What the CY 2027 Physician Fee Schedule final rule, the MIPS-to-MVP transition, and the telehealth timeline mean for physical therapy practice economics — and for what a buyer will pay.
Today, November 4, 2026, CMS released the Calendar Year 2027 Medicare Physician Fee Schedule final rule. For the physical therapy practice owner, the headline is blunt: the conversion factor that most PTs are paid on falls 2.31% on January 1, 2027, erasing much of the one-year bump Congress provided for 2026.1 At the same time, CMS locked in a decade-long march away from traditional MIPS and toward specialty-specific quality pathways and outcome measurement.2
For owners contemplating a sale in the next 12–36 months, these changes are not abstract policy. Buyers model Medicare exposure line by line, stress-test it, and multiply every dollar of lost EBITDA by the deal multiple. This paper explains exactly what changed, what it means at the CPT-code level, and how to position your practice before a buyer's Quality of Earnings team does the math for you.
The 2027 cut is not a new CMS policy decision so much as the expiration of a temporary one. Public Law 119-21 (which CMS refers to as the "Working Families Tax Cut" legislation) added a one-year 2.5% increase to the 2026 conversion factor. That increase sunsets on December 31, 2026, and current law requires CMS to remove it.1 Three components produce the final 2027 figures:
| Component | Non-QP (most PTs) | QP (Advanced APM) | What It Is |
|---|---|---|---|
| Statutory MACRA update | +0.25% | +0.75% | Fixed by law beginning in 2026; the source of the two-tier system |
| Work RVU adjustment | −0.12% | −0.12% | Budget-neutrality offset for changes to work RVUs on certain codes |
| Expiration of the 2026 one-year increase | −2.44% | −2.44% | Removing a 2.5% multiplier (÷1.025) equals a −2.44% change |
| Net change, CY 2027 | −2.31% | −1.83% | $33.4009 → $32.63 (non-QP); $33.5675 → $32.95 (QP) |
Beginning in CY 2026, MACRA requires separate conversion factors for clinicians who are Qualifying APM Participants (QPs) in Advanced Alternative Payment Models and for everyone else. QPs must meet participation thresholds in models that carry accountability for quality and cost.1
The overwhelming majority of outpatient PT, OT, and SLP practices do not meet QP thresholds independently.9 For a typical private practice, the relevant 2027 rate is $32.63. The QP premium is roughly 1.0% in 2027 ($32.95 vs. $32.63) — small today, but it compounds annually because the QP statutory update (+0.75%) exceeds the non-QP update (+0.25%) every year.
The widening gap is a deliberate policy signal: Medicare is rewarding participation in accountable-care arrangements. For PT practices, the practical paths to that upside run through ACO and hospital-system partnerships and outcome-aligned models such as CMMI's ACCESS model, which includes a musculoskeletal track.
Hospital-affiliated and ACO-aligned buyers can underwrite a different Medicare trajectory than a stand-alone practice. When Mihama runs a process, we identify which bidders can credibly capture accountable-care economics — because those bidders can often justify a higher price for the same EBITDA.
Medicare payment for a CPT code equals its total RVUs (work, practice expense, malpractice — geographically adjusted) multiplied by the conversion factor. A practice's real 2027 rate change depends on its CPT mix, not the headline. Three structural factors matter most for therapy:
For 2026, CMS finalized a 2.5% "efficiency adjustment" that reduces work RVUs and intraservice time for most non-time-based services. Time-based services were excluded, and after comments from APTA and others, the final rule also removed several therapy codes from the adjustment list, including 97032–97036, 97113, 97124, 97140, and 97533.5,14
Timed codes such as 97110, 97140, and 97530 — the backbone of most PT revenue — sit outside the adjustment. Untimed modalities such as unattended electrical stimulation (billed to Medicare as G0283; 97014 for most commercial payers) and mechanical traction (97012) are the exposure.14 Practices with heavy untimed-modality billing carry more 2026–2027 rate risk than practices built on skilled, timed intervention.
The final rule phases out the indirect practice cost index (IPCI) over two years, replaces it with a "PE stabilizer" to limit volatility, and allocates indirect practice expense on both work RVUs and clinical-labor PE RVUs for most codes.1
When the rule was proposed in July, APTA reported that CMS estimated physical therapy codes could see an overall payment increase of roughly 1–3%, largely from practice-expense changes; APTA's own September analysis concluded that the proposal's long-term payment gains were larger still.15,7 The final rule modified the PE policy and finalized a deeper conversion-factor cut than proposed (−2.31% vs. −1.68%).1,6 The net effect for therapy must be confirmed against the final-rule specialty impact tables and code-level RVUs — not assumed.
Mihama's Recommendation: Re-price your top 15 CPT codes (for most practices, the large majority of Medicare charges) using final 2027 RVUs for your locality, then weight by your actual 2026 unit volumes. That single exercise converts a headline into a defensible budget — and it is exactly the analysis a buyer's QoE team will run.
