Your practice could receive 50% less for certain same-day E/M visits and procedures in 2027 under a significant Medicare payment change proposed by the Centers for Medicare & Medicaid Services (CMS).
The proposal targets encounters in which your physician or another physician in the same practice provides a separately identifiable office/outpatient evaluation and management (E/M) service on the same day as a procedure with a 0-, 10- or 90-day global period.
For practices that frequently use Modifier 25, the financial impact could add up quickly. And the proposed reduction comes at a time when many practices are already struggling with rising operating costs and continued pressure on Medicare reimbursement.
How the Proposed Modifier 25 Payment Cut Would Work
Under the CY 2027 Medicare Physician Fee Schedule proposed rule, CMS would change how it pays when a separately identifiable office/outpatient E/M visit is performed on the same day as a procedure with a 0-, 10- or 90-day global period.
CMS proposes paying the highest-valued service at 100% of the applicable amount and reducing payment for the other same-day E/M or surgical procedure service or services to 50%.
For example, if the procedure is the higher-valued service, Medicare would pay 100% for the procedure and 50% for the separately identifiable E/M service. If the E/M service is more expensive, the E/M would be paid at 100% and the lower-valued procedure would be subject to the 50% reduction.
CMS says the proposed policy is intended to account for efficiencies when a physician provides an E/M service and a procedure during the same encounter. The agency believes some resources may overlap when both services are provided together.
Why the Modifier 25 Proposal Could Have a Major Impact on Your Practice
The financial impact depends heavily on your specialty, patient volume and how frequently your providers perform procedures during separately identifiable E/M encounters.
Dermatology, ophthalmology, orthopedics and other procedure-heavy specialties could be particularly sensitive to a policy affecting same-day E/M and procedure payments. But any practice regularly reporting Modifier 25 should evaluate its own claims rather than assuming the change will have only a minor effect.
Start by identifying your most frequently billed E/M and procedure combinations. Determine how many of those encounters involve procedures with 0-, 10- or 90-day global periods and calculate what a 50% reduction to the lower-valued service could mean over a month, quarter and full year.
The results could help you identify your practice’s potential financial exposure before the 2027 Medicare Physician Fee Schedule is finalized.
Your Practice Could Face Additional Medicare Payment Pressure in 2027
The proposed Modifier 25 policy isn’t the only Medicare reimbursement change practices need to watch.
CMS has proposed a 2027 non-qualifying APM conversion factor of $32.84, which represents a projected 1.68% decrease from the current $33.40 conversion factor. The proposed qualifying APM conversion factor is $33.17, a projected 1.19% decrease from the current $33.57.
CMS explains that one reason for the year-over-year decline is the expiration of the one-year 2.5% Physician Fee Schedule increase that applies in 2026.
That means some practices could feel pressure from multiple directions in 2027: changes to the conversion factor plus a potential reduction for certain same-day E/M and procedure combinations.
Physician Groups Are Pushing Back Against the Proposed Cut
The proposal has already drawn opposition from physician and medical practice organizations.
In an August 27, 2026 letter, the Medical Group Management Association (MGMA) and other organizations urged CMS not to finalize the 50% payment reduction. The organizations challenged CMS’s reasoning that efficiencies from furnishing the services together justify a uniform payment reduction and raised concerns about the potential impact on independent physician practices.
The organizations instead asked CMS to address potential resource overlap on a code-specific basis rather than imposing a uniform reduction.
Whether those objections will result in CMS changing or withdrawing the proposal remains to be seen. For now, the important point for your practice is that this remains a proposed policy—not a finalized Medicare payment rule.
Don’t Let Lower Reimbursement Lead to Modifier 25 Coding Mistakes
A potential payment cut does not change the fundamental requirement for reporting Modifier 25.
The E/M service must still be significant and separately identifiable from the procedure or other service performed on the same day. Your documentation needs to support the distinct E/M work performed.
