization is struggling to turn strategy into action, our experts are available to help you lay a clear path to positive results. Whether you are focused on payments, healthcare delivery, government policy, behavioral health, life sciences, Medicare, Medicaid, or Managed Care, our HMA experts are ready to partner with you, from initial strategy-setting through implementation.
Related resources:
- Learn more about our Strategy & Transformation services
- Spotlight: Achieving financial resilience in a time of turbulence
- Spotlight: Realize transaction-related cost synergies
- Spotlight: Building Sustainable Health Systems
Supporting real-time strategic decision-making across the leadership team
HMA Spotlight
Supporting real-time strategic decision-making across the leadership team
HMA was recently contacted by a chief strategy officer of a healthcare company with dominant market share struggling to react to the rapid changes in healthcare policy. His CEO was regularly asking him for updates, and he knew he needed a proactive construct for understanding, reacting, and ultimately shaping the environment. Could we help him build the capability to monitor those changes within the company’s strategy function?
As organizations operate within our highly turbulent policy environment, strategy leaders are well served to consider how they source and socialize the information that sustains strategic decision-making.
While every company is different, strategy leaders should monitor the following:
Regulatory and policy realities
Existing and potential competitive offerings
Market and client needs
Organizational assets and competencies
Formal and informal relationships
These are the ingredients for developing and validating hypotheses for market growth – a critical function of the strategy office. However, just as important as monitoring this information is socializing it across the leadership team.
On one recent HMA strategy project, the executive team of an association listened soberly as we described their direct competitor. The competitor was growing rapidly and winning over long-time members of the association. They had a small, nimble team, in contrast to the association’s cumbersome and complex governance structure. As we rehearsed the sentiments of their members, the needs in the markets, their partnerships, their offerings, and the shifting policy environment, we painted an up-to-date picture of their market realities. Their reaction was almost explosive: they had to take action to stem their eroding position.
By socializing fact-based information, a strategy leader can create the tailwinds for action within an organization. The leader can also ensure that those who need to ratify or support strategic action understand the rationale for change. We think of strategically viable actions as being grounded in the domains above. For example, does the action take advantage of policy opportunities, avoid areas of dense competition, address demonstrated need, and leverage organizational capabilities and relationships? If those blessing the decision understand these same considerations, it will be easier to get to yes.
If you sit in a chief strategy seat, consider building the capability to monitor these domains, and surface your fact-based findings to organizational decision-makers. This information should be the bedrock for strategic decision-making—and strategy leaders will find it easier to secure board and executive support if those audiences are grounded in the same set of facts.
Ready to transform your organization?
Whether you are focused on payments, healthcare delivery, government policy, behavioral health, life sciences, Medicare, Medicaid, or Managed Care, our HMA experts are ready to partner with you, from initial strategy-setting through implementation.
Related Resources
Learn more about our Strategy & Transformation services
Achieving financial resilience in a time of turbulence
Realize transaction-related cost synergies
Building Sustainable Health Systems
CMS Shakes Up the Innovation Center Model Landscape: What Comes Next?
How One Organization Unlocked Exceptional Financial Gains Through Revenue Cycle Optimization
Contact our experts:
Rebecca Nielsen
Managing Director
Proposed Rule on the CY 2026 Medicare PFS Emphasizes Value-Based Care and Alternative Payment Models
This week, our first In Focus reviews the Centers for Medicare & Medicaid Services (CMS) proposed rule for the calendar year (CY) 2026 Medicare Physician Fee Schedule (PFS), released on July 14, 2025. The proposal echoes many of the administration’s priorities and would substantially change how physicians are paid for their services, focusing on value-based payment strategies, efficiency adjustments, conversion factors, technology coding, and MSSP eligibility.
This In Focus is the second in our series covering recent Medicare-related announcements. [Last week, we discussed CMS Innovation Center updates.]
Emphasis on Value-Based, Hospital-Based Care
The CY 2026 Medicare PFS proposed rule reflects the administration’s prioritization of value-based care, chronic care management, new payment strategies for evolving models of care delivery, and support for technology-based services. Provisions in the proposed rule also are intended to reduce costs through reimbursement rate changes, better access to behavioral health services, and facilitated advanced primary care management (APCM).
The proposal recognizes the additional complexity of providing primary care in the home and other residential environments by proposing to allow billing of an add-on code to trigger additional payment for home-based visits. CMS also proposes to delete separate coding and payment for social determinants of health (SDOH) risk assessments (established in 2024) and will begin referring to SDOH as “upstream driver(s).”
Emphasis on Efficiency and Lower Practice Expenses
Proposed changes include an “efficiency adjustment,” which would reduce the physician work relative value unit (RVU) based on the assumption that as clinicians gain experience and technology advances, procedures become more efficient. CMS also proposes to rebalance clinician reimbursement for expenses to recognize that hospital-based physicians incur fewer costs than physicians in private or group practices and that the number of physicians practicing in hospitals has increased significantly, leaving far fewer physicians in freestanding offices. As a result, CMS estimates specialists who furnish care in hospital settings will experience double-digit cuts in reimbursement on average, whereas those practicing in freestanding (non-facility) settings will generally receive increases, though the impact on any individual clinician or practice will depend on the mix of services provided.
