CMS’s 2027 final rules: what changes for physician and hospital revenue on Jan 1

CMS finalized the 2027 physician fee schedule and hospital outpatient rules on Nov 4. Both take effect Jan 1, the same day payers’ new prior authorization APIs are due. Here’s what changes for physician and hospital revenue, and what to set up in December.

By the TSI Research Team

On Nov 4, 2026, CMS issued the calendar year 2027 Medicare Physician Fee Schedule final rule (CMS-1848-F fact sheet) and the 2027 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center final rule (CMS-1850-F fact sheet). Both apply to services on or after Jan 1, 2027.

That’s 8 weeks to load new rates, edits and modifiers. It’s also the date Medicare Advantage plans, Medicaid and CHIP programs and marketplace plans on the federal exchanges must have their prior authorization APIs running under a separate rule (CMS-0057-F).

What changes for physicians

• A lower conversion factor. The 2027 conversion factor is $32.63 for clinicians who aren’t qualifying APM participants, down 2.31% from $33.40. For qualifying APM participants it’s $32.95, down 1.83% from $33.57 (CMS).
• G2211 becomes modifier B1. The visit complexity add-on moves from a separate code to a modifier on the E/M code, and it pays 16% of the E/M payment instead of a flat amount.
• Tighter remote monitoring rules. Remote therapeutic monitoring is limited to established patients, and remote physiologic or therapeutic monitoring now needs a separately reportable initiating visit. The rule that only practice-employed staff can furnish these services is delayed to Jan 1, 2029.
• The end of traditional MIPS reporting. It sunsets with the 2031 performance period. Clinicians have through 2030 to move to MIPS Value Pathways or an Advanced APM (CMS).

What changes for hospital outpatient departments

• A 2.3% rate update for hospitals that meet quality reporting rules: a 3.2% market basket increase, less a 0.9 point productivity adjustment. ASCs get the same 2.3% (CMS).
• 340B drugs at ASP minus 28%. CMS estimates that cuts Medicare drug payments by $4.35 billion in the first year, offset budget-neutrally by higher payment for non-drug services.
• A bigger 340B remedy offset. The cut to non-drug services rises from 0.5% to 2% in 2027, except for hospitals that enrolled in Medicare after Jan 1, 2018. It stays until the total reaches $7.8 billion, which CMS expects in 2031.
• Site-neutral pay for imaging. Imaging without contrast (including x-rays, ultrasounds, CT and MRI) in excepted off-campus provider-based departments is paid at the physician fee schedule rate. Rural sole community hospitals are exempt.
• 637 more services off the inpatient-only list, in year 2 of a 3-year phase-out. Medicare can now pay for them in the outpatient department when that’s clinically appropriate.
• Prior authorization for 8 more botulinum toxin injection codes in hospital outpatient departments.

The prior authorization deadline on the same day

Under CMS-0057-F, the payers it covers already have to decide prior authorization requests within 72 hours for urgent requests and 7 calendar days for standard ones, and give a specific reason for every denial. Those rules started in 2026. From Jan 1, 2027, they must also run a Prior Authorization API that lists which services need approval, shows the documentation required, and returns an approval, a denial with a specific reason, or a request for more information (CMS).

For a revenue cycle team, that means clearer denial reasons from Medicare Advantage and Medicaid plans, and less of an excuse for a missed authorization.

What it does to the revenue cycle

What to set up in December

1. Load the 2027 rates and model the gap. Update the fee schedule and outpatient rates in your contract management system, and rerun expected-payment models so underpayment reports stay accurate from the first January remit.
2. Swap G2211 for modifier B1. Update charge capture, coding guidance and claim scrubber edits before the first January claims drop.
3. Audit remote monitoring workflows. Confirm every remote monitoring episode starts with a documented initiating visit, and that therapeutic monitoring goes only to established patients.
4. Check 340B claims. Confirm 340B-acquired drugs carry the right modifiers, and budget for the 2% non-drug offset.
5. Review inpatient-only removals against payer policies. For the 637 services, check what each Medicare Advantage and commercial contract requires before an outpatient case is scheduled.
6. Get ready for payer prior authorization APIs. Ask your top Medicare Advantage and Medicaid plans when their APIs go live, and route their specific denial reasons into your denial tracking so you can fix root causes, not just resubmit.

Dates to keep

• Jan 1, 2027: the physician fee schedule and outpatient final rules take effect, and covered payers’ Prior Authorization APIs are due.
• Jan 1, 2029: only practice-employed clinical staff can furnish billable remote monitoring services.
• 2031: the 340B remedy offset is expected to end, and traditional MIPS reporting sunsets with that performance period.

The CMS rules are 2 of the Jan 1 changes on TSI’s 2027 rule calendar, which puts every date across collections, healthcare and servicing on one page.

TSI’s Healthcare Revenue Cycle Management (RCM) team works with hospitals, health systems and physician groups on extended business office, claims and denials, and patient-pay recovery. To see what a denied claim costs you to rework, try the free denial economics calculator. If you want a second set of eyes on your January plan, talk to TSI’s team.

This post summarizes CMS fact sheets published Nov 4, 2026 and isn’t legal or coding advice. Check the final rules in the Federal Register and your MAC’s guidance before changing billing.