Modifier 25 Payment Reduction for 2027: What CMS Proposed and What It Costs Your Practice

What is the proposed modifier 25 payment reduction for 2027?

As of July 2026, the CMS CY 2027 Physician Fee Schedule proposed rule (CMS-1848-P) includes a provision that would cut Medicare payment by 50% on any E/M visit billed with modifier 25 on the same day as a procedure carrying a 0, 10, or 90 day global period. The highest-paid service on the claim would be reimbursed at 100%, while every other service that day would drop to half. If finalized, this change takes effect January 1, 2027.

• Who it affects: Any practice that bills a separately identifiable E/M visit on the same day as a procedure with a global period. Dermatology, podiatry, ophthalmology, orthopedics, OB/GYN, family medicine, and urgent care carry the heaviest modifier 25 volume.
• The deadline: The 60 day public comment period closes September 14, 2026, and the final rule is expected by November 2026.
• What to do now: Model the revenue impact on your top modifier 25 code pairs and submit a comment to CMS if the reduction threatens your practice.

What CMS Actually Proposed

On July 14, 2026, CMS published the CY 2027 Medicare Physician Fee Schedule proposed rule (CMS-1848-P). The 1,592 page rule includes dozens of policy changes, but one provision stands out for its direct hit to daily practice revenue: a proposed 50% payment reduction on same-day E/M visits billed alongside procedures with global periods.

Here is how it works. When a physician, or another physician in the same group practice, furnishes a separately identifiable office or outpatient E/M visit on the same day as a procedure that carries a 0, 10, or 90 day global period, Medicare would pay the most expensive service at 100% and reduce every other service on that claim to 50%. The modifier 25 workflow is the textbook scenario for this reduction, because modifier 25 is the flag that tells Medicare the E/M was a significant, separately identifiable service on the same procedure day.

CMS first attempted a narrower version of this cut in the CY 2019 proposed rule. At that time, the agency proposed reducing only the lesser 0 day global procedure by 50% when billed with a separate E/M visit. After significant pushback from specialty societies and commenters who argued the reduction was duplicative with existing RUC survey adjustments, CMS did not finalize the 2019 version. The 2027 proposal is broader. It applies across all global period lengths and reduces the lesser service regardless of whether it is the procedure or the E/M.

This is a proposed rule, not a final rule. The comment period closes September 14, 2026. CMS could narrow, delay, or withdraw the provision in the final rule expected this November.

Three 2027 Changes People Are Confusing

The CY 2027 proposed rule includes multiple payment changes dropping at once, and we are already seeing providers mix them up. Getting them confused leads to the wrong response, so it is worth separating them clearly.

• The conversion factor cut. The proposed CY 2027 conversion factor for qualifying APM participants is $33.17, down 1.19% from the 2026 rate of $33.57. For non-qualifying practitioners it is $32.84, a 1.68% drop from $33.40. This decrease is largely driven by the expiration of the temporary 2.5% conversion factor increase Congress provided for CY 2026 only. This affects every Medicare service, not just modifier 25 encounters.
• The G2211 modifier transition. CMS proposes converting the visit complexity add-on code G2211 from a standalone billing code to a modifier appended to the E/M base code. The new modifier would increase payment on the associated E/M visit by 16%, replacing the current flat-rate add-on. A separate modifier for ACO practitioners would increase the E/M by 32%. This is a structural change, not a cut, but it changes how the line item appears on the claim.
• The modifier 25 same-day reduction. This is the 50% reduction described above. It is independent of the conversion factor change and independent of the G2211 transition. Even if Congress restores the 2.5% conversion factor bump, the modifier 25 reduction would still apply if finalized.

Each of these three provisions has a different impact, a different comment deadline dynamic, and a different mitigation path. Treating them as one story leads to the wrong action plan.

Which specialties does the modifier 25 payment reduction affect?

The proposed 50% reduction applies to every specialty that bills a separately identifiable E/M visit on the same day as a procedure with a global period. In practice, some specialties carry far more modifier 25 volume than others, and those specialties absorb a disproportionate share of the revenue loss.

