The Centers for Medicare and Medicaid Services (CMS) has proposed a change in methodology to indirect practice expense (PE) payment in the proposed 2026 Medicare Physician Fee Schedule (PFS), which would reduce payment for facility-based services and practices while increasing payment for office-based services and practices.

The total impact of the proposal is estimated to be –6% for facility-based cardiology services and +5% for office-based cardiology services. These percentages are for the entire specialty. Individuals and practices will fare differently depending on their practice makeup.

The indirect PE proposal is negatively impactful for facility-based procedures. This change produces total relative value unit (RVU) reductions of around 10% for many facility-based services, such as pacemaker implants, TAVR, PCI, ablation, etc. View impacts to select codes in the table below, and access ACC's Medicare PFS calculator to visualize more impacts from 2025 to 2026. A portion of these reductions would be offset by the 3.8% increase in conversion factor when payment is made in dollars, but that only applies for 2026.

Indirect PE is one of several components of the Medicare PFS. It is meant to reimburse for overhead costs that are not directly attributable to a specific service – rent, utilities, administrative staff, etc. Every service has some indirect PE. Since a portion of indirect PE is linked to a service's work RVU, services with higher work RVUs have more indirect PE.

Citing the migration of physicians from independent practice to hospital employment or integration, CMS suggests that allocation of the same indirect PE for services performed in the facility as in the office is no longer accurate, overpaying for overhead services. Therefore, this proposal reduces the facility PE for services valued in the facility setting starting in 2026.

The proposal does not apply to every service performed in a hospital or ambulatory surgical center. This policy would not apply to services that can be billed with professional services in both the facility and nonfacility setting. See examples of this exception in the table below.

This change is arbitrary and neglects the fact that all physicians – whether in independent private practice or employed directly by a hospital – carry overhead costs that constitute indirect PE. Administrative staff support the physician in scheduling patients for procedures and office visits using software and computers. Billing staff code and submit claims. Building personnel maintain the physical environment. Utility costs for internet, telephone, water and electricity are incurred. Rent or depreciation costs are attributed to practices, service lines and individual physicians.

This is an unprecedented proposal that will significantly affect nearly all specialties. The ACC will collaborate with the American Medical Association and the House of Medicine to contest this proposal. Stay tuned for more updates and insights from the ACC Advocacy team at ACC.org/Advocacy and with the weekly ACC Advocate newsletter.

Keywords: Fee Schedules, ACC Advocacy, Centers for Medicare and Medicaid Services, U.S., Delivery of Health Care