The RVU Shake-Up: How 2026 Medicare Payment Changes Could Reshape Physical Therapy Practice

The Centers for Medicare & Medicaid Services (CMS) has proposed its 2026 Medicare Physician Fee Schedule, and for the first time in several years, the conversion factor is going up. On paper, the 3.3% boost for most outpatient therapy providers looks like a win. But when you read past the headline, a more complicated and potentially troubling story emerges.

Under the proposal, physical therapists who are not participating in an advanced Alternative Payment Model (APM) would see their conversion factor rise to $33.42. That’s up from $32.3465 in 2025 and marks a rare departure from years of reimbursement erosion. For those in qualifying APMs, the rate would be even higher, at $33.85.

Yet CMS’s simultaneous changes to Relative Value Units (RVUs), the bedrock of how Medicare calculates payment, could erase these gains. For most therapy practices, the net effect may be an actual reduction in reimbursement.

Why the Higher Conversion Factor Doesn’t Tell the Full Story

The Medicare payment formula is built on three RVU components: work, practice expense, and professional liability. CMS is proposing adjustments to all three for physical therapy codes, a move that is unusual in scope and reach.

In its own estimates, CMS predicts a net negative impact of about 1% for therapy services once these RVU shifts take hold. Early analysis suggests a mixed bag. A few commonly used codes may see modest increases, others may stay flat, and several are likely to drop.

For clinic owners and therapy directors who were hoping for relief, that is a sobering forecast.

The Controversial “Efficiency Adjustment”

Adding to the uncertainty is CMS’s proposed “efficiency adjustment” to work RVUs for non-time-based codes. The agency argues that some services are overvalued relative to current clinical practice and should be reduced to reflect productivity gains.

In theory, this makes sense, but in practice, something appears off. Most physical therapy services are time-based, billed in 15-minute increments. Yet the adjustment, a 2.5% cut, seems to have been applied to certain time-based codes as well.

If this stands, it could mean unintended payment reductions across a wide swath of therapy services, cutting deeper than CMS’s own projections suggest.

The CPI Survey Data That Wasn’t Used

In 2024, professional associations partnered with the American Medical Association to conduct the Clinical Practice Information (CPI) Survey. The goal was to give CMS a more accurate picture of real-world practice costs.

The results were clear: therapy practices face higher overhead than Medicare’s current assumptions account for. But CMS has chosen not to use this data for 2026, citing response rate and comparability concerns. That means practice expense values will stay anchored in older data that may no longer reflect reality.

Missed Potential in Remote Therapeutic Monitoring

Remote Therapeutic Monitoring (RTM) codes have been gaining traction as a way to extend care beyond the clinic, leveraging digital tools to track patient progress. Specialty experts recommended higher work values for both existing and new RTM codes based on evidence of time and professional involvement.

CMS disagreed. Existing RTM codes will stay as they are, and new ones will be valued below recommended levels. That undervaluation could slow adoption of technology-driven models that might otherwise improve outcomes and patient engagement.

Telehealth’s Future Still Uncertain

One bright spot in the proposal is CMS’s move to streamline how codes are added to the Medicare Telehealth Services List. If adopted, the process could help keep telehealth viable for more services.

However, therapy-specific telehealth coverage is still set to expire September 30, 2025, unless Congress acts. Without legislative intervention, any telehealth flexibility in the fee schedule will be irrelevant for most physical therapy providers.

The Low Back Pain Model and the Missing Players

CMS is also proposing a new mandatory alternative payment model focused on low back pain and congestive heart failure, with a start date of 2027. The goal is to reduce costs and improve outcomes by adjusting specialist payments based on targeted quality measures.

It is an important area, as low back pain drives significant Medicare spending, but CMS’s model does not include physical therapists as eligible participants. That omission ignores decades of evidence showing therapy as a first-line, cost-effective intervention for musculoskeletal conditions.

What This Means for Physical Therapy Practices

For many outpatient therapy businesses, 2026 may be a year where reimbursement changes more in structure than in headline rate. The increase in the conversion factor is meaningful, but the underlying RVU shifts, efficiency adjustment, and decision not to update practice expense data will shape the real-world impact.

Savvy clinic owners will need to look beyond the top-line percentage change and analyze:

• Which high-volume CPT codes will rise or fall
• How small RVU changes multiply into larger annual revenue effects
• Whether operational adjustments, like optimizing scheduling or reviewing payer mix, can offset losses

For those serving large Medicare populations, the financial planning should start now.

A Turning Point for Therapy Reimbursement

The 2026 proposal signals a broader transition in Medicare payment philosophy. CMS is clearly moving toward more targeted valuation of services, more frequent RVU recalibration, and increased use of alternative payment models. Physical therapy is caught in the middle of that shift, benefiting from some policy updates while being sidelined in others.

The takeaway is this: do not mistake the 3.3% conversion factor increase for a simple raise. The real story lies in the details of RVU changes and how they intersect with your practice’s service mix. Understanding those nuances now will be essential to navigating the year ahead.