The 2026 efficiency adjustment: which codes took the 2.5% work RVU cut, and which did not

What is the efficiency adjustment in the 2026 fee schedule?

A -2.5% adjustment to the work RVUs, and the intraservice portion of physician time, of every non-time-based service in the CY 2026 Medicare physician fee schedule, finalized on October 31, 2025¹. CMS derived the number from the Medicare Economic Index productivity adjustment percentage over a five-year look-back¹. The premise is that procedures get faster as clinicians repeat them while the time values inside the fee schedule are rarely re-surveyed, so CMS trimmed the work values across the board instead of code by code.

The fact sheet describes the adjustment as something CMS will apply again, not a one-time cut¹.

And it sits alongside two other changes in the same rule. The conversion factor rose to $33.57 for qualifying APM participants (+3.77%) and $33.40 for everyone else (+3.26%), both from $32.35, and both figures include a one-year +2.5% increase set by statute¹. The practice expense method also changed in favor of office settings. Read the three together or you’ll misread your January remittances. A clean claim pays the allowed amount; the question this year is what the allowed amount became.

Which codes are exempt, and why time-based codes?

Time-based codes are exempt, and the fact sheet names the families: evaluation and management services, care management services, behavioral health services, services on the Medicare telehealth list, and maternity codes¹. The logic follows from the premise. If the cut exists because procedures get quicker with practice, a service whose value is defined by the minutes spent with the patient can’t become “more efficient” without becoming a different service, so the adjustment doesn’t reach it.

The telehealth exemption is the one billers trip over, because it’s defined by a list rather than a code family. CMS’s List of Telehealth Services page carries the List of Telehealth Services for Calendar Year 2026³, and a code on that list is exempt whether or not your practice ever furnishes it by telehealth. The post on Medicare telehealth billing through 2027 covers the flexibilities themselves.

How does the site-of-service practice expense change interact with it?

It partly offsets the cut for office procedures and compounds it for facility ones. The 2026 rule recognizes greater indirect costs for practitioners in office-based settings compared to facility settings, reasoning that allocating indirect costs in the facility setting at the same rate as the non-facility setting may no longer reflect contemporary clinical practice¹. CMS also moved to use hospital outpatient (OPPS) data, which it describes as auditable and routinely updated, to set practice expense for certain technical services¹.

So three forces act on each code. Work RVUs fall 2.5% unless the code is exempt. Practice expense RVUs rise in the office relative to the facility. The conversion factor rises 3.26% for practitioners outside a qualifying APM. The net for an office-based procedural practice can be close to flat; the net for a surgeon working in a hospital is down. The allowed amount on the remit is the product of all three, which is why a flat allowed amount can hide a work cut and a practice expense gain that cancelled out.

How do you see the net effect on your top 20 codes?

Pull the 2025 and 2026 RVU components for your top 20 codes by Medicare volume from the RVU files CMS publishes with each rule, and compute allowed amount = (work + practice expense + malpractice RVUs) × conversion factor for each year, with the geographic adjustments if you want local figures. Mark each code exempt or not.

Don’t take the shortcut of applying -2.5% to the allowed amount. The adjustment is to work RVUs only, so a code whose value is mostly practice expense barely feels it. A dedicated biller does this reprice whenever a fee schedule changes, then watches the January remits for the gap between expected and paid. The medical coding service page covers the code-level review; the KPIs guide covers tracking payment against expected allowed amounts, so a contractual adjustment that grows faster than the fee schedule explains is caught as an underpayment rather than filed as policy.

What does the 2027 proposed rule do to work RVUs?

It adds an estimated +0.53% adjustment to account for proposed changes in work RVUs for some services, and it says nothing about repeating or reversing the efficiency adjustment². The larger 2027 story is the conversion factor. Public Law 119-21 provided a one-year increase of 2.50% for CY 2026 that will no longer be in effect for CY 2027, so the proposed factors fall to $33.17 for qualifying APM participants, a decrease of $0.40 or 1.19%, and $32.84 for everyone else, a decrease of $0.56 or 1.68%, after statutory updates of +0.75% and +0.25%². The 2027 proposed cut post models that change in full.

The narrower point here: the 2.5% work cut from 2026 stays in the RVUs. It isn’t a one-year item like the conversion factor bump. When 2027 arrives, a procedural practice keeps the lower work values and loses the increase that softened them.

How should a procedural practice respond?

A procedural practice should respond to the efficiency adjustment in three moves: reprice its top codes at the 2026 and proposed 2027 factors, re-mix toward exempt services it already furnishes but bills poorly, and stop paying for the cut twice. Reprice means running the top-20 calculation at the 2026 factor and again at the proposed 2027 factor, and putting both totals in the budget. Re-mix means looking hard at the exempt services the practice already furnishes but bills poorly: care management, behavioral health integration, and a separately identifiable E/M visit on the day of a procedure where modifier 25 is supported. Those services carried full work value in 2026 and gained from the conversion factor.

There’s a trade-off in re-mixing. Chasing exempt codes without the clinical work and documentation behind them is how a practice ends up in a prepayment review; the question is whether work already done is going unbilled.

Paying twice is the payer-side problem. A commercial contract pegged to the current Medicare fee schedule inherits the RVU change automatically. A contract pegged to a fixed year’s schedule doesn’t, and a reduction that appears anyway is an underpayment to dispute, not a policy to absorb. Check which type each contract is. The Medicare billing service page covers the fee schedule work a dedicated biller carries into January.

What to do this week

• List your top 20 codes by Medicare volume and mark each exempt or not, using the fact sheet’s five exempt families and the CY 2026 telehealth list.
• Reprice them at $33.40 and at $32.84 and put both totals in front of the owners.
• Check each commercial contract: pegged to the current Medicare schedule, or to a fixed year?
• Review documentation for exempt services you furnish but under-bill.
• Add expected allowed amount per code to the weekly report so the January remits can be compared against it.