CMS released the CY 2027 Medicare Physician Fee Schedule final rule on November 4, 2