Your Reimbursement Model Is Changing — Whether You're Ready or Not

Here's a number that should get your attention: CMS's 2026 Medicare Physician Fee Schedule offers physical therapists a 3.3% conversion factor increase on paper — but the net impact for most PT practices is actually -1%, once RVU adjustments are factored in.

So the raise isn't really a raise.

That gap exists, in part, because of how the two dominant payment models in U.S. healthcare are diverging. Fee-for-service (FFS) and value-based care (VBC) aren't just policy buzzwords — they represent two fundamentally different philosophies about how clinics get paid, how care gets delivered, and where the financial risk sits.

If you run a PT, OT, or SLP practice and haven't seriously thought about this yet, 2026 is the year to start. Not because FFS is dying tomorrow — it isn't — but because the gap between the two models is widening fast, and the clinics that understand both will be the ones negotiating from strength.

This guide gives you the plain-English breakdown: what each model actually means, a side-by-side comparison, real clinic scenarios, common myths busted, and what every clinic needs regardless of which model they're operating in.

Fee-for-Service vs. Value-Based Care in Healthcare: Let's Break It Down Simply

What Is Fee-for-Service (FFS)?

Fee-for-service is the traditional model. Your clinic delivers a service, bills a CPT code, and gets reimbursed a set rate per unit. Volume drives revenue. The more visits you see, the more you bill.

It's still the dominant model for Medicare Part B PT/OT/SLP billing in 2026. The CY 2026 conversion factor for non-APM participants is $33.40 — a 3.26% increase from 2025, but offset by efficiency adjustments that reduce the value of many commonly used therapy codes.

Think of FFS like a restaurant bill — you order each item, you pay for each item. Simple. Predictable. But expensive at scale, and increasingly under scrutiny.

What Is Value-Based Care (VBC)?

Value-based care flips the model. Instead of paying per service, payers reward clinics for patient outcomes, efficiency, and quality metrics. The better the result per episode — and the less unnecessary utilization — the more the clinic earns.

CMS is actively pushing this direction. In 2026, qualifying APM (Alternative Payment Model) participants receive a higher conversion factor of $33.57 — versus $33.40 for non-APM providers. That $0.17 gap sounds small, but it represents directional policy intent that will only widen over time. (CMS-1832-F; Consumer Financial Services Law Monitor, November 2025)

Think of VBC like a performance bonus — you get paid more for delivering better results, more efficiently.

Where Does Rehab Fit Right Now?

Honestly? Somewhere in the middle — and slightly uncomfortable about it.

The APTA's analysis of the 2026 proposed rule is direct: the majority of physical therapists providing Medicare Part B services do not currently qualify as APM participants. (APTA, July 2025) That means most PT/OT/SLP clinics are still billing FFS — but operating in an environment where payers, especially commercial and Medicare Advantage plans, are quietly embedding outcome requirements into contracts.

That tension is exactly why this comparison matters.

Value-Based Care vs. Fee-for-Service

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5 Myths About Value-Based Care in Rehab That Are Costing Clinics Money

Before going further, let's bust some of the misconceptions that keep rehab clinic owners from planning strategically.

Myth 1: "Value-Based Care Is Just for Hospitals and Physicians. "False. CMS's 2026 dual conversion factor structure applies to all eligible providers. More importantly, Medicare Advantage plans — which now cover more than 54% of all Medicare beneficiaries (KFF, 2024) — routinely embed outcome requirements into outpatient PT and OT contracts. If you're billing Medicare Advantage, you're already in VBC territory, whether you call it that or not.

Myth 2: "Fee-for-Service Is Going Away Soon. "Not even close. The majority of PT/OT/SLP Medicare Part B billing remains FFS-based in 2026. Congress has repeatedly intervened to soften CMS payment cuts — the Consolidated Appropriations Act of 2024 added a 2.93% update to offset earlier reductions. FFS has a deep legislative infrastructure. It will coexist with VBC for years. The incentive gap is widening — but the cliff edge doesn't exist.

Myth 3: "Value-Based Care Means Seeing Fewer Patients. "VBC rewards efficient care — fewer unnecessary visits, better outcomes per episode. A clinic that discharges a patient at functional goal in 8 visits with documented outcome scores is rewarded under VBC. Clinics that drag out care without documented progression get penalized. VBC doesn't shrink your practice; poor clinical tracking does.

Myth 4: "Small PT Clinics Can't Participate in VBC Models. "MIPS (Merit-Based Incentive Payment System) applies to many solo and small group practices. The 2026 MIPS Value Pathway (MVP) reporting — based on 2025 performance year data — was specifically designed to reduce reporting burden while maintaining quality incentives. (CMS CY 2025 Final Rule) Small clinics can and should engage with MIPS as an entry point.

