Medicare’s finalized payment rules introduce a series of technical but consequential changes affecting physician reimbursement, hospital outpatient payment, and oncology coding. At the Association of Cancer Care Centers Winter 2025 Virtual Oncology Reimbursement Meeting, Teri Bedard, BA, RT(R)(T)(ARRT), CPC, executive director, client and corporate resources, revenue cycle coding strategies, walked attendees through the CY 2026 Medicare Physician Fee Schedule (PFS) and Hospital Outpatient Prospective Payment System (HOPPS) final rules, with a focus on operational implications for oncology providers.
“I want to focus on what we do know from a Medicare perspective, and a couple of the coding updates that are really impactful to the oncology side of the house,” Ms Bedard said.
Medicare PFS: 2 Conversion Factors and New Payment Adjustments
She began with a review of how Medicare determines payment under the PFS, noting that reimbursement is built from geographic adjustments, physician work, practice expense, malpractice, and the annual conversion factor.
Medicare will move away from a single conversion factor to 2 conversion factors, depending on whether clinicians participate in a qualifying Alternative Payment Model (APM). “Because of the Medicare Access and CHIP Reauthorization Act, there are now 2 factors,” Ms Bedard said. Clinicians participating in qualifying APMs will receive a larger payment update than nonparticipants.
Beyond the conversion factor, Medicare finalized 2 adjustments that will affect physician payment. These adjustments took effect January 1, 2026:
- Efficiency adjustment. Medicare will apply a 2.5% reduction to physician work relative value units (RVUs)—the standardized measures used to calculate physician payment—and the associated time assigned to services based on a retrospective analysis intended to reflect increasing efficiency over time. Ms Bedard cautioned that Medicare has not defined a clear end point for how far efficiency-related reductions could extend in future payment cycles. She cited examples, such as bone marrow biopsy and radiation oncology planning services, to illustrate how even small per-service changes could accumulate over time
- Site-of-service payment differential. Medicare also finalized a policy aimed at reducing what it views as overlapping payments when services are furnished in facility settings. “Medicare does not like double dipping,” she said, explaining that the growth of hospital-owned physician practices has raised concerns about paying both hospital costs and physician practice expense for the same services. Under the finalized policy, certain services furnished in facility settings will see reduced physician reimbursement compared with nonfacility settings
She explained that some procedures could see payment decreases when performed in hospitals and increases in freestanding offices, depending on how practice expense and supply costs are accounted for, noting that the impact will vary based on practice patterns and site of care.
She also cautioned practices to verify they are using corrected PFS payment files, noting that early files released by Medicare reflected proposed values rather than finalized efficiency-adjusted amounts.
Radiation Oncology: Major Coding Changes for 2026
A significant portion of Ms Bedard’s presentation focused on radiation oncology, where Medicare finalized sweeping coding changes that took effect January 1, 2026.
Medicare will delete the G-codes historically used for external beam radiation treatment delivery and require use of Current Procedural Terminology (CPT) codes 77402, 77407, and 77412 across all sites of service. These CPT codes, which describe physician and technical services for billing purposes, have revised definitions that are now organized into tiered levels.
Another major operational shift involves image-guided radiation therapy (IGRT). Although CPT code 77387 remains the single code for IGRT, its technical component (TC), which reflects the equipment, supplies, and staff resources used to deliver the service, will no longer be separately billable when IGRT is performed as part of external beam treatment. Image guidance is now bundled into the revised external beam delivery codes.
“Because the treatment delivery includes image guidance, nobody can bill 77387 with a TC modifier for any of these external beam codes,” Ms Bedard said. Physicians may still bill the professional component, which reflects physician work, when applicable.
She also reviewed new and deleted codes for superficial radiation therapy, explaining that utilization thresholds and changes in predominant specialty use triggered code review. Several existing superficial treatment codes will be deleted, replaced by new codes distinguishing planning/simulation, delivery based on energy level, and initial-day guidance. These changes apply in both office and hospital outpatient settings.
For proton therapy, she noted that Medicare sought comment on potential alignment between hospital and office payment but did not finalize changes for 2026. “For next year, nothing changed with proton treatment delivery,” she said, suggesting future updates are more likely in later rulemaking.
HOPPS: Hospital Outpatient Payment and Drug Administration
Turning to HOPPS, she explained that hospital outpatient payment relies heavily on wage indices and cost reporting rather than physician work RVUs. For 2026, hospitals are projected to see an overall increase, with additional adjustments continuing for certain cancer-designated hospitals.
One of the most consequential HOPPS changes for oncology involves drug administration. She highlighted the large payment gap between physician office and hospital outpatient reimbursement for common chemotherapy administration services and Medicare’s concern that site-of-care decisions may be reimbursement driven.
Medicare finalized a policy paying certain drug administration services, grouped under ambulatory payment classifications, at 40% of the outpatient department rate, a move she said is intended to better align payment across settings and reduce incentives for unnecessary shifts to hospital outpatient departments. Correct use of modifiers identifying service location will be critical to ensure accurate payment.
For drugs, biologics, and radiopharmaceuticals, Ms Bedard reported relative stability in 2026. The packaged per-day threshold for separate payment will remain unchanged, Average Sales Price–based reimbursement will continue, and biosimilars will retain enhanced payment rates. She also noted an increase in the daily threshold for separately payable diagnostic radiopharmaceuticals, with drugs above the threshold paid separately and those below packaged into the associated imaging service.
Additional HOPPS updates discussed included repayment dynamics related to the 340B program, a new value code for invoice-priced drugs when standard benchmarks are unavailable, and Medicare’s ongoing phase-out of the inpatient-only list by 2029—an issue she said will primarily affect hospital planning and patient safety considerations.
Coding Updates to Incorporate Now
She closed with several coding updates practices should incorporate into workflows, including ICD-10 guidance under the neoplasms chapter (effective October 1, 2025) for encounter sequencing when admissions are primarily for antineoplastic therapy, new codes for inflammatory breast cancer, and updates affecting certain G-codes used for assessments and care integration.
Acknowledging the volume of changes, Ms Bedard emphasized the importance of preparation. “I know there’s always a lot of information,” she said, encouraging practices to review coding changes, verify payer policies, and ensure documentation supports billing under the 2026 rules.