Dermatology practices routinely bill an E/M visit alongside a same-day destruction, biopsy, or excision. A typical dermatologist may append modifier 25 on a majority of encounter days. Podiatry follows a similar pattern with nail procedures, wound debridements, and injections paired with E/M visits. Ophthalmology, orthopedics, and OB/GYN each have high-frequency same-day procedure and E/M combinations. Urgent care and family medicine practices that perform minor procedures in the office also bill modifier 25 regularly, though at lower per-provider volume than procedural specialties.

One question we hear constantly from practice managers is whether their payer mix insulates them from a Medicare-only change. It does not, fully. Commercial payers watch Medicare policy signals closely, and when CMS finalizes a payment methodology change, commercial contracts often follow within 12 to 24 months. The practices we connect with billing partners routinely report that a Medicare billing rule change becomes a commercial payer audit trigger within a year. If you are already seeing CO-45 adjustments on modifier 25 claims, this proposal should accelerate your review timeline.

Why CMS Revisited Its 2019 Proposal

CMS has maintained since 2019 that there are efficiencies when the same practitioner provides an E/M service in conjunction with a procedure that carries a global period. The agency’s position is that the current payment methodology likely duplicates payment for resources that overlap between the two services, specifically the intake, history review, and shared clinical setting that occur once but are billed twice.

The 2019 proposal was narrower and drew enough opposition to stall. What changed between then and now is the broader policy direction of the CY 2027 rule, which is built around payment accuracy, site-neutral payment expansion, and reducing what CMS calls overvaluation in the fee schedule. The modifier 25 provision fits that frame. CMS also references data showing that post-operative visits during global periods are not occurring at the frequency the global payment assumes, reinforcing the agency’s view that same-day overlap is a valuation problem worth correcting.

For providers, the signal is clear: CMS views same-day E/M plus procedure billing as an area of persistent overvaluation and intends to act on it. Even if this specific provision is modified in the final rule, the policy direction is unlikely to reverse.

How much would a practice lose per encounter?

The exact dollar loss depends on the specific E/M level, the procedure code, and the practice’s locality adjustment. But the mechanics are straightforward: Medicare identifies the most expensive line item on the same-day claim and pays it at 100%. Every other line item drops to 50%. In most modifier 25 scenarios, the E/M visit is the lesser service, so the E/M reimbursement gets halved.

Consider a common dermatology encounter: a Level 4 office visit (99214) billed with modifier 25 alongside a destruction of premalignant lesions (17000). Under current rules, both services are paid at their full fee schedule amount. Under the proposal, the higher-paid service is reimbursed in full and the lower-paid service is cut to 50%. For a non-facility 99214 with a national average payment near $128, that is roughly $64 lost on a single encounter. A dermatologist seeing 20 of these encounters per week loses approximately $1,280 weekly, or over $66,000 annually, from this one provision alone.

The table below compares the current and proposed payment structure for common modifier 25 scenarios.

Note: Dollar estimates above are approximate and based on 2026 national average non-facility rates. Actual impact varies by locality, GPCI, and payer. These figures apply only to the Medicare fee schedule; commercial payer impact would depend on individual contract terms.

Practices that bill on a percentage-of-collections model with their billing company feel this twice. When the Medicare allowed amount drops, practice revenue drops, and the billing fee calculated as a percentage of collections drops with it. Tim Daniels, Director of Strategic Accounts at Billing Service Quotes, notes that this is one of the first questions to ask a prospective billing partner: whether they have modeled the CMS-1848-P impact against your specialty’s modifier 25 volume. If you are already evaluating how much it costs to outsource medical billing, factor the proposed fee schedule reduction into your projections.

What should practices do before the September 14 deadline?

Practices that bill modifier 25 regularly should take six steps between now and the close of the comment period to protect their revenue and influence the final rule.

