Four separate payment changes take effect on the same morning. On January 1, 2027, independent practices absorb a lower Medicare conversion factor, a mandatory risk model for certain specialists, new electronic prior authorization rails, and a set of Medicaid changes that quietly shorten how far back coverage reaches.
Most of the coverage treats these as policy news. For a practice, they’re an operations problem with a date on it. Here’s what each one does to your revenue, and the short list of things worth doing before the comment window closes on September 14.
Key takeaways
- The 2.5% increase that lifted 2026 rates expires December 31. Nothing replaces it.
- Proposed 2027 conversion factors are $33.1693 for qualifying APM participants and $32.8409 for everyone else, down 1.19% and 1.68%.
- Medicaid retroactive coverage drops from three months to one or two, which lands directly on your A/R.
- The 2027 fee schedule is still a proposed rule. Comments close September 14 and the figures will move before November.
What changes on January 1, 2027?
Four things, all at once. The Medicare conversion factor falls, the Ambulatory Specialty Model begins for drafted specialists, payers must run electronic prior authorization interfaces, and Medicaid tightens eligibility and retroactive coverage. Only the fee schedule piece is still open to comment.
What does the conversion factor cut cost you?
Between $4,800 and $6,700 on $400,000 of Medicare allowed charges, depending on your participation status. CMS has proposed conversion factors of $33.1693 for qualifying advanced APM participants and $32.8409 for everyone else, reductions of 1.19% and 1.68% from 2026.
The reduction isn’t a new cut so much as an expiring raise. Congress wrote a 2.5% increase into Public Law 119-21 for one year only, and it lapses December 31. The proposed 2027 numbers already fold in the statutory updates of 0.75% and 0.25% plus a 0.53% budget neutrality adjustment. Payment still falls, because none of that offsets losing the 2.5%.
| On $400,000 in Medicare allowed charges | Proposed 2027 impact |
|---|---|
| Qualifying APM participant (−1.19%) | about −$4,800 |
| Everyone else (−1.68%) | about −$6,700 |
The single-year number matters less than the slope behind it. From 2027 forward, absent new legislation, the permanent annual update is 0.75% for qualifying APM participants and 0.25% for everyone else. Practice costs have not been rising at 0.25% a year. That gap is the real planning problem, and it’s the reason a 1.68% cut deserves a response beyond absorbing it.
Why the Medicaid changes hit A/R hardest
Retroactive Medicaid coverage shrinks from three months to one month for expansion adults and two months for everyone else. That change is the sleeper on this list, because it converts previously billable care into bad debt without touching a single rate.
Think about how retroactive coverage actually works in a practice. A patient shows up uninsured, gets treated, enrolls afterward, and Medicaid picks up the prior three months. Starting January 1, it reaches back one or two. The same visit, the same patient, the same enrollment, and now a balance nobody is going to pay.
Two related changes compound it. Expansion adults ages 19 to 64 must document 80 hours a month of work or qualifying activity to stay eligible, and renewals move from annual to every six months. Both produce more coverage churn, which shows up at your front desk as failed eligibility checks and at your billing desk as claims denied for coverage that lapsed between scheduling and service.
The operational answer is the same one that works for denials generally: verify eligibility before the visit rather than after, and re-verify for anything scheduled more than a few weeks out. If your days in A/R is already above benchmark, this is the change most likely to push it further.
What should you do before September 14?
Comment on the proposed rule if a specialty-level change affects you, because September 14 is the last point at which any of the 2027 payment policies are open to influence. Everything else on the timeline is settled law or final rulemaking.
Three things are worth doing now, and none of them take long:
MODEL BOTH RATES
Run your 2027 Medicare revenue at both proposed conversion factors. If the gap between them is larger than you assumed, your APM participation decision may be worth revisiting.
CHECK THE SPECIALTY MODEL LIST
If you have cardiology, orthopedics, neurosurgery, pain management, anesthesiology, or PM&R under your roof, confirm whether they were drafted. Participation is automatic with no opt-out, and adjustments run from −9% to +9% on all Part B claims.
WAIT ON THE BUDGET
Build the 2027 budget after the final rule lands, not before. Conversion factors and specialty impacts routinely move between proposal and final text.
One caution worth repeating: the CY 2027 fee schedule is a proposed rule. Every 2027 figure here will change before it’s final, and Congress has stepped in on the conversion factor in most recent years. Plan against current law, but don’t treat it as a forecast.
Going into 2027 with less margin for error
Lower rates and more coverage churn punish a revenue cycle that’s already leaking. An RCM improvement audit finds where yours is, before January does it for you.
Frequently asked questions
What is the 2027 Medicare conversion factor?
CMS has proposed $33.1693 for qualifying advanced APM participants and $32.8409 for everyone else, down 1.19% and 1.68% from 2026. Both are proposed figures in the CY 2027 Physician Fee Schedule and will likely change in the final rule, expected around November 1, 2026.
Why is Medicare pay dropping in 2027?
The 2.5% increase Congress enacted for 2026 was written for one year and expires December 31, 2026. The statutory updates that remain, 0.75% for qualifying APM participants and 0.25% for everyone else, don’t offset it, so the net conversion factor falls.
Who has to join the Ambulatory Specialty Model?
Specialists treating heart failure or low back pain in selected geographic areas who have historically handled at least 20 qualifying episodes a year. CMS projects roughly 8,600 physicians. Participation is mandatory with no opt-out, and it runs five performance years from 2027 through 2031.
When does Medicare telehealth coverage expire?
December 31, 2027. H.R. 7148, signed in February 2026, extended the flexibilities through that date. Unless Congress acts again, a narrower baseline returns January 1, 2028, and physical therapists, occupational therapists, speech-language pathologists, and audiologists lose the ability to bill Medicare for telehealth.
Planning against a moving target
Nothing on this timeline is optional, and only one item is still open. The practices that handle January well won’t be the ones that predicted the conversion factor correctly. They’ll be the ones whose eligibility verification was already tight enough that a shorter retroactive window didn’t create a wave of unbillable visits.
Model the rates, check whether your specialists were drafted, and rebuild the budget in November. Then turn your attention to the front end of the revenue cycle, because that’s where these changes actually get paid for.
