How Coding Accuracy Affects Reimbursement Under the New Rules
How Autonomous Medical Coding Helps Health Systems Navigate Regulatory Change
In 2026, the Centers for Medicare & Medicaid Services (CMS) reduced work relative value units (RVUs) by 2.5% across nearly 7,000 non-time-based physician services, a change that touches 91% of the services physicians provide (1). That is one adjustment, in one rule.
It is also one of several reimbursement shifts you need to account for heading into 2027. Between the 2026 Medicare Physician Fee Schedule, a new mandatory bundled-payment model, expanding site-neutral payment rules, the phase-out of the inpatient-only list, and a proposed acceleration of 340B repayments, the pipeline is crowded. Here is what is changing and where it lands on your revenue.
Medicare pays hospitals through two separate systems: the Inpatient Prospective Payment System (IPPS) for inpatient care, and the Outpatient Prospective Payment System (OPPS) for outpatient care such as emergency department (ED) visits and same-day procedures. CMS updates payment under both every year.
For Federal Fiscal Year (FFY) 2026, CMS finalized a 2.6% increase to IPPS operating payment rates for hospitals that meet quality reporting and meaningful electronic health record (EHR) requirements, reflecting a 3.3% market basket increase offset by a 0.7 percentage point productivity adjustment (2). Two numbers get quoted for this rule, and they are not the same thing. The 2.6% is the operating rate update. The standardized base payment amount rises 1.94%, from $6,624.39 to $6,752.61 per discharge (3). Hospitals that fall short on quality reporting or EHR requirements receive a reduced update, and hospitals failing both face a net decrease of up to 0.7% (4).
On the OPPS side, CMS proposed accelerating its 340B repayment schedule in 2026, then withdrew it after significant industry pushback (5). The idea came back in the CY 2027 proposed rule, where CMS has proposed a compressed 340B recoupment schedule (6, 7). Withdrawn is not the same as gone.
The Medicare Physician Fee Schedule (MPFS) sets what Medicare pays physicians for each service. Payment is based on a conversion factor, a dollar amount Medicare multiplies by a complexity score assigned to each procedure or visit type.
For 2026, CMS finalized two: $33.57 for clinicians in qualifying alternative payment models, a 3.77% increase over 2025, and $33.40 for everyone else, a 3.26% increase (8). Part of that increase is a temporary 2.5% adjustment Congress passed under the One Big Beautiful Bill Act (1). Build your 2027 model without it.
CMS also finalized a 2.5% reduction to work RVUs and the corresponding intra-service physician time for nearly 7,000 non-time-based services, on the reasoning that these services have become more efficient to deliver (1). Time-based codes are exempt, including evaluation and management (E/M) services, care management, behavioral health, telehealth-list services, and certain maternity care (8). Your specialty mix determines how much of this you absorb.
Separately, CMS reduced practice expense RVUs for services performed in a facility such as a hospital or ambulatory surgical center. Payment for facility-based services drops 7% overall (1). Physicians who work primarily in hospitals or surgery centers take both changes at once, so if your physicians are hospital-based, the headline conversion factor increase will not show up as higher net payment. The increase is real. So is the offset.
The Transforming Episode Accountability Model (TEAM) is a mandatory Medicare payment model that bundles payment for surgery and recovery into a single episode. CMS designed it to reduce fragmented and duplicative care and cut avoidable readmissions and ED visits by holding hospitals accountable for what happens after surgery, not just the procedure itself (9).
TEAM covers five high-cost procedure categories (4):
Selected hospitals take financial responsibility for the full episode, from the surgery date through 30 days after discharge, for patients with Original Medicare (9). So what does that mean for coding? Every encounter inside that window feeds the same episode target price. A readmission coded as unrelated, or a post-op visit that never gets attributed back to the episode, does not just affect one claim. It moves the number the entire episode is measured against.
Site-neutral payment requires Medicare to pay the same amount for a service regardless of where it is performed. Medicare has historically paid more for a visit or procedure delivered in a hospital-owned outpatient department than in a private office, and CMS and Congress have been narrowing that gap service by service.
These policies apply service by service, not across an entire department. The code and place of service on each claim decide which rate you get paid.
CMS began a three-year phase-out of the Medicare Inpatient-Only (IPO) list in 2026. The IPO list has historically designated procedures Medicare would pay for only in the inpatient setting. Removing it shifts site-of-care decisions to physician discretion, with 285 procedures, most of them musculoskeletal, coming off the list for calendar year 2026 (5).