Myth 5: "Better Outcomes Automatically Mean Better Pay in VBC."This is the most dangerous myth. Outcomes must be measured, recorded, and reported using standardized tools — Patient-Reported Outcome Measures (PROMs), functional assessments, and episode tracking. Great clinical care without data capture is invisible to payers. In VBC, if it isn't documented, it didn't happen.

Value-Based Care for Clinics vs. FFS: What It Looks Like in the Real World

Abstract models are easier to understand through real scenarios. Here are three composite clinic archetypes — built on actual CMS data and 2026 regulatory patterns.

Clinic A — The High-Volume Suburban PT Practice (FFS)

This clinic sees 40+ patients per day, bills primarily Medicare Part B FFS, and has operated profitably for years on visit volume. In 2026, they're facing a net -1% Medicare reimbursement impact from RVU adjustments, rising KX modifier documentation requirements, and projected audit exposure of 12–15% annually. (CMS contractor data; APTA 2025)

Their pain point isn't clinical — it's administrative. One under-documented KX modifier, one missed medical necessity note, and a claim gets denied or flagged. Revenue is volume-dependent, with no payer relationship leverage.

What they need: Airtight documentation workflows, billing accuracy, and audit readiness.

Clinic B — The Multi-Location Rehab Group (Transitioning to VBC)

This group has Medicare FFS and commercial payer contracts that are increasingly outcome-based. They're investing in Remote Therapeutic Monitoring (RTM) — three new RTM CPT codes (98XX4, 98XX5, 98XX7) proposed in the 2026 rule create outcome data touchpoints between visits. (Net Health; CMS 2026 Proposed Rule)

They're building the data infrastructure to eventually qualify as APM participants — which would move them to the $33.57 conversion factor and stronger payer negotiation leverage. They're not there yet, but they're building toward it intentionally.

What they need: Outcomes analytics, RTM integration, episode-level reporting.

Clinic C — The SLP Private Practice (Under Pressure)

SLP practices face a unique challenge in 2026. CMS's efficiency adjustment — a 2.5% reduction applied to work RVUs — hits SLP harder than PT/OT because SLP relies more heavily on non-time-based codes with less flexibility to buffer through volume. (Net Health, August 2025)

For SLP, diversifying into outcome-based commercial contracts isn't optional anymore — it's a hedge against continued Medicare rate erosion.

What they need: Commercial payer strategy, outcome measurement, and revenue diversification.

Value-Based Care in Rehab: Who Benefits in Each Model?

Not every clinic is ready for VBC — and that's okay. The goal is clarity about which model fits your current situation and where you're heading.

2026 Clinic Fit Matrix

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The honest middle ground? Most PT/OT/SLP clinics in 2026 are operating FFS while quietly needing VBC infrastructure. They're billing per visit while payers are increasingly asking: what did the patient actually gain?

Spry's AI-powered documentation and analytics give PT, OT, and SLP clinics the clinical data infrastructure that works across both payment worlds

Why Fee-for-Service vs. Value-Based Care Healthcare Isn't a Binary Choice in 2026

Here's what the loud VBC advocates don't tell you: the transition is gradual, uneven, and far from complete.

The 2026 dual conversion factor is an incentive, not a mandate. APTA is explicit — most physical therapists don't qualify for APM participation today. (APTA, July 2025) Congressional intervention has repeatedly cushioned CMS rate shifts. The legislative and payer infrastructure that sustains FFS runs deep.

The realistic timeline? Industry analysts and CMS trajectory data suggest a 10–15 year gradual transition — not a cliff edge. Clinics that panic-pivot to VBC without the infrastructure to support it often end up worse off. And clinics that dismiss VBC entirely are sleepwalking into a payer environment that's already changed around them.

The smarter framing: FFS and VBC will coexist. Your job in 2026 is to operate FFS compliantly and build the data foundation that makes VBC participation possible when your payer mix demands it.

Whether You're in FFS or Value-Based Care, Every Rehab Clinic Needs These Two Things

This is where the practical rubber meets the road — and where the payment model debate becomes less important than clinic execution.

Regardless of whether you're billing pure FFS today or transitioning toward value-based contracts, two operational fundamentals determine your financial health in 2026.

1. Documentation That Protects Revenue

Under FFS: Medical necessity documentation, KX modifier compliance, audit-ready progress notes. With audit probability projected at 12–15% for most practices in 2026, documentation isn't just good practice — it's financial protection. (CMS contractor data)

Under VBC: Standardized PROMs, functional outcome benchmarks at evaluation and discharge, episode-level tracking for payer reporting.

Both demand the same thing: fast, accurate, compliant clinical documentation that captures what actually happened in the visit.