Physical therapy practices across the U.S. are navigating a pivotal shift. After more than a decade of incremental Medicare reform, value-based care (VBC) is no longer a future concept—it is the active payment environment. The CMS 2026 Physician Fee Schedule Final Rule, published November 2025, continues the trajectory: MIPS performance thresholds locked at 75 points through 2028, MIPS Value Pathways accelerating toward mandatory adoption, and a conversion factor increase that still leaves most non-APM physical therapist swith a net −1% impact due to RVU devaluations.

This guide answers the questions practice owners ask most: Whatis value-based care? Which payment models apply to my practice? What does my team need to do right now? Use the table of contents to navigate, or read end-to-end for a complete orientation.

1. What Is Value-Based Care?

Value-based care (VBC) is a health care delivery and payment model in which provider reimbursement is tied to the quality and efficiency of care delivered, rather than the volume of services billed. Under a value-based care model, payers—primarily CMS for Medicare beneficiaries—reward clinicians for improving patient outcomes, reducing unnecessary utilization, and demonstrating measurable performance across defined quality metrics.

CMS defines value-based care as health care "designed to focus on quality of care, provider performance and the patient experience," where 'value' reflects what each individual patient values most (CMS, 2023). The American Medical Association's 2024 definition adds that VBC arrangements "tie payment amounts for services provided to patients to the results that are delivered."

The contrast with fee-for-service (FFS) is fundamental. Under FFS—the dominant payment system since Medicare's inception in 1966—providers are compensated for each billable service regardless of whether the patient improves. VBC inverts this logic: payment follows outcomes.

Why this matters for physical therapy: The U.S. spends approximately $5.6 trillion annually on health care, with roughly 25%—an estimated $1.4 trillion—considered wasteful, including overtreatment, care coordination failures, and administrative inefficiency (Shrank et al., JAMA,2019; UnitedHealth Group, 2025). PT, OT, and SLP are increasingly recognized by CMS as essential, lower-cost pathways for musculoskeletal, neurological, and communication disorders. VBC formalizes that recognition by building quality reporting requirements directly into Medicare reimbursement.

FFS vs. Value-Based Care: Side-by-Side Comparison

‍

2. Why Value-Based Care Matters Right Now

For practice owners, 2026 is not the time to monitor VBC from a distance. Several converging factors make immediate preparation critical:

•       Payment consequences are real.

MIPS-eligible clinicians face a ±9% Medicare payment adjustment based on 2025 performance scores, paid in 2027. On a practice billing $300,000 in annual Medicare revenue, that swing represents up to$27,000—before considering bonuses for exceptional performance.

•       Traditional MIPS is sunsetting.

CMS has signaled a full transition to MIPS Value Pathways(MVPs) targeting the 2029 performance year/2031 payment year. Practices not already familiar with MVP reporting face compressed timelines.

•       2026 conversion factor update.

The CY2026 Final Rule proposes a 3.3% conversion factor increase to $33.42 for non-qualifying APM participants—positive on the surface, but offset by RVU reductions and efficiency adjustments that CMS estimates produce a net −1% impact for most physical therapists (APTA, July 2025).

•       Healthcare spending context.

U.S. health spending reached $5.6 trillion in 2025—projected to exceed 20% of GDP by 2033 (CMS NHE Projections, 2024). CMS's policy response is accelerating the shift from FFS to value-based payment models across all provider types, including rehabilitation therapy.

•       90% of Medicare FFS payments are now quality-linked.

CMS has tied 90% of traditional Medicare payments to quality or value (Penn LDI, 2023). Only 40% currently flow through Advanced APMs—the gap represents both compliance risk and revenue opportunity for well-prepared practices.

Key CMS Value-Based Payment Models for PT, OT, and SLP

‍

MIPS — Merit-Based Incentive Payment System

MIPS remains the primary quality reporting framework for most Medicare-eligible physical therapists, occupational therapists, and speech-language pathologists. Eligibility is determined annually by CMS based on patient volume and Medicare billing above the low-volume threshold.

MIPS scores are calculated across four performance categories: Quality (30%), Promoting Interoperability (25%), Improvement Activities (15%),and Cost (30%). The 2026 Final Rule maintains the 75-point performance threshold through the 2028 performance year. Critically, PTs, OTs, and SLPs  no longer receive automatic reweighting of the Promoting Interoperability category beginning in 2025.

MIPS Value Pathways (MVPs) — The Future of Rehab Therapy Reporting

MVPs represent CMS's redesigned reporting framework, offering a streamlined, specialty-aligned subset of measures rather than the full MIPS menu. For rehabilitation therapists, the M1370 Rehabilitative Support for Musculoskeletal Care MVP is the primary pathway, introduced in 2024 and expanded for 2025 with new MSK outcome measures (MSK6–MSK9 for pain improvement across cervical, upper extremity, back, and lower extremity conditions).

The 2026 Final Rule modifies all 21 existing MVPs and adds 6 new MVPs (non-rehabilitation-specific this cycle), while maintaining stability in threshold policy.

