Medicare reimbursement is always bigger than just a budgeting issue; it touches staffing, access, and much more. 

But to understand those effects, we should start with the financial picture: Our Feb. 24, 2026, MGMA Stat poll finds that 80% of medical groups report their Medicare reimbursement is below the cost to deliver care, while 20% say their rates are equal to (15%) or above (5%) their cost. The poll had 166 applicable responses. 

In 2021, nearly three-quarters (73%) of medical practices told MGMA that Medicare payments did not cover the cost of delivering care. The specific pressures have evolved, but the core challenge has not: Medicare payment updates have struggled to keep pace with the real-world cost of running a medical practice. 

What you told us 

• Widening losses each year: Many respondents noted that a slight Medicare payment increase in 2026 are “too little, too late” after years of declines and rates failing to keep up with inflation, rising supply costs, higher wages, growing admin burdens.
• Impacts to labor (hiring freezes, staff cuts, inability to offer raises): Stagnant reimbursement leads some practices to hold positions open or pull back on wage increases in light of reimbursement shortfalls. 
• Access constraints: Inadequate Medicare payment rates can lead some practices to work on capping their Medicare patient mix or limiting acceptance of new Medicare FFS patients.
• Specialty‑specific cuts and procedure‑related reductions undermining service lines: Significant declines in reimbursement for certain procedures/surgeries, as well as for injections where drug costs exceed payment, and anesthesia. This can make services in ambulatory surgery centers (ASCs) or clinical settings unprofitable even when volumes are steady.
• Turning to value-based care, AI, and cash-pay: Several said inadequate reimbursement pushed them to explore VBC models, implement AI to cut costs, or expand cash‑pay offerings.
• Financial instability delaying necessary technology upgrades: Even for those who acknowledge AI might help them lower costs, some reported difficulty maintaining or upgrading essential technology and equipment due to razor‑thin margins.
• MA denial strain compounding financial stress: Rising claim denials from Medicare Advantage reduced effective reimbursement, making it difficult to maintain adequate resources for care and back‑office operations.

Below is what medical group administrators should expect in Medicare payment and what to do about it through the rest of this year. 

1. The conversion factor increased but didn’t “solve” the inflation gap 

For 2026, CMS finalized two Physician Fee Schedule (PFS) conversion factors as required by statute: one for qualifying Advanced APM participants (QPs) and one for clinicians who are not QPs. CMS set the 2026 conversion factor at $33.57 for QPs and $33.40 for non-QPs — increases of 3.77% and 3.26%, respectively, from the past-year conversion factor.  

That’s a welcome change after years of flat or functionally negative updates, but it’s not a reset. Total operating cost per FTE physician rose more than 63% from 2013 to 2022, while the Medicare conversion factor increased only 1.7% over the same period — and 90% of medical groups reported increased operating costs in 2025. A one-year increase helps, but it doesn’t erase a decade-plus gap. 

That’s why MGMA continues to push for holistic payment reform, including annual inflation-based updates tied to the Medicare Economic Index (MEI) and modernization of budget neutrality rules. [The MEI is widely used as a proxy for practice cost inflation.] 

2. Changes moving dollars between services and sites of care 

Despite a higher conversion factor, two methodological changes may make things feel uneven at a service-line level: 

• An efficiency adjustment to work RVUs: CMS finalized an efficiency adjustment of -2.5% applied to work RVUs (and the intraservice portion of time) for many non–time-based services, using a five-year lookback of the MEI productivity adjustment. In practical terms: if your top outpatient services lean procedural and non–time-based, you’ll want to look closely at code-level impact. [Learn more in MGMA Government Affairs’ member-benefit resource.] 
• Practice expense (PE) and site-of-service shifts: CMS also finalized PE methodology updates intended to better reflect current clinical practice patterns, including recognizing greater indirect costs for office-based settings and using hospital outpatient data to inform cost assumptions for certain technical services. Our 2026 MPFS analysis notes the net effect can vary by specialty and setting and may blunt the headline increase for some groups.  

For administrators, this will be a big year for impact modeling by service line. If your margins already rely on commercial rates to subsidize Medicare shortfalls, don’t wait to uncover these surprises. 

