By: Christopher Parrella, Esq., CPC, CHC, CPCO
Parrella Health Law, Boston, MA
A Health Care Provider Defense and Compliance Firm

CMS recently dropped the 2026 Medicare Physician Fee Schedule (MPFS) final rule and followed it with a direct “Dear Provider” letter laying out its priorities for the year. Together, they tell you exactly where federal regulators are headed on payment, telehealth, value based care, and program integrity. If you’re a Medicare participating practice, behavioral health or SUD provider, specialty group, ACO, or telehealth operator, this rule set is going to drive both your revenue and your audit exposure in 2026 and beyond.

Telehealth and supervision rules continue to evolve in ways that matter for outpatient and virtual care models. For 2026, CMS is simplifying how services get onto the Medicare telehealth list by eliminating the old “provisional vs permanent” categories and focusing on whether a service can truly be delivered via two way audio video. It is permanently removing long standing frequency limits on subsequent inpatient visits, nursing facility visits, and critical care consults when delivered by telehealth. The rule also makes “virtual direct supervision” permanent for a wide range of services, allowing supervising physicians and practitioners to meet the direct supervision standard via real time audio visual technology for most incident to services, diagnostic tests, and rehab programs.

Behavioral health and chronic disease management are front and center. The final rule creates new optional add on codes for Advanced Primary Care Management that are specifically designed to bolt behavioral health integration and psychiatric collaborative care services onto advanced primary care, and CMS is explicitly recognizing that integrated behavioral health improves outcomes for patients with chronic disease. CMS is also expanding payment for digital mental health treatment devices, including tools used in ADHD treatment, when they are furnished incident to ongoing behavioral health care under a treatment plan. On top of that, in the Shared Savings Program, new behavioral health integration and psychiatric collaborative care add on codes are being folded into the definition of “primary care services” that determine beneficiary assignment to ACOs, which makes integrated BH work more central to attribution and ACO revenue.

Program integrity and fraud control are not subtle themes here. In its December letter, CMS points out that Medicare made an estimated 54 billion dollars in improper payments in FY 2024 and makes clear that “crushing fraud” using next generation analytics and payment policy changes is a top priority. In the MPFS itself, you see that in the aggressive overhaul of skin substitute payments after spending exploded from roughly 250 million dollars in 2019 to over 10 billion dollars in 2024. Beginning in 2026, skin substitutes will be treated as incident to supplies with a single national rate (around 127 dollars per unit) and aligned to FDA regulatory categories, a change CMS estimates will cut Part B skin substitute spending by nearly 90 percent. You also see it in new rules around Part B drug pricing, where CMS is tightening expectations around how manufacturers report average sales price, document bona fide service fees, and account for units sold at the Medicare “maximum fair price”, all of which will reverberate through infusion practices and hospital outpatient drug programs. The message for providers is simple. Expect more algorithmic scrutiny, more targeted reviews of high growth service lines, and a closer linkage between coding, pricing, and fraud analytics.
On the value based care side, CMS is adjusting both the Quality Payment Program and the Medicare Shared Savings Program, but with an emphasis on stability. The QPP fact sheet makes clear that CMS is finalizing a limited number of changes for 2026, keeping the MIPS performance threshold at 75 points through the 2028 performance year, adding six new MIPS Value Pathways, and slightly trimming the traditional quality measure inventory from 195 to 190 measures while adding a handful of new outcome focused measures. In the ACO world, CMS is tightening timelines for how long an ACO can stay in one sided risk under the BASIC track, increasing flexibility around the 5,000 beneficiary minimum in benchmark years while layering in safeguards, and expanding its extreme and uncontrollable circumstances policies so that cyberattacks can qualify an ACO for relief if the ACO applies through the MIPS EUC process. These changes push more entities toward two sided risk while trying to keep smaller and rural ACOs in the game.

The broader CMS Dear Provider letter wraps these changes inside five strategic pillars for 2026. The agency stresses its goal of reducing administrative burden, including a commitment to cut quality reporting measures by about 5 percent per year, and to relax outdated rules about where and how clinicians can deliver care, such as the ongoing phase out of the inpatient only list and adjustments to PFS values that better recognize nonfacility care. It highlights a push to align payment with outcomes through models like the new Ambulatory Specialty Model for heart failure and low back pain, continued tweaks to the Shared Savings Program, and efforts to leverage technology via the CMS Health Tech Ecosystem to make longitudinal data more available and revenue more predictable at the point of care. CMS also reminds providers to maintain Medicare participation status, update their NPPES information, and take advantage of QIO support over the next five years.

For a primary care practice, behavioral health group, SUD treatment center, specialty clinic, or ACO working with Parrella Health Law, the practical questions are all about impact and risk. How will the dual conversion factors, efficiency adjustment, and practice expense shifts affect your 2026 Medicare revenue by site of service and service line. How exposed are you to the skin substitute and Part B drug changes if you run wound care or infusion programs. Are your telehealth and virtual supervision workflows aligned with the new permanent rules, including documentation of audio visual supervision and teaching physician presence. Are you using or planning to use digital mental health devices in a way that is billable, documented, and defensible under the new DMHT and APCM add on codes. And if you are in MIPS, an ACO, or both, how will the QPP and Shared Savings Program changes alter your quality strategy and risk posture.

You can read the full CY 2026 MPFS final rule in the Federal Register here:
CY 2026 Medicare Physician Fee Schedule Final Rule (CMS)

CMS’s official fact sheet is here:
CMS CY 2026 MPFS Final Rule Fact Sheet (CMS)

From a legal and compliance standpoint, this is the moment to get proactive. Your next steps should include a focused MPFS impact analysis by specialty and setting, a review of telehealth and supervision policies, a scrub of behavioral health integration and digital mental health billing strategy, and a hard look at any exposure around high scrutiny products like skin substitutes and Part B drugs. Practices in MIPS or ACOs should also be mapping out how the 2026 QPP and MSSP changes affect their quality dashboards and risk contracts. If you want help translating these rules into a concrete compliance and reimbursement strategy tailored to your organization, this is exactly the kind of work we do every day. If you have any questions or comments about the subject of this blog, or want a targeted 2026 MPFS impact review, please contact Parrella Health Law at 857.328.0382 or Chris directly at cparrella@parrellahealthlaw.com.