On July 14, 2026, the Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2027 Medicare Physician Fee Schedule (PFS) proposed rule. While the annual fee schedule always introduces adjustments, the 2027 proposal contains a major structural shift that has independent practices and surgical specialties sounding the alarm.
Chief among these concerns is a proposed 50% payment reduction when an Evaluation and Management (E/M) service is billed alongside a global surgical procedure. Here is a breakdown of how the proposed bundling works, how it upends current billing rules, and how much revenue orthopedic surgeons stand to lose.
The 50% Same-Day E/M Reduction Explained
Under the CY 2027 proposal, CMS plans to aggressively bundle what it views as overlapping practice expenses. Beginning in 2027, if a separately identifiable office or outpatient E/M visit is furnished by the same physician (or a physician in the same practice) on the exact same day as a procedure with a 0-, 10-, or 90-day global period, the reimbursement will be reduced.
Specifically, the highest-valued service—whether that is the minor procedure or the E/M visit—will be paid at 100%. However, any remaining surgical procedures or E/M services performed on that date will automatically be paid at 50%.
How This Differs From Current Rules
Currently, physicians rely on Modifier 25 to indicate that an E/M visit was significant, separately identifiable, and went above and beyond the usual pre- and post-operative care associated with a minor procedure on the same day.
Under current rules, when you properly append Modifier 25, Medicare provides 100% separate reimbursement for the E/M visit alongside the standard full reimbursement for the procedure.
The 2027 proposed rule effectively penalizes this same-day care model. CMS’s rationale is that when an E/M and a procedure occur back-to-back, there are efficiencies and potentially duplicative administrative payments that should not be fully reimbursed. Instead of recognizing the full separate value of the physician’s diagnostic work, the lesser service is simply halved.
The Specialties Most Impacted
This policy will hit procedural and surgical specialties exceptionally hard—specifically those that routinely diagnose a complex problem and offer immediate intervention during the same encounter. The most impacted specialties include:
- Dermatology: Frequently bills an E/M for a comprehensive evaluation alongside same-day skin biopsies or excisions. They face a devastating 9% specialty-level relative value unit (RVU) cut even before conversion factor reductions. (For a full review estimated CY 2027 PFS impacts on individual specialties, reference table D-B5 on page 1146 of the proposed rule.)
- Otolaryngology (ENT): Also facing an estimated 9% specialty-level RVU cut, as they often evaluate patients and perform in-office scoping during a single visit.
- Wound Care and Podiatry: Routinely bill an E/M code for evaluating wound progression and managing systemic factors alongside a same-day debridement procedure.
- Orthopedics: Heavily reliant on diagnosing musculoskeletal issues and administering same-day treatments like joint injections, fracture care, or casting.
The Financial Hit to Orthopedic Surgeons
Orthopedic surgeons are facing a significant revenue loss based on CMS’s PFS 2027 estimations.
Here is how the estimate breaks down based on the CMS projections:
- Specialty-Level RVU Cuts: CMS estimates that the 2027 fee schedule’s relative value unit (RVU) changes will reduce aggregate PFS allowed charges for orthopedic surgery directly by 7%. Within that average, facility-based services are estimated to drop by 8%, while non-facility (office-based) services face a 5% reduction.
- Conversion Factor Expirations: To compound the issue, a temporary 2.5% statutory payment increase previously provided by Congress is expiring at the end of 2026. Because of this expiration, the overall PFS conversion factor will drop by 1.19% for qualifying Alternative Payment Model (APM) participants (falling from $33.5675 to $33.1693) and by 1.68% for non-qualifying clinicians (falling from $33.4009 to $32.8409).
When you combine the 7% specialty-level cut with the 1.19% to 1.68% drop in the conversion factor, the average reduction in total Medicare allowed charges for an orthopedic practice lands squarely in that 8% to 9% range.
For independent practices already grappling with rising overhead costs, an 8–9% reduction is severe. The American Association of Orthopaedic Surgeons (AAOS) has strongly opposed the proposal, warning that it undervalues complex musculoskeletal care and will ultimately drive further consolidation and limit patient access to timely care.
What’s Next? CMS will be accepting public comments on the proposed rule until September 14, 2026. In the meantime, practices should urgently model their highest-volume CPT codes against the proposed conversion rates and audit their Modifier 25 utilization to prepare for the revenue shifts that could take effect on January 1, 2027.
During this time of uncertainty, orthopedic surgery practices and other impacted specialties should button up any possible revenue leakage. Look for a trusted revenue cycle management partner, such as Kovo RCM, to examine your practice’s financials and ensure that underpayments, denials, and lost revenue do not further undermine your practice.
Sources & Official Documentation:
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