Two CMS Rules Dropped This Month. Hospitals Got a Raise. You Got a Cut.
Medicare hands hospitals an inflation raise every year and hands physicians a cut. That gap is the whole design.
They will tell you the physician cut is a budget accident.
It carries a temporary bump that expired, a productivity adjustment, a formula.
Hospitals get an inflation update written into law.
Physicians get whatever the formula leaves behind. Every year.
IN TODAY’S ARTICLE:
Why the physician cut is not an accident of arithmetic
The one payment mechanism hospitals have, and physicians do not.
The 2027 rule read as a consolidation instrument, not a fee update.
The comment window closes September 14, and what to do with it.
Glossary at the bottom of today’s article.
TWO RULES. ONE MONTH. OPPOSITE DIRECTIONS.
On July 14, CMS released the calendar year 2027 Medicare Physician Fee Schedule.
It sets the conversion factor at $33.17 for physicians inside advanced payment models and $32.84 for everyone else.
Those are cuts of 1.19% and 1.68% from 2026.
Twelve days earlier, CMS released the hospital outpatient rule.
It raises hospital and surgery-center payment by 2.4%, a 3.2% market basket update trimmed by a 0.8-point productivity adjustment. Total hospital outpatient dollars climb roughly $9.5 billion, to about $110.9 billion for the year.
Same agency.
Same July.
The physician takes a cut.
The hospital collects a raise.
Read the two envelopes side by side, because they were never meant to be read together.
And read them for what they are.
Medicare prices medicine. In the same stroke, it decides who will own the people who practice it.
THE CUT IS THE DESIGN
Look at the mechanics honestly, because the honest version is worse than the angry one.
The physician cut comes mostly from a temporary 2.5% payment increase Congress attached for 2026 and then let expire. When it lapses, the law requires the money to come back out. So the number falls.
The expired increase explains this year’s number. The missing permanent update explains why the same crisis returns every year.
Here is the mechanism nobody has to vote on twice. Hospitals carry a permanent inflation update, written into statute, indexed to a market basket. It arrives every year, automatically. Physicians carry no such thing. MACRA replaced the old formula with a schedule of frozen and near-frozen updates and told physicians to earn the rest through reporting programs.
So the same event repeats on a calendar. Hospital payment rises with inflation. Physician payment does not. The distance between the two lines widens on schedule, and no one has to be the villain in any single year.
The system is not broken. It is working exactly as designed.
Everything above this line is how a physician gets sold.
Everything below it is how a physician stops.
$300 a year to read the exit, or keep negotiating the terms of your own sale.