CMS continues to evaluate potential payment reform for global surgical packages and is studying the real-world division of work between surgeons and providers of postoperative care, as CMS findings suggest only a fraction of post-discharge visits included in valuation are furnished.
Positive PFS Conversion Factor Update
All providers/suppliers paid for services under the PFS will benefit from positive statutory updates to the conversion factor, with slightly higher increases going to clinicians who meet certain eligibility requirements for participating in an Advanced Alternative Payment Model (APM) under the Quality Payment Program (QPP). Specifically, two conversion factors would be available in CY 2026. Under the proposed rule, services furnished by providers who participate in qualifying Advanced APMs would be paid based on a conversion factor of $33.5875, representing a 3.84 percent increase (or $1.2410) from the 2025 amount of $32.3465. Services furnished by providers who do not participate in a qualifying AAPM are proposed to be paid based on a conversion factor of $33.4209, representing an increase of 3.32 percent (or $1.0744) from CY 2025.
Both conversion factors reflect the 2.50 percent overall update required by statute, a 0.55 percent budget neutrality adjustment to account for RVU changes, and an updated factor of 0.75 percent for qualified APMs or 0.25 percent for non-qualifying APMs. CY 2026 is the final year in which eligible clinicians can receive an additional APM incentive. Qualifying clinicians will get a one-time payment of 1.88 percent of their paid claims for covered professional services based on performance from two years earlier.
Evolving Coding and Payment for Technology-Based Services
CMS continues to expand coding and payment for technology-based services, including a proposal for the use of digital mental health treatment (DMHT) devices used in conjunction with an ongoing treatment plan of care for attention deficit hyperactivity disorder (ADHD). The agency recognizes that behavioral health conditions are common chronic diseases and that the field of digital therapeutics is evolving.
CMS requests comments on the use of devices for treating symptoms of gastrointestinal conditions, sleep disturbance for psychiatric conditions, and symptoms of fibromyalgia, as well as to aid in the diagnosis of autism spectrum disorder. The agency also seeks input on a broader set of digital tools that could be used to encourage a healthy lifestyle. Through comment requests, CMS suggests that it might consider payment for digital tools that do not require Food and Drug Administration clearance in future years.
While CMS allows PFS payment of Software as a Service (SaaS) and artificial intelligence (AI) applications in certain circumstances, it also solicits comments on how to establish stable and consistent reimbursement for these technologies and asks how they can be used in the management of chronic diseases and primary care services.
Telehealth-Related Flexibilities
CMS proposes to streamline the process for adding codes to the telehealth list and making other adjustments to supervision and frequency of billing requirements for codes on the list.
Medicare Diabetes Prevention Program
CMS proposes several changes to the Medicare Diabetes Prevention Program (MDPP), which was expanded in 2018 under the CMS Innovation Center authority to increase beneficiary participation and to align with the Centers for Disease Control and Prevention program standards. These proposed changes include the addition and codification of more virtual flexibilities including asynchronous delivery of services, technical changes to the collection of data, and payment changes to reflect these new requirements.
Medicare Shared Savings Program
The proposed rule comprises several provisions to modify eligibility requirements for certain tracks of the program, revisions to the quality performance standards and reporting requirements, and other changes to improve the operations of the program. The Medicare Shared Savings Program (MSSP) now has more than 477 ACO participants, furnishing care to 11.2 million Medicare beneficiaries.
Drugs and Biological Products Incident-to Physician Services
The proposed rule addresses reimbursement for drugs paid incident-to a physician’s service, including policies related to the Inflation Reduction Act provisions, continued implementation of discarded units refund requirements, changes and clarifications to Average Sales Price (ASP) reporting, and payment for procurement of tissue required to manufacture cell-based gene therapies.
Citing a nearly 40-fold increase in spending for skin substitute products from 2019 to 2024, CMS proposes major changes for reimbursement of skin substitutes that would pay for most of these products as supplies incident-to physician services, rather than as Part B drugs. CMS estimates that these modifications would result in significant savings. If finalized, these proposals will take effect at the same time as CMS launches a new model in six geographic areas to test clinical review for certain services, including skin substitutes, in fee-for-service Medicare to achieve the WISeR (Waste and Inappropriate Service Reduction) Model.
Requests for Information
CMS included multiple requests for information in the CY 2026 proposed rule. The agency seeks stakeholder feedback on how the fee schedule can be used to better account for indirect practice expenses (PEs) costs in facility settings, integration of preventive services into APCM bundles, and use of motivational interviewing and health coaching to improve chronic disease prevention and management.
On the QPP, CMS seeks input on advancing digital quality measurement, refining MIPS (Merit-Based Incentive Payment System) Value Pathways (MVPs) through core elements, procedural code alignment, and well-being and nutrition measures. The agency also requests comments on improving public health and prescription drug monitoring reporting and strengthening data quality and performance thresholds across Medicare’s quality programs.
Contact an HMA Medicare Expert Today
Health Management Associates, Inc. (HMA), policy and rate setting experts are analyzing the details and impacts in the proposed rule and will provide additional updates to key Medicare policies as they become available. Our team can help support stakeholder development of policy and data-oriented comments on this rule, due September 12, 2025, and on any other Medicare policy topic of interest. Contact our experts below to discuss your priorities and approach.