Of everything in the 2026 rules, this is the one I would put in front of your team first. Procedures that were automatically inpatient now need a documented clinical rationale for the setting chosen, and that rationale has to be visible in the record. The payment gap between an inpatient admission and an outpatient procedure is wide, and payers reviewing these claims will look first at whether the documentation supports the setting. Two more waves of removals follow through 2028.
The No Surprises Act took effect January 1, 2022, protecting patients from unexpected out-of-network bills, most often in emergencies or when an out-of-network provider treats a patient at an in-network facility. When a provider and insurer cannot agree on a payment rate, either side can request Independent Dispute Resolution (IDR), where a third party selects the more reasonable offer.
Filing a dispute carries a non-refundable administrative fee, and that fee has moved considerably. It rose to $350 per party in 2023 before a court challenge, then settled at $115 from January 2024 through June 10, 2026. A May 2026 final rule cut it to $15 per party for disputes initiated on or after June 11, 2026 (11). That changes the math on small balances. Underpayments you wrote off because the filing fee ate the recovery are now worth a second look. The Act does not apply to Medicare or Medicaid, which have their own billing protections.
In 2024, CMS finalized a rule requiring insurers, including Medicare Advantage and Medicaid managed care plans, to build electronic prior authorization systems, with most requirements effective January 1, 2027 (12). The rule also sets decision deadlines, requires insurers to publicly report prior authorization data, and requires a specific reason for every denial (12).
In April 2026, CMS proposed extending the same requirements to prescription drugs, which the original rule excluded. Under the proposal, electronic prior authorization for drugs would be required starting October 1, 2027 (12).
Taken together, these changes raise the financial weight of every code. When CMS applies efficiency adjustments code by code, expands site-neutral rates service by service, and bundles payment across an entire episode under TEAM, a single coding error moves a larger share of a claim's value than it once did.
Payer review is getting more automated at the same time. CMS is piloting AI-assisted prior authorization review in traditional Medicare through the WISeR (Wasteful and Inappropriate Service Reduction) Model, starting with selected procedures in six states in 2026. Early evidence from AI-aided prior authorization in Medicare Advantage points to higher denial rates (13). Inconsistent coding is exactly the pattern automated review is built to find.
Autonomous medical coding solutions analyze patient records and assign codes to encounters without human intervention, routing only encounters that fall below the accuracy threshold to coders for manual review. Applied to regulatory change, the value is consistency: the same rules applied the same way across every encounter.
Solutions in this category differ in two ways that matter here: how fast they absorb a rule change, and how much they show you.
While some autonomous coding solutions require lengthy retraining processes, Nym's engine uses Clinical Language Understanding (CLU) technology, combining machine learning models with rules-based clinical ontologies to enable quick adaptation when coding guidelines are updated. That same rules-based foundation supports configuration against your internal coding guidelines alongside CMS, American Medical Association (AMA), and payer-specific rules.
Nym’s engine also produces a transparent audit trail for every code assignment, showing the supporting documentation and the guidelines referenced during code selection.
That combination matters most when payer review is automated. One large health system reduced its radiology professional fee (ProFee) coding-related denial rate by 97%, from 0.0998% to 0.0030%, after implementing Nym's engine.
Regulatory change is constant, and the teams that absorb it fastest protect the most revenue. See how Nym's autonomous medical coding engine helps your team keep pace with policy changes as they take effect. Get in touch today.
CMS finalized a 2.6% increase to IPPS operating payment rates for FFY 2026 for hospitals that meet quality reporting and meaningful EHR requirements. The standardized base payment amount rises 1.94%, from $6,624.39 to $6,752.61 per discharge (2, 3).
TEAM is a mandatory Medicare payment model that bundles payment for surgery and recovery into a single episode. Acute care hospitals paid under IPPS and located in designated Core-Based Statistical Areas are required to participate (14).
Medicare has historically paid more for a service delivered in a hospital-owned outpatient department than in a private office. Site-neutral policies close that gap service by service, so the code and place of service on each claim determine the rate. In 2026 the policy extended to certain drug infusions, and CMS has proposed adding certain imaging services for 2027 (7, 10).
CMS began a three-year phase-out of the Inpatient-Only list in 2026, shifting site-of-care decisions to physician discretion and removing 285 mostly musculoskeletal procedures for calendar year 2026 (5).
CMS finalized two: $33.57 for clinicians in qualifying alternative payment models and $33.40 for everyone else (8). Both are increases over 2025, but the 2.5% work RVU efficiency adjustment and the 7% reduction to facility-based practice expense payments offset those gains, and some specialties will see a net decrease (1).