LUGPA Policy Update - MedPAC Reviews Physician Payment Adequacy and CY 2027 Update

January 2026

At-a-Glance Essentials

On January 15, MedPAC voted to recommend a +0.5% payment update above current law for CY 2027 for physicians and other health professionals. While framed as supporting access, the discussion revealed deep concern about whether Medicare physician payment policy is accelerating consolidation and undermining independent practice.

Why It Matters
Even modest “positive” updates fail to keep pace with inflation, rising practice costs, and long-term payment erosion under the Medicare Physician Fee Schedule (MPFS). Several commissioners warned that continued net-negative updates—combined with persistent payment disparities between hospital outpatient and physician office settings—are fueling consolidation and threatening the viability of private practice.

This recommendation marks a clear shift away from MedPAC’s prior position supporting permanent inflation-based updates to Medicare physician payments—a reform long advocated by physician groups, including LUGPA, to stabilize practice finances and preserve patient access to care.

What MedPAC Found

Access appears stable—but fragile: Medicare beneficiaries report comparable or better access than privately insured adults, yet commissioners emphasized that access can erode rapidly once financial pressures force clinicians to limit participation or exit independent practice.
Revenue growth masks instability: Increases in allowed charges were driven largely by higher service volume and coding changes, including the G2211 complexity add-on—not sustainable payment updates.
Structural inequities persist: The growing divergence between hospital outpatient payment rates and physician fee schedule rates continues to incentivize hospital acquisition of physician practices and care migration to higher-cost settings.
Measurement gaps remain: MedPAC acknowledged limitations in quality and access metrics, particularly as more physicians become hospital-employed and clinician compensation is increasingly cross-subsidized within large systems.

Why This Matters to LUGPA Members
For independent urology practices, the MedPAC discussion reinforces longstanding concerns:

Payment instability continues despite temporary patches, failing to reflect real-world practice costs.
Consolidation pressures intensify as hospitals receive significantly higher payments for identical services.
Access data understates risk to specialty care, rural communities, and independent practices operating on thin margins.
Incremental updates fall short of addressing MACRA’s structural flaws and site-of-service payment distortions.

LUGPA’s Takeaway
While MedPAC acknowledged the risks of consolidation and limitations in available data, the Commission stopped short of recommending meaningful structural reform. LUGPA remains concerned that incremental payment updates alone will not halt the continued erosion of independent practices or address rising Medicare costs driven by persistent site-of-service disparities.

LUGPA will continue to call on Congress to enact permanent, inflation-based updates to the Medicare Physician Fee Schedule to ensure reimbursement keeps pace with rising practice costs and to protect patient access to high-quality, community-based urologic care.

Action Outlook

LUGPA will continue working with Congress and CMS to advance comprehensive physician payment reform that: