Robert Hall

The Calendar Year 2027 Medicare Physician Fee Schedule proposed rule contains better news for physical therapy than many recent annual rules. But practice owners should not mistake “better” for “fixed.” The Centers for Medicare & Medicaid Services estimates that proposed changes to relative value units could increase aggregate payment for physical therapy by approximately 3%. At the same time, the conversion factor used to turn those relative values into actual dollars would fall for most physical therapists. The result is likely a modest net improvement—not a meaningful restoration of Medicare payment.

That distinction matters. Private practices have absorbed years of inflation, wage growth, technology costs, compliance expense, and administrative burden while Medicare’s payment formula has repeatedly failed to keep pace. A favorable technical adjustment in one proposed rule does not cure that structural problem.

The headline numbers

CMS proposes a 2027 conversion factor of $32.84 for clinicians who are not qualifying participants in an Advanced Alternative Payment Model—the category that includes most physical therapists. That is a $0.56, or 1.68%, decrease from the 2026 conversion factor of $33.40. The qualifying APM conversion factor would be $33.17, down 1.19%. The decline largely reflects the expiration of the temporary 2.5% statutory increase Congress provided for 2026.

CMS nevertheless projects an approximately 3% aggregate increase for the physical therapy specialty from proposed RVU and practice-expense changes. Taken together, the specialty-level estimate and lower conversion factor suggest a rough net improvement of approximately 1% for physical therapy, although no practice should budget from that average. Actual results will vary by code mix, geography, participation status, and any revisions made in the final rule.

The proposed therapy threshold would rise to $2,540 for physical therapy and speech-language pathology combined, with a separate $2,540 threshold for occupational therapy. The $3,000 targeted medical review threshold remains in place through 2027. These thresholds are not hard caps on medically necessary care, but they continue to create documentation and audit exposure that practices must manage carefully.

Why physical therapy fares somewhat better

The most consequential favorable proposal is CMS’s continued overhaul of practice-expense methodology. Practice expense is supposed to account for the clinical labor, equipment, supplies, rent, administrative infrastructure, and other costs required to furnish a service. CMS proposes moving away from a methodology anchored in specialty-level cost data dating to 2007 or earlier and phasing out the final adjustment that forces aggregate practice-expense RVUs to conform to those outdated figures.

That change matters to private physical therapy practices because the existing methodology has not reliably reflected the cost structure of contemporary outpatient care. CMS would replace the old adjustment with a stabilizer intended to reduce short-term volatility while allowing values to respond more accurately to current inputs. The projected increase for physical therapy is evidence that payment methodology—not merely the conversion factor—can suppress or improve reimbursement.

APTA Private Practice will support modernization of practice-expense data while pressing CMS to ensure that the replacement method is transparent, auditable, frequently updated, and capable of capturing the actual costs borne by small and independent practices. A new formula built on incomplete data would only produce a newer version of the same problem. 

The RTM proposal moves in the wrong direction

CMS proposes several significant restrictions on remote therapeutic monitoring. RTM would be limited to established patients; the billing practitioner would have to furnish a separately reportable initiating visit when RTM begins; and monitoring services performed by contracted clinical staff would no longer qualify for payment. CMS is also reconsidering the valuation of RTM devices and seeking comment on whether existing RPM and RTM codes should be bundled into four new HCPCS G-codes.

Those proposals could make RTM less workable for private practices without demonstrating that the restrictions improve outcomes or protect beneficiaries. Requiring direct employment of every staff member involved in monitoring ignores legitimate staffing arrangements and may disproportionately burden smaller practices. An initiating-visit requirement can also add friction where the patient’s condition and treatment plan are already well established. CMS should target documented program-integrity risks rather than impose blunt restrictions that reduce access to clinically appropriate digital care.

What this proposal does not solve

Even if the estimated physical therapy increase survives into the final rule, the proposed rule leaves the fundamental instability of Medicare payment intact:

  • No automatic inflation update. The underlying PFS still lacks a permanent annual update tied to the Medicare Economic Index or another measure of practice-cost inflation.
  • Temporary congressional relief expires. The 2026 conversion-factor increase was a one-year patch, so its expiration immediately pulls 2027 rates downward.
  • Administrative deductions remain. The multiple procedure payment reduction and other payment policies continue to discount care even as practice costs rise.
  • Averages conceal winners and losers. A projected specialty-wide increase does not guarantee an increase for every code, setting, locality, or private practice.

What private practices should do now

The rule is proposed, not final. CMS will accept comments through September 14, 2026, under file code CMS-1848-P. Practice owners can strengthen APTA’s advocacy by providing concrete evidence rather than general objections. Useful information includes changes in wages and benefits, rent, technology and compliance expenses, RTM staffing models, patient outcomes associated with RTM, services that have become financially unsustainable, and the effect of Medicare rates on beneficiary access.

APTA Private Practice will urge CMS to preserve the improvements in physical therapy practice-expense valuation, reject unsupported RTM restrictions, and adopt transparent methodologies grounded in current practice costs. We will also continue pressing Congress for the larger reform CMS cannot deliver through annual rulemaking alone: a stable Medicare payment system with a permanent inflation-based update.

The bottom line

The CY 2027 proposal is a limited step forward for physical therapy payment methodology and a warning about the fragility of the system surrounding it. A roughly 3% specialty-level RVU improvement is worth defending. But after the proposed conversion-factor reduction, it is not a windfall, and it does not erase years of declining purchasing power. Private practices should treat this rule as an advocacy opportunity—not as evidence that the Medicare payment crisis has passed.