1. Pull a modifier 25 volume report from your practice management system. Identify every CPT pair where modifier 25 appeared on a Medicare claim in the last 12 months and calculate the total reimbursement on the lesser line item. That number is your maximum annual exposure.
2. Rank your exposure by code pair. The code combinations you bill most frequently are where the cumulative loss concentrates. Focus your modeling there first.
3. Run the 50% reduction against your top five code pairs. Multiply the lesser line item’s allowed amount by 0.50, then multiply by annual volume. This gives you a defensible dollar figure for the revenue at risk.
4. Submit a public comment to CMS before September 14, 2026. Comments can be submitted at regulations.gov under docket CMS-1848-P. CMS is required to read and respond to every substantive comment. Specialty societies are mobilizing, but individual practice comments carry weight, especially when they include real volume data.
5. Review your documentation standards for modifier 25. The proposal does not change the documentation requirements, but a separate rulemaking or MAC audit could follow. Practices that bill modifier 25 at high volume are already audit targets, and this rule signals that CMS is watching the space. Make sure every modifier 25 claim is supported by documentation showing the E/M was a significant, separately identifiable service.
6. Ask your billing partner whether they have modeled this change for your specialty. If they have not, or if you do not currently work with a billing company, this is the right time to compare partners who understand your modifier 25 exposure. If your current billing company has not flagged this proposed rule for you, that tells you something about their regulatory awareness. Practices that need a billing partner equipped for E/M coding at the level CPT 99284 requires should be asking that question now, before January.

Common Misreadings of This Proposal

The most common misreading we see among providers reaching out this month is the assumption that the 50% cut applies to the procedure, not the E/M. In most modifier 25 scenarios, the E/M visit is the lower-paid service, so the E/M is what gets halved. The procedure typically remains at 100%. Practices that assume the procedure is at risk are modeling the wrong line item.

A second misreading is that this proposal eliminates modifier 25 or makes it non-billable. It does not. Modifier 25 still exists, the E/M is still separately reportable, and the documentation requirements are unchanged. What changes is the reimbursement on the lesser service, not the ability to bill it.

A third mistake is treating this as final. It is a proposed rule. CMS pulled back the 2019 version after public comment. Specialty societies including the AMA, AAPC, and multiple surgical specialty organizations have already signaled opposition. The final rule could narrow the scope, phase in the reduction over multiple years, or withdraw the provision entirely. Providers who restructure their scheduling or stop billing modifier 25 preemptively are reacting to a rule that does not yet exist.

A fourth misreading is assuming the reduction only affects Medicare patients. While the rule itself applies to Medicare fee-for-service, commercial payers routinely benchmark their own payment policies against CMS methodology. A finalized Medicare reduction in this area creates a blueprint that commercial plans can adopt, and in our experience matching providers with billing partners, commercial payer audits on modifier 25 usage tend to increase within a year of a Medicare policy shift.

Should you handle this in house or with a billing partner?

For practices with a dedicated compliance officer and a billing team that tracks CMS rulemaking in real time, managing this in house is viable. The modeling work described above is arithmetic, not rocket science, and the comment submission process is straightforward.

The question is whether your current setup actually does that work. In our experience matching providers with billing partners across 60 specialties, the practices that get blindsided by fee schedule changes are almost always the ones whose billing is handled by a small in-house team that is focused on daily claims volume and does not have bandwidth for regulatory monitoring. They find out about a payment cut when the first remittance advice comes back short, not when the proposed rule publishes.

A billing partner with specialty-specific expertise should be doing three things right now: modeling the modifier 25 reduction against your code mix, advising you on whether to submit a comment, and preparing your claim workflows for the January 1, 2027 effective date in case the provision is finalized. If your current partner is not doing those three things, the gap is not just about this one rule. It is about whether they are positioned to catch the next one.

Billing Service Quotes connects providers with billing companies that have verified experience in their specialty. The matching process takes about 30 minutes, rates start as low as 6% of collections, and the service is 100% free to providers with no hidden fees at any stage.

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