Health Law Daily Wrap Up, HEALTH CARE REIMBURSEMENT NEWS—Updated physician fee schedule rule includes slight payment increase, introduces significant changes, (Nov 5, 2025)

By Rebecca Mayo, J.D.

The final rule focuses on tackling chronic illness and behavioral health needs, reducing spending on skin substitutes, and modernizing billing for rural health centers.

CMS has released the Physician Fee Schedule (PFS) Final Rule for Calendar Year 2026. The rule implements improved quality measures, reduces waste and unnecessary use of skin substitutes, and introduces a new payment model focused on improving care for chronic disease management. The rule also updates billing codes for rural health clinics (RHCs) and federally qualified health centers (FQHCs) as well as updates the inflation rebate programs under Part B and Part D (Final Rule, 90 Fed. Reg. 49266 (Nov. 5, 2025)).

“The new Medicare fee schedule delivers a major win for seniors, protects hometown doctors, and safeguards American taxpayers,” said HHS Secretary Robert F. Kennedy, Jr. “It realigns doctor incentives and helps move our country from a sick-care system to a true health care system.” CMS has outlined the Physician fee schedule rule in a fact sheet, as well as released a fact sheet for both the Quality Payment Program changes and the Medicare Shared Savings Program changes in the PFS final rule.

Chronic illness and behavioral health needs. For CY 2026, CMS is finalizing the creation of optional add-on codes for Advanced Primary Care Management (APCM) services that would facilitate providing complementary behavioral health integration (BHI) or psychiatric Collaborative Care Model (CoCM) services. CMS is also expanding payment policies for digital mental health treatment (DMHT) services to also make payment for devices used in the treatment of Attention Deficit Hyperactivity Disorder (ADHD).

The final rule introduces five new outcomes measures focused on the prevention of chronic disease – while simultaneously working to reduce unnecessary burden in quality reporting by removing ten quality measures that did not directly improve patient health outcomes. The rule also finalizes changes to the Medicare Diabetes Prevention Program, which will allow more people with Medicare to access coaching, peer support, and practical training in dietary change, physical activity, and behavior change strategies to delay or prevent the onset of Type 2 diabetes for people with prediabetes, at no cost to the beneficiary.

Skin substitutes. Currently, most skin substitutes are paid as if they are biologicals under the average sales (ASP)-based payment methodology. For CY 2026, CMS is making pay for skin substitute products as incident-to-supplies when they are used as part of a covered application procedure paid under the PFS in the non-facility setting or under the OPPS in the hospital outpatient department setting. CMS is also aligning skin substitute categorization consistent with their FDA regulatory status, such as 361 Human Cells, Tissues, and Cellular and Tissue-Based Products (HCT/P) and the device types: Pre-Market Approvals (PMSs) and 510(k)s. CMS is also finalizing the use of a single payment rate reflecting the highest average for these three categories of skin substitute products to ensure it is not underestimating the resources involved with furnishing these services.

Part B drugs and biologics. CMS is requiring manufacturers of certain single-dose container or single-use package drugs to provide refunds with respect to discarded amounts. The new rule also includes a new policy regarding pricing concessions and bona fide services fees (BFSFs) in calculating the manufacturer’s average sale price (ASP). The new rule clarifies that units of selected drugs sold at the maximum fair price (MFP) are included in the calculation of the manufacturer’s ASP. The rule also finalizes a continuation of the existing bundled payment policy for CAR T-cell therapies and extends it to autologous cell-based immunotherapy and gene therapy, such that preparatory procedures for patient-specific cell or tissue procurement required for manufacturing are included in the product payment.

Rural health clinics. The final rule adopts the optional add-on codes finalized under the PHFS for APCM that would facilitate billing for BHI and Psychiatric Collaborative Care Model (CoCM) services when rural health clinics (RHCs) and federally qualified health centers (FQHCs) are providing advanced primary care. RHCs and FQHCs will be required to report individual codes that make up both the CoCM and the Communications Technology-Based Services (CTBS) and Remote Evaluation Services, HCPCS codes G0512 and G0071, respectively. Under the new rule, CMS will pay for services that are established and paid under the PFS and designated as care management services as care coordination services for purposes of separate payment for RHCs and FQHCs. Additionally, a physician or supervising practitioner will be required to provide supervision through real-time audio and visual interactive telecommunications. Also, RHCs and FQHCs will be able to bill for services furnished using telecommunication technology by reporting HCPCS code G2025 on the claim, including services furnished using audio-only communications technology through December 31, 2026.

Medicare Prescription Drug Inflation Rebate Program. CMS is finalizing new policies for the Medicare Part B Drug Inflation Rebate Program and Medicare Part D Drug Inflation Rebate Program, that include establishing a claims-based methodology to remove 340B units from Part D rebate calculation starting on January 1, 2026. CMS is also establishing a Medicare Part D Claims Data 340B Repository for voluntary submissions by covered entities for Part D claims with dates of service on or after January 1, 2026, to allow CMS to begin usability testing for the 340B repository.

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