CMS finalized the CY2026 Physician Fee Schedule on October 31, 2025, setting two conversion factors for the first time in Medicare's history: $33.5675 for qualifying APM participants and $33.4009 for everyone else, increases of 3.77% and 3.26% from 2025's $32.3465. Most outpatient PT, OT, SLP, and chiropractic clinics fall into the non‑QP tier. After CMS's efficiency adjustment and facility practice expense changes are factored in, APTA estimates the real net impact for physical therapy lands closer to 1.75%, not the full 3.26% headline number. Layer in a GPCI update that adjusts every locality's payment differently, and the honest answer to "how much more will I get paid in 2026" is: it depends entirely on your codes, your setting, and your zip code, and almost no clinic is calculating this correctly by hand.

What Did CMS Actually Finalize for the 2026 Conversion Factor?

For five straight years, the Medicare conversion factor went one direction: down. From $36.09 in 2020 to $32.3465 by 2025, physician and therapy payment per RVU dropped more than 10% while practice costs kept climbing. The 2026 final rule is the first reversal since that slide began.

Three things drove the increase. First, the One Big Beautiful Bill Act, signed by Congress in July 2025, wrote a temporary 2.5% payment bump directly into the 2026 conversion factor. Second, statutory MACRA updates added 0.75% for qualifying APM participants and 0.25% for everyone else. Third, a budget neutrality adjustment of 0.49% pushed the number up further because CMS's own efficiency adjustment (more on that below) was projected to reduce total payments enough to require an offsetting bump elsewhere.

Here's the full trend, using CMS's own final figures rather than the proposed rule numbers that circulated through most of 2025:

Sources: American Medical Association Conversion Factor History; CMS CY2026 Medicare Physician Fee Schedule Final Rule (CMS‑1832‑F); Medicare Payment Advisory Commission.

The takeaway most clinics miss: this is the first year the conversion factor alone doesn't tell you your actual payment change. That's the next question.

Why Does My Clinic Have Two Different Conversion Factors to Choose Between?

Beginning in 2026, Medicare law requires CMS to set separate conversion factors for qualifying Advanced Alternative Payment Model participants and everyone else. This isn't a rounding difference. It's the financial mechanism CMS has been building toward for a decade, and it's designed to reward practices that take on quality and cost accountability through models like Medicare Shared Savings Program ACOs.

Qualification generally requires either 8% of your Medicare Part B payments or 25% of your Medicare patients running through an Advanced APM during the relevant performance year. The overwhelming majority of outpatient physical therapy, occupational therapy, speech language pathology, and chiropractic practices do not meet this threshold on their own. Independent rehab therapy clinics almost always fall into the non‑QP tier, which means the $33.40 conversion factor, not the $33.57 rate that headlines tend to lead with, is the number that actually applies to your claims.

If your practice participates in a larger accountable care arrangement through a hospital system or IPA, it's worth confirming your actual QP status rather than assuming either way. The 0.37% gap compounds across every claim you submit for the year.

What Do GPCIs Do, and What Changed for 2026?

The conversion factor sets a national baseline. Geographic Practice Cost Indices adjust that baseline for where you actually practice, because the cost of running a clinic in Manhattan is not the cost of running one in rural Arkansas. GPCIs split into three components that each adjust a different part of the payment formula: work, practice expense, and malpractice.

CMS implements a full GPCI data refresh roughly every three years, and 2026 is one of those refresh years, with the next major update not expected until CY2029. The refreshed practice expense data is being phased in over two years rather than applied all at once, which softens the swing for localities seeing a big directional change either way.

Sources: American Medical Association Geographic Practice Cost Indices summary; American Academy of Sleep Medicine legislative update; CMS Final Report for the CY2026 Update of GPCIs and MP RVUs.

The work GPCI floor matters more than most clinics realize. Without it, dozens of Medicare localities would see work payments drop below the national average simply because of where they're located, regardless of the actual skill or effort involved in the care delivered. Congress let that floor briefly lapse at the end of January 2026 during a government shutdown, then restored and extended it through 2027 as part of the deal that ended the shutdown. If your clinic is in a lower cost locality, that extension is real money, and it's exactly the kind of legislative moving target that a static, once a year fee schedule update inside your EMR will not catch.

