For years the story in medicine has been consolidation: independent practices selling to hospital systems. Many practices have said Medicare's payment differences between settings were part of the reason. In 2026, Medicare took a step in the other direction.
What changed
The 2026 Medicare Physician Fee Schedule changed how practice expense is split between settings. Physicians are now paid less practice expense for services they perform in a hospital or other facility, and more of that money goes to services performed in the office. This change applies to what Medicare pays the physician, not what it pays the hospital. Broadly:
- Office-based physician payments generally moved up.
- Facility-based physician payments moved down. Specialties that work mainly in facilities saw lower practice expense payments, and a separate 2.5% efficiency cut applied to most services that are not billed by time. Office visits, care management, and behavioral health services were exempt from that cut.
CMS said the goal was accuracy. Its old method assumed physicians who work in hospitals also pay to run separate offices, and CMS said that no longer matches how most physicians practice today.
Why it matters for independent practices
Many independent practices have said Medicare's payment differences between settings pushed them toward selling to hospital systems, and CMS has acknowledged those concerns. The 2026 change narrows one part of that gap, the physician's own practice expense payment, in favor of the office.
This is not only a primary care story. Specialists who appropriately manage stable patients in the office rather than a facility may benefit from the same shift.
How to actually capture it
A change in the fee schedule only helps if it changes what you do. Three moves:
- Bring appropriate care into the office. Identify stable patients being managed in higher-cost settings and, where clinically appropriate, shift routine management into office visits.
- Build the recurring layer. Pair those visits with care-management programs like APCM and remote monitoring so the relationship generates steady monthly revenue, not just episodic claims.
- Capture the add-ons. HCPCS code G2211, an add-on for ongoing longitudinal care, can be billed with office and outpatient visits and, starting in 2026, home visits. CMS has said it was reported less often in 2024 than it expected.
The bigger picture
The 2026 shift fits a larger direction. Medicare's value-based programs reward similar behavior: keeping patients healthy and managing chronic conditions over time. Practices that get good at this now are building toward where the money is going, not just where it is today.
How SmartOps Health helps
SmartOps Health shows you, across every payer, where your practice is leaving value-based and quality dollars on the table, and turns each one into an action your team can take. It is built for the independent, office-based practice.
See what you are leaving on the table. See the platform.