That’s particularly important because a lower payment amount doesn’t eliminate your compliance exposure. Incorrectly reporting Modifier 25 can still lead to denials, audits, overpayment demands and recoupments.
In other words, the answer to lower reimbursement isn’t to automatically stop reporting Modifier 25—or to automatically schedule every procedure for another day. Your practice needs to make coding, documentation and scheduling decisions based on the services actually provided, Medicare requirements and the needs of the patient.
Calculate the Potential Modifier 25 Revenue Impact Now
You don’t have to wait for the final rule to determine whether this proposal could significantly affect your practice.
Pull a sample of your recent Medicare claims involving Modifier 25 and identify your most common same-day E/M and procedure combinations. Then estimate what you would have received if the lower-valued service had been reduced by 50%.
For a more meaningful analysis, extend the calculation across 12 months of claims.
This can give your physicians and practice leadership an estimated dollar amount to consider rather than discussing the proposal only in percentages.
For example, determine:
- How many Modifier 25 claims you submit each month
- Which E/M and procedure combinations occur most frequently
- Which service would likely be subject to the 50% reduction
- Your current Medicare allowed amount for those services
- Your estimated monthly and annual revenue reduction if the policy is finalized
Your actual financial exposure may look very different from that of another practice—even within the same specialty.
Audit Your Modifier 25 Documentation Before 2027
This is also a good time to review whether your current Modifier 25 claims are adequately supported.
Pull a representative sample of recent claims and compare the E/M documentation with the procedure note. Your record should make it clear why the E/M service was significant and separately identifiable from the work associated with the procedure.
Pay particular attention to encounters where Modifier 25 appears to be routinely appended based on the combination of codes rather than the actual services documented.
Finding those problems internally gives your practice an opportunity to correct documentation, coding and workflow issues before they result in a denial or payer audit.
Review Your Scheduling Policies—But Don’t Make Changes Based on Payment Alone
A 50% payment reduction could naturally lead practices to question whether procedures and E/M services should continue to be performed on the same day.
Be careful about making blanket scheduling changes.
There may be legitimate clinical, patient-access and operational reasons to provide both services during one encounter. Requiring a patient to return on another day simply to avoid a payment reduction can create additional burdens and should not replace appropriate clinical and compliance considerations.
Instead, make sure your front desk, clinical staff, providers and billing team understand when same-day services are appropriate and how those services must be documented and reported.
Three Steps Your Practice Can Take Now
Although CMS has not finalized the proposed Modifier 25 payment reduction, you can begin preparing now.
- Audit your Modifier 25 claims. Review a sample of recent same-day claims and confirm that the record clearly supports a significant, separately identifiable E/M service independent of the procedure.
. - Model your potential revenue exposure. Identify your highest-volume same-day E/M and procedure combinations and calculate what the proposed 50% reduction could mean to your practice annually.
. - Train the people who affect the claim. Make sure your providers, coders, billers and front-desk staff understand how documentation, coding and scheduling decisions can affect both compliance and reimbursement.
CMS’s proposal is not final, so practices should continue monitoring the 2027 Physician Fee Schedule rulemaking before changing billing or scheduling policies.
Stay Ahead of Medicare Payment Changes Before They Cost Your PracticeModifier 25 is just one of the reimbursement, coding and compliance issues your team must keep up with. When Medicare, commercial payers and regulators change the rules, waiting until denials or lost revenue show up on your reports can be costly. Healthcare Training Leader’s Annual All-Access Pass gives your entire practice access to expert-led live and on-demand masterclasses covering Medicare reimbursement, coding, billing, compliance, credentialing, front-desk operations and other issues that directly affect your practice. Instead of buying training one topic at a time, you can give your team practical answers throughout the year whenever a new rule, payer policy or compliance problem arises. Give your team the expertise they need to know what to do—and help your practice stay compliant, avoid costly mistakes and protect the revenue you’ve earned. |