3. Telehealth: Slight stability after the policy “cliff” reset 

Telehealth remains one of the clearest examples of why temporary extensions disrupt operations; policy should support continuity of care and appropriate reimbursement. 

The good news for now is that federal policy has moved toward a longer runway. Recent federal action extended many Medicare telehealth flexibilities through Dec. 31, 2027. [See our member-benefit Medicare telehealth status resource for details.]  

At the same time, CMS’ 2026 PFS final rule includes important changes that matter regardless of broader statutory flexibilities, including permanently removing certain telehealth frequency limits for subsequent inpatient, nursing facility, and critical care services, and allowing real-time audio/video to satisfy direct supervision requirements for many services. 

For rural health clinics (RHCs) and federally qualified health centers (FQHCs), 2026 has additional Medicare payment specifics worth highlighting because these clinics operate under distinct payment systems rather than standard fee-for-service. CMS set the CY 2026 payment rate for G2025 telehealth medical visits at $97.53, with billing flexibilities extended through Dec. 31, 2026, for these settings. [Read more in our 2026 Payment Overview for RHCs and FQHCs.] 

4. Quality reporting and value-based payment: Stability in MIPS, but a continued push toward APMs and risk 

CMS’ approach in 2026 to quality and value is a mix of stability and transition: 

• MIPS stability: CMS maintains the 75-point performance threshold through the 2028 performance period (2030 payment year).  
• More MVPs and ongoing migration: CMS adds new MIPS Value Pathways (MVPs) for several specialties and continues steering the program toward MVP reporting over time.  
• Advanced APM mechanics: The QP/non-QP distinction now has direct rate implications, and CMS finalized changes such as adding an individual-level QP determination beginning with the 2026 QP performance period.  

Layered on top is the continued development of specialty-focused models. CMS finalized a mandatory Ambulatory Specialty Model scheduled to begin in 2027 for selected specialists treating Medicare patients for heart failure or low back pain. While that model does not begin in 2026, many organizations will spend this year preparing operationally. 

5. Ongoing payment concerns from Medicare Advantage 

Medicare payment conversations increasingly continue to include Medicare Advantage (MA). As MA enrollment continues to grow, MGMA’s 2026 Advocacy Agenda highlights that many practices face higher administrative burden and payment challenges, including prior authorization, downcoding, and narrow networks. In short, MA dynamics can effectively reduce your yield even when fee schedule rates rise — through denials, documentation disputes, and delays that increase cost-to-collect. 

What administrators can do now 

• Look closely at how Medicare pays for your most common services. Make a short list of your most frequently billed outpatient services and compare what Medicare pays in 2026 to what it costs your practice to provide those services. Review this more than once during the year as volumes or staffing change. 
• Pay attention to services that may be paid less under new rules. Some services are affected by changes to how Medicare measures time and overhead costs. If your practice provides a lot of procedures or non-time-based services, do not assume the higher conversion factor means higher payment for every service. 
• Make sure you know whether your clinicians qualify for the higher Medicare update. Practices that participate in Advanced APMs may receive a higher Medicare payment update. Confirm now whether your clinicians qualify and what reporting steps are required to maintain that status. 
• Keep telehealth policies and billing rules up to date. Review who is eligible for telehealth visits, how those visits must be documented, and how supervision rules apply. Assign someone to watch for policy changes so the practice can adjust without scrambling later. 
• Track Medicare Advantage payment issues by health plan. Keep simple records of denied claims, downcoded services, prior authorization delays, and appeal outcomes. Looking at this information by plan can help identify patterns and support contract discussions. 
• Share clear examples when payment problems affect care delivery. Specific examples — such as services that consistently lose money or delays that limit patient access — help strengthen advocacy efforts aimed at improving Medicare payment policies over time. Reach out to govaff@mgma.org to share what you are seeing with MGMA Government Affairs, or use the MGMA Member Community to highlight issues with fellow practice leaders. 

Code by code and contract by contract, administrators who do the math now on these impacts from Medicare payment policy will be best positioned to protect access and financial viability.