How Do the Efficiency Adjustment and Facility Changes Affect Rehab Therapy Codes Specifically?

The single most consequential policy in the 2026 rule for PT, OT, SLP, and chiropractic billing is the efficiency adjustment: a 2.5% cut to work RVUs for non time based services, built on CMS's argument that physician time estimates for many procedures have grown outdated as care has become more efficient. This adjustment now recurs every three years, tied to the Medicare Economic Index.

Time based evaluation and management codes, telehealth list codes, behavioral health codes, and select maternity codes are exempt. That distinction is why your actual net change depends heavily on your billing mix, not just the headline conversion factor increase.

Rehab therapy associations pushed back hard during the comment period, and it worked. The final rule removed several high volume PT and OT codes from the efficiency adjustment list entirely: 97032, 97033, 97034, 97035, 97036, 97113, 97124, 97140, and 97533. Two of those, 97140 and 97113, actually flipped from a negative year over year change to a positive one once the removal took effect.

The second major shift is what CMS did to facility based practice expense. Starting in 2026, facility PE RVUs are allocated at half the rate of non facility PE RVUs, reflecting CMS's view that fewer physicians and clinicians maintain separate office overhead when working out of hospital based settings. For rehab therapy, this means services delivered in a private practice office setting are treated more favorably in the RVU calculation than the identical service delivered in a hospital outpatient department.

Net all of it together, and the American Physical Therapy Association's own analysis lands on an average net reimbursement increase of approximately 1.75% for physical therapy, well below the 3.26% headline conversion factor increase and a meaningful reversal from CMS's original proposed estimate of a 1% cut before advocacy changed the final numbers. Your actual number could be higher or lower depending on how much of your billing sits in exempted codes versus adjusted ones.

The KX modifier threshold also moved for 2026, rising to $2,480 for combined PT and SLP services and $2,480 for OT, with the targeted medical review threshold holding at $3,000 through 2028. That's a compliance detail worth tracking closely, and we've covered it in full in a dedicated guide.

How Do You Actually Calculate What This Means for Your Practice?

The underlying Medicare payment formula hasn't changed:

Payment = [(Work RVU × Work GPCI) + (Practice Expense RVU × PE GPCI) + (Malpractice RVU × MP GPCI)] × Conversion Factor

Illustrative example only: a non‑QP clinic in a locality with a work GPCI of 1.05, a PE GPCI of 1.10, and an MP GPCI of 0.95, billing a code with 1.0 work RVU, 1.5 PE RVU, and 0.1 malpractice RVU, would calculate roughly [(1.0 × 1.05) + (1.5 × 1.10) + (0.1 × 0.95)] × $33.40, or about $91.60 per unit before any efficiency adjustment is applied to the work component. Change the locality, the QP status, or whether the code sits on the efficiency adjustment list, and that number moves again. Run that calculation across a full year of claims, across every code and every locality your therapists bill from, and you can see why practices doing this manually in a spreadsheet are almost always working from stale or approximate numbers by March.

Why Manual Calculation Is a Losing Strategy in 2026: The SPRY Edge

Here's what most billing software and most spreadsheets still get wrong about 2026: they update the conversion factor once, at the start of the year, and stop. They don't distinguish QP from non‑QP status per provider. They don't apply the efficiency adjustment only to the codes it actually touches. They don't reflect a mid‑year legislative change like the GPCI floor extension that Congress passed as part of ending a government shutdown. A platform that can't do all four of those things in real time isn't giving you an estimate. It's giving you a guess with a dollar sign in front of it.

SPRY's revenue cycle engine applies conversion factor, GPCI, and RVU logic at the claim level, not the calendar level, which means every claim reflects current CMS rules automatically rather than whatever rate was hardcoded in January. Combined with AI powered claim scrubbing that catches coding errors before submission and an eligibility verification layer running at 97% accuracy, SPRY clinics are running a 95%+ clean claim rate against an industry average closer to 85 to 92%, with claims closing in 12 to 23 days against a broader industry range of 8 to 28 days. Automated claim scrubbing built on SOAP note data has reduced coding errors by more than 70% for SPRY clinics, and the AI Scribe layer cuts documentation time by roughly 75%, which matters directly here because clean, complete documentation is what protects a claim once the KX threshold and medical review threshold both come into play under the same fee schedule.