Because Medicare rate changes flow almost entirely to EBITDA (your staffing, rent, and overhead do not shrink when the fee schedule does), every percentage point is magnified by the deal multiple. The illustration below assumes a practice with $1.2 million of annual Medicare Part B fee-for-service revenue and assumes costs do not change. Because buyers value the practice on a multiple of EBITDA, each dollar in the last column is magnified into several times that amount in enterprise value at closing.
| Scenario (Net Medicare Rate Change, 2027 vs. 2026) | Rate Change | Annual Revenue & EBITDA Impact |
|---|---|---|
| Conversion-factor cut with no RVU offset | −2.31% | −$27,720 |
| Partial practice-expense offset | −1.00% | −$12,000 |
| Full offset (flat year) | 0.00% | $0 |
| RVU gains exceed CF cut | +1.00% | +$12,000 |
Sophisticated buyers do not stop at next year's rate. Practices with high Medicare concentration are stress-tested at hypothetical 5%, 10%, and 15% rate reductions, and the results inform both price and structure (earnouts, holdbacks, or a lower multiple). Your best defense is a documented, code-level 2027 rate analysis, a diversified payer mix, and evidence that you can offset rate pressure through visit productivity and commercial contracting.
Congress has repeatedly intervened at year-end to adjust physician fee schedule payments in recent years; the conversion factor in effect on January 1 can still change by legislation. Plan to the final rule, and treat any relief as upside.
CMS will sunset the traditional MIPS reporting option beginning with the CY 2031 performance period. Clinicians have through CY 2030 to move to MIPS Value Pathways (MVPs) or Advanced APMs — two more years than the July proposal, which would have ended traditional MIPS after 2028.2
Starting with the CY 2027 performance period, clinicians must report at least one specialty-specific "Core Measure."2 CMS also finalized three new MVPs (diabetes, hypertension, hospitalist). The rehabilitation-relevant pathway is the Rehabilitative Support for Musculoskeletal Care MVP.
PTs, OTs, and SLPs in private practice who exceed all three low-volume thresholds — more than $90,000 in Part B allowed charges, more than 200 Medicare beneficiaries, and more than 200 covered professional services — must participate. The performance threshold is 75 points through the 2028 performance year, and adjustments range up to ±9%, applied two years after the performance year (2027 performance drives 2029 payments).10
CMS also proposed replacing older FOTO-based functional status measures with new PROMIS-based functional outcome measures for neck, back, upper-extremity, lower-extremity, and knee patients.13 Confirm which were finalized before selecting 2027 measures.
Why It Matters for Valuation: A −9% MIPS adjustment on Medicare revenue is a material, known future liability that a buyer will price. Conversely, a practice with clean MVP reporting and patient-reported outcome data has a defensible quality story for payers, hospital partners, and acquirers. Outcome data is moving from "nice to have" to the currency of value-based contracting.
For 2026, CMS added RTM codes including 98985 (musculoskeletal device supply for 2–15 days in a 30-day period) and 98979 (treatment management with at least one real-time interactive communication), addressing the old "16 days or nothing" problem. They are "sometimes therapy" codes and must be part of a therapy plan of care when furnished by PTs.11
CMS finalized that RTM is furnished only to established patients and that a separately reportable initiating visit is required when RTM begins. The proposed requirement that RTM be performed only by practice-employed clinical staff (not contractors) was delayed to January 1, 2029.1 Vendor-run RTM programs should be re-papered now.
The Consolidated Appropriations Act, 2026 (signed February 3, 2026) extended Medicare telehealth flexibilities — including PT, OT, and SLP eligibility as distant-site practitioners and the home as an originating site — through December 31, 2027.12 Revenue that depends on telehealth beyond that date is a disclosed risk, not a run-rate.
As covered in Mihama's compliance white paper, buyers reconcile RTM software logs (data days, interactive communication time) to the billing ledger. Under the 2027 rules, they will also look for the initiating visit and established-patient status. Unsupported RTM revenue is stripped from EBITDA entirely.
Use final 2027 RVUs and your locality GPCIs; weight by actual volume. Know your true Medicare rate change to the tenth of a percent.
Identify which MA and commercial contracts are pegged to a percentage of the Medicare fee schedule — the 2027 cut may flow through automatically.
Every commercial rate improvement is a pro forma EBITDA add-back at sale. Time renegotiations so the new rates are in force before you go to market.
Practices leaning on untimed modalities face the efficiency adjustment and weaker clinical defensibility. Shift toward skilled, timed intervention.
Select 2027 measures with the new Core Measure requirement in mind. A 75-point score is the floor; below it, you are paying a penalty in 2029.
Collect validated PROMs consistently. They support MVP scoring, payer negotiations, hospital partnerships, and value-based models.
Document established-patient status, the initiating visit, data days, and interactive time. Plan for the 2029 in-house staffing requirement.
Isolate Medicare telehealth revenue and present it separately in your financials so buyers do not haircut your entire run-rate for a 2027 cliff.
Mihama models your practice's code mix, payer mix, and Medicare exposure against the final 2027 rule — and shows you how buyers will underwrite it. Confidential, no retainer, paid only at close.
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Final-rule figures are from CMS materials released November 4, 2026. Code-level RVUs, the final CY 2027 KX threshold, and specialty impact tables should be confirmed against the final rule addenda and CMS transmittals as they are published. Valuation examples are illustrative.