Each fall, CMS publishes the Medicare Physician Fee Schedule for the coming year, and each year small practices have to sort through dense regulatory language to understand what actually changed and what it means for their revenue. The 2026 fee schedule brought a small but meaningful conversion factor increase, a structural change to how that increase is applied, expanded telehealth coverage, and a new prior authorization model that directly affects practices in Arizona.
The Conversion Factor: Two Numbers Instead of One
Starting January 1, 2026, CMS established two separate conversion factors for the first time. The conversion factor is the dollar amount CMS multiplies by each service's relative value units to calculate the Medicare payment rate.
| Provider Type | 2026 Conversion Factor | Change from 2025 |
|---|---|---|
| Qualifying APM Participants | $33.59 | +3.77% |
| All Other Physicians and Practitioners | $32.35 | +3.26% |
The increase reflects a temporary 2.5% congressional add-on plus small permanent adjustments. Qualifying APM participants receive a higher rate because they have accepted additional risk and quality reporting obligations under advanced alternative payment models. For most small independent practices in Tucson, the $32.35 conversion factor applies.
A conversion factor increase sounds straightforwardly positive, but it does not translate to a uniform revenue increase across all services. The fee schedule changes the relative value units assigned to specific codes as well, and those changes can offset or amplify the conversion factor effect for any given practice depending on what services make up most of its billing.
Evaluation and Management: A Win for Office-Based Practices
One of the most practice-relevant changes in the 2026 fee schedule is the increase in reimbursement for evaluation and management (E/M) services performed in the non-facility (office) setting. CMS increased the practice expense relative value units for office visit E/M codes, which means practices that primarily see patients in their own offices will see a more meaningful revenue improvement than the conversion factor alone suggests.
This is good news for primary care, internal medicine, and specialty practices that see the majority of their Medicare patients in an office setting. Behavioral health practices, registered dietitians, acupuncturists, and other providers who see patients in a private practice office environment fall into this category.
By contrast, E/M services billed in a facility setting (hospital outpatient departments, ambulatory surgery centers, and similar) saw reimbursement decreases. If your practice provides services in both settings, the net effect on your revenue will depend on the proportion of each.
Telehealth: From Provisional to Permanent
During and after the COVID-19 public health emergency, CMS added dozens of services to the Medicare telehealth list on a provisional basis. For 2026, CMS moved all remaining provisional telehealth services to the permanent list. This includes developmental testing, psychological testing, and neuropsychological testing, among others.
Permanently listed telehealth services no longer face the uncertainty of annual provisional extensions. Practices that have incorporated telehealth into their service delivery model can plan with greater confidence that these services will continue to be covered under Medicare without needing to track expiring waivers.
For behavioral health providers in Tucson and Southern Arizona, this is meaningful. Telehealth has become an important access tool in a region where patients may travel long distances to reach providers, and the permanent status of behavioral health telehealth codes provides a stable billing foundation.
The WISeR Model: Prior Authorization Comes to Traditional Medicare in Arizona
Traditional Medicare has historically processed most outpatient services without prior authorization. That changed January 1, 2026, when CMS launched the Wasteful and Inappropriate Service Reduction (WISeR) Model in six pilot states, Arizona among them.
Under WISeR, prior authorization is required for 17 specific outpatient procedures under traditional Medicare. The affected procedures include certain musculoskeletal surgeries, pain management interventions, and other outpatient services that CMS has identified as having elevated rates of medically unnecessary utilization. The model does not apply to inpatient services or to the full range of outpatient procedures, only to the 17 designated codes.
If your practice bills any of the designated codes in an outpatient setting for Medicare patients, you are required to submit a prior authorization request to the Medicare Administrative Contractor before providing the service. Providing the service without authorization results in a non-payable claim, and there is no mechanism to retroactively authorize a completed procedure.
Practices that have not previously dealt with Medicare prior authorization should review the WISeR code list, identify whether any of their commonly billed procedures are included, and build an authorization workflow for those codes now. Novitas Solutions is the MAC for Arizona and handles WISeR authorization requests for providers in our region.
Quality Reporting: MIPS and APM Thresholds
The 2026 fee schedule also updated the Merit-based Incentive Payment System (MIPS) performance thresholds and exceptional performance benchmarks. Providers who participate in MIPS and score below the performance threshold face a payment adjustment (penalty) in the 2028 payment year based on their 2026 data.
For small practices, MIPS participation involves quality measure reporting, promoting interoperability (EHR use), improvement activities, and cost. The administrative burden is real, but the payment implications of non-participation or poor performance are also real. If you have not reviewed your MIPS obligations for 2026, now is the time to do so. CMS offers a low-volume threshold exemption for providers with very low Medicare billing volume, which excludes certain small practices from the MIPS requirements entirely.
What This Means for Your Revenue Cycle in 2026
The practical steps for small practices responding to the 2026 fee schedule are straightforward. Pull a report of your top Medicare billed codes and compare the 2025 and 2026 allowed amounts. Calculate the expected revenue impact. Identify whether any of your commonly billed outpatient procedures fall under the WISeR prior authorization requirement. Confirm whether the telehealth services you bill are now permanently covered. And if you participate in MIPS, verify your 2026 quality measure selections are appropriate and that your EHR is set up to capture the required data.
For practices that see a significant Medicare patient volume, the fee schedule is not a once-a-year administrative formality. It is a document that directly affects what you are paid for every Medicare service you provide all year long.
Frequently Asked Questions
What is the Medicare conversion factor for 2026?
CMS established two conversion factors for 2026: $33.59 for qualifying advanced APM participants and $32.35 for all other physicians and practitioners. This is the first year CMS has used two separate conversion factors. Most small independent practices use the $32.35 rate.
Did Medicare reimbursement go up or down for small practices in 2026?
It depends on your service mix and setting. Office-based E/M services saw increased reimbursement, which benefits primary care and specialty practices with high office visit volume. Facility-based E/M services saw decreases. The headline conversion factor increase does not apply uniformly to every service.
What telehealth changes did CMS make in the 2026 Medicare fee schedule?
CMS moved all previously provisional telehealth services, including developmental, psychological, and neuropsychological testing, to the permanent Medicare Telehealth Services list. Providers no longer need to track provisional telehealth waivers for these services.
What is the WISeR Model and does it affect my practice in Arizona?
The WISeR Model launched January 1, 2026 and requires prior authorization for 17 specific outpatient procedures under traditional Medicare in six pilot states, including Arizona. If your practice bills any of the designated outpatient procedure codes for Medicare patients, you must obtain authorization from Novitas Solutions (the Arizona MAC) before providing the service. Performing the service without authorization results in a non-payable claim.
Questions About Your Billing or Revenue Cycle?
A.W. Medical Billing LLC handles clean claim submission, eligibility verification, denial management, credentialing, and revenue cycle management for small and independent practices throughout Tucson and Southern Arizona. We are AAPC-certified, locally owned since 2020, and we offer free consultations.
Call us at (520) 704-5811 or email [email protected].