None of that requires your billing team to track a legislative floor extension buried in a shutdown resolution. That's the point.

What Real Clinics Are Seeing

Sam Shah, DPT and owner of Movement Physical Therapy, put it directly: switching to SPRY helped grow revenue by nearly 20% while cutting documentation time by up to 20%, describing it simply as a more efficient system, clinically and financially. Bryan Davis, DPT and co owner of Excel Therapy, saw a $50,000 revenue lift in year one, with real time therapist level dashboards giving his team visibility into claims and performance they didn't have before, allowing them to spot problems early rather than after a denial.

That kind of visibility is exactly what a year like 2026 rewards. A conversion factor that moves in two directions depending on your APM status, an efficiency adjustment that only touches some codes, and a GPCI floor that Congress nearly let lapse mid‑year are not problems a once a year fee schedule update solves.

What Your Clinic Should Do Now

Confirm your APM status rather than assuming you're non‑QP by default, especially if you bill under a larger health system or ACO arrangement. Pull your current billing mix and check how many of your top volume codes sit on or off the 2026 efficiency adjustment list, since that single distinction drives most of the variance between the 3.26% headline number and your actual net change. Verify your locality's current GPCI values directly against the CMS Physician Fee Schedule Look Up Tool rather than a spreadsheet built earlier in the year, since the work GPCI floor extension changed the baseline for many localities after January 2026 began. And evaluate whether your current billing platform is applying these rules per claim or per calendar year, because that distinction is worth real revenue over the course of 2026.

Ready to see what your practice is actually leaving on the table under the 2026 fee schedule? Book a demo with SPRY and we'll walk through your billing data and model the real impact, not the headline number.

Frequently Asked Questions

Q: Is the 2026 conversion factor increase permanent?

A: Partly. The MACRA statutory updates and the efficiency adjustment structure are ongoing. The 2.5% One Big Beautiful Bill Act boost is a one year provision for 2026 only, which means practices should treat this year's full increase as temporary and plan for a possible reduction in 2027 absent further congressional action.

Q: Does the efficiency adjustment apply to all my PT and OT codes?

A: No. It excludes time based codes, telehealth list codes, and, following advocacy from PT and OT groups, nine specific codes including 97140, 97113, and 97124 that were removed from the list entirely in the final rule.

Q: How do I know if my locality's GPCI values changed for 2026?

A: Use the CMS Physician Fee Schedule Look Up Tool directly rather than relying on a static export, since the work GPCI floor was extended mid‑cycle after briefly lapsing at the end of January 2026.

Q: Will commercial payers follow Medicare's 2026 changes?

A: Many commercial contracts benchmark off Medicare rates, but adoption timing and proportion vary significantly by payer, and there is no guarantee commercial rates move in step with the Medicare update.

Q: What's the actual net impact for my physical therapy practice?

A: APTA's analysis puts the average net impact at approximately 1.75% once RVU and efficiency adjustment changes are factored in, well below the 3.26% conversion factor headline, though your specific mix of codes and setting will move that number up or down.

References

1. Centers for Medicare & Medicaid Services. Calendar Year (CY) 2026 Medicare Physician Fee Schedule Final Rule (CMS‑1832‑F). October 31, 2025.
2. American Physical Therapy Association. CMS Finalizes Fee Schedule Pay Bump for the First Time in 5 Years. November 18, 2025.
3. Alliance for Physical Therapy Quality and Innovation. CMS Releases Medicare Physician Fee Schedule Final Rule for CY 2026. November 2025.
4. American Medical Association. History of Medicare Conversion Factors.
5. American Medical Association. Geographic Practice Cost Indices (GPCIs) summary.
6. American Academy of Sleep Medicine. Congress Ends Partial Government Shutdown and Extends the Work GPCI Floor Through 2027. February 2026.
7. American Hospital Association. CMS Issues CY 2026 Physician Fee Schedule Final Rule. October 31, 2025.
8. American Speech Language Hearing Association. Medicare Finalizes 2026 Medicare Fee Schedule. November 2025.

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