Washington, D.C. — Nursing homes are set to get some relief on physician payments after the Centers for Medicare and Medicaid Services acknowledged a costly policy error and moved to fix it in its latest proposed rule.
CMS issued the 2027 Physician Fee Schedule proposed rule this week, and buried in the technical adjustments is a significant course correction. The agency admitted it unintentionally cut payments to physicians who treat nursing home residents during Medicare Part A stays by roughly 12% last year, while actually increasing payments for long-stay residents by about 4%.
That disparity hurt access to care, according to industry advocates.
“Restoring equitable payment for physicians caring for long-stay residents and short-stay patients is an important step toward protecting access to high-quality care for Medicare beneficiaries,” said Clif Porter, president and CEO of the American Health Care Association and National Center for Assisted Living.
The problem started with the calendar year 2026 PFS rule. CMS recalibrated physician payments for nursing home residents, but the math didn’t work out as intended. Short-stay patients — those receiving skilled nursing care under Medicare Part A coverage — ended up with significantly reduced physician reimbursements compared to long-stay residents.
The consequences were real. The cut “negatively impacted access to physician services for Medicare beneficiaries during their SNF Medicare Part A stay,” AHCA/NCAL said in its analysis of the proposed rule.
The new rule equalizes payments, bringing short-stay patient reimbursements up to the same level as long-stay residents. It’s a fix that nursing home operators and physician groups had been pushing for since the error became apparent.
Overall, CMS proposed a 1.19% decrease in the PFS conversion factor for 2027, but nursing homes and other providers who can’t participate in PFS incentive programs will see a steeper 1.68% decrease. The reductions stem from statutory update requirements and budget neutrality calculations, according to the agency.
More Than Just Payment Rates
The proposed rule includes several other changes that will affect how nursing homes operate.
CMS is proposing to increase annual therapy thresholds based on the 2.5% Medicare Economic Index update. The 2027 thresholds for physical therapy, speech-language pathology, and occupational therapy would all rise to $2,540. The targeted medical review threshold stays at $3,000 through 2027.
The rule also splits a speech therapy catch-all code into 10 separate codes — a change that will require significant training for speech-language pathologists in facilities.
Telehealth policies get extended through the proposed rule as well. Congressional extensions for telehealth flexibilities would remain in place through December 31, 2027, with audio-only telehealth extended through January 1, 2028. Geographic and originating site restrictions stay waived through 2027.
On the ACO front, the rule aims to make participation more attractive with higher shared savings rates and reduced administrative burdens. The changes could indirectly strengthen partnerships between nursing homes and accountable care organizations by making ACO participation less of a headache.
The proposed rule is open for public comment for the next 60 days. CMS Administrator Dr. Mehmet Oz said the reforms are designed to reward better outcomes rather than simply more services.
The payment fix addresses a concern that’s been bubbling since last year’s rule took effect. For nursing homes, which already face intense pressure on staffing and margins, the restoration of equitable physician payments removes one more obstacle to delivering consistent care.
Industry groups had flagged the disparity early, and CMS’s willingness to correct it suggests the agency is listening to operator concerns — even if the broader conversion factor still trends downward.
For residents, the practical effect should be more reliable access to physician care during their Medicare-covered stays, without the financial disincentives that had been driving some providers away.
The rule is part of a broader set of CMS reforms aimed at reducing administrative burdens on nursing homes while maintaining care standards. Whether the payment adjustments are enough to offset the continued pressure on facilities remains to be seen, but the fix is a start.
Source: CMS CY 2027 Physician Fee Schedule Proposed Rule
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