PDPM — Patient-Driven Payment Model (SNF Settings)

Physical, occupational, and speech therapists working ins killed nursing facilities operate under PDPM, which replaced the RUG-IV system in October 2019. Under PDPM, SNF reimbursement is determined by patient acuity, clinical complexity, and functional assessment data—not therapy minutes. This fundamentally changes how PT, OT, and SLP teams document care and demonstrate value.

Accurate MDS (Minimum Data Set) coding, Section GG functional assessment completion, and outcome documentation are financial imperatives under PDPM—directly parallel to MIPS quality measure documentation in outpatient settings.

Alternative Payment Models (APMs)

APMs, including Accountable Care Organizations (ACOs), bundled payment arrangements (BPCI-A), and the Comprehensive Joint Replacement model(CJR), represent the highest-level VBC integration for PT practices. Qualifying APM Participants receive a 3.85% conversion factor in 2026 vs. 3.3% forn on-QPs—a meaningful premium.

The Role of PT, OT, and SLP in Value-Based Care

Rehabilitation therapy is uniquely positioned within the value-based care ecosystem. Physical therapists, occupational therapists, and speech-language pathologists address the conditions that drive the highest Medicare costs: musculoskeletal disorders, post-surgical recovery, stroke rehabilitation, fall prevention, and functional decline. Research published inthe National Library of Medicine demonstrates that physical therapy as a first-line intervention for low back pain—the leading cause of disability globally—reduces downstream imaging, opioid prescriptions, and surgical procedures.

Under VBC, this clinical value must be documented, measured, and reported. Key responsibilities for PT/OT/SLP teams include:

•       Validated Functional Outcome Measures: Administering and recording validated

patient-reported outcome tools (FOTO, OPTIMAL, LEFS, NDI, DASH, PSFS) aligned with the MIPS PT/OT specialty set and the M1370 MVP quality measures.

•       SNF Functional Assessments: Completing Section GG

MDS assessments are accurate, as these directly determine PDP Mcase-mix classification and reimbursement rates.

•       Patient Engagement and Adherence: Engaging patients in

home exercise programs and RTM protocols—MIPS patient engagement improvement activities reward practices for measurable adherence improvement.

•       Caregiver Training (New 2025 CPT Codes): Documenting

caregiver training services using five newly approved CPT codes (CMS Final Rule 2025) that can be billed without the patient present—creating new revenue streams aligned with VBC care coordination goals.

Technology's Role in VBC Compliance

Value-based care is, at its core, a data problem. MIPS requires the systematic collection of quality measure data across every eligible patient encounter. MVPs demand documentation aligned to specific clinical pathways. PDPM requires precision in functional assessment coding. None of this is achievable at scale without the right technology infrastructure.

The right practice management EMR for a VBC-ready PT, OT, or SLP practice should deliver:

•       Automated outcome measure capture integrated into the clinical workflow—not as an add-on after documentation is complete

•       MIPS quality measure tracking with real-time score visibility, so practices know their performance status before the submission deadline

•       MIPS Value Pathway (MVP) reporting support for M1370, including the 2025-expanded MSK outcome measures

•       RTM workflow tools aligned with the new 2026lower-threshold CPT codes for remote therapeutic monitoring

•       Billing automation that reduces claim denials and  ensures KX modifier accuracy for Medicare therapy thresholds

•       Caregiver training, CPT code documentation support, and capturing the new 2025 revenue opportunity within the standard clinical record

Spry is purpose-built for PT, OT, and SLP practices navigating the VBC transition. From AI-assisted clinical documentation that reduces per-note time by up to 80%, to automated MIPS tracking and denial reduction workflows, Spry consolidates the technology requirements of VBC compliance into a single practice management platform.

VBC Implementation Roadmap: Where to Start

Transitioning from a purely FFS mindset to a VBC-ready practice is a process, not an event. The following roadmap is designed for outpatient PT practices beginning or accelerating their VBC journey. SNF-based teams should layer PDPM compliance steps alongside these milestones.

Phase 1 — Assess (Days 1–30)

1.    Determine MIPS eligibility at qpp.cms.gov using your TIN and individual NPI.

2.    Pull your most recent MIPS feedback report to identify performance gaps by category.

3.    Audit current outcome measure documentation—are validated tools being administered and recorded consistently?

Phase 2 — Build (Days 31–60)

5.    Select MIPS quality measures aligned to the PT/OT specialty set; register for M1370 MVP if applicable.

6.    Establish standardized outcome measure administration protocols across all clinicians.

7.    Implement RTM workflows and evaluate the new 2026lower-threshold RTM CPT codes.

Phase 3 — Optimize (Days 61–90+)

9.    Monitor MIPS scores quarterly using your EMR dash board the or QCDR reporting tools.

10.  Model the financial impact of current MIPS trajectory—project the 2027 payment adjustment using current scores.

11.  Evaluate APM participation feasibility if Medicare volume is high.

7. VBC Readiness Checklist for PT/OT/SLP Practices

Use this checklist to rapidly assess your practice's preparedness across the core domains of value-based care compliance. Items marked HIGH priority have direct 2025–2026 payment implications.