The 2027 Medicare fee schedule proposal, released July 14, 2026, delivers a headline number that looks like bad news… the overall conversion factor is set to drop. But the picture for PT clinics specifically is more mixed than that single number suggests, and none of it is finalized yet.
This post covers what’s actually proposed under the 2027 Medicare fee schedule, what’s genuinely changing from 2026, what remains uncertain, and what a clinic owner can act on right now regardless of how the final rule lands.
What Was Proposed in the 2027 Medicare Fee Schedule
CMS proposed two separate conversion factors for 2027, as required by law. Qualifying alternative payment model participants would see $33.17. Non-qualifying participants would see $32.84. Both figures represent a decrease from the 2026 conversion factors of $33.57 and $33.40.
CMS also proposed raising the annual therapy threshold. That’s the KX modifier amount above which providers must attest that continued therapy is medically necessary. The proposed increase moves it from $2,480 to $2,540, reflecting a 2.5% Medicare Economic Index update. The targeted medical review threshold would stay unchanged at $3,000.
What Is Changing From 2026
The conversion factor is falling for a specific reason. A temporary one-year 2.5% statutory increase applied specifically to 2026 and was never designed to continue automatically. Remove that temporary boost, and the underlying conversion factor settles lower even with modest statutory updates layered back in.
Here’s the detail most summaries of the 2027 Medicare fee schedule miss. CMS’s own specialty-level impact estimates project smaller increases for physical and occupational therapy. Proposed changes to practice expense calculations and relative value units for PT-specific codes drive that increase. That’s the opposite direction from the headline conversion factor number. The net effect on any single clinic depends on its specific billing mix of CPT codes, not on the conversion factor alone.
What Is Not Final Yet
Every number above is proposed, not enacted. CMS is accepting public comments through September 14, 2026. The final rule typically publishes in early November, ahead of a January 1 effective date. Between now and then, conversion factors, thresholds, and specialty impact estimates can all shift.
Treating a proposed rule as a locked-in outcome creates its own risk. Some clinic owners assume the worst-case conversion factor and the best-case specialty impact at the same time. Others do the reverse. Either approach means planning around a number that may not exist in the final rule.
What the 2027 Medicare Fee Schedule Means for Clinic Owners
Federal policy sets the conversion factor, the statutory update percentages, and CMS’s practice expense methodology. No individual clinic decision changes what the final rule says. No amount of operational efficiency offsets a genuine rate cut if the final numbers land that way.
That reality points to the actual fix. Waiting anxiously for November accomplishes nothing. Making sure every dollar the clinic is already owed under current rates actually gets collected does — because reimbursement uncertainty makes existing revenue leaks more expensive, not less.
Five Administrative Leaks Clinic Owners Can Control
Five administrative gaps determine how much of your current reimbursement rate you actually collect, regardless of where the final 2027 rates land. Our post on physical therapy revenue leaks covers these in detail: prior authorization lapses, insurance verification errors, dropped charge units, aging AR without follow-up, and unfilled scheduling gaps.
Each of these costs real money at today’s rates. If 2027 rates come in lower for some codes, the same leaks become proportionally more expensive to ignore. Closing them now is the one lever entirely within a clinic’s control, independent of anything CMS finalizes in November.
What to Review Before the 2027 Medicare Fee Schedule Finalizes
Start by identifying which CPT codes make up the bulk of your billing. The specialty-level estimate for PT overall doesn’t tell you what happens to your specific code mix. Cross-reference that against the proposed rule once the comment period closes, and watch for reactions from specialty associations like the American Physical Therapy Association that clarify how the final numbers are likely to shift.
In the meantime, review whether your insurance verification, prior authorization, and AR follow-up processes are actually collecting everything owed under current rates. A clinic already leaking revenue at 2026 rates is in the weakest position to absorb whatever the finalized rule brings.
What to Do Next
The 2027 Medicare fee schedule is still a proposal, not a policy. Final numbers won’t be confirmed until later this year. What isn’t uncertain is whether your clinic is collecting everything it’s owed right now, at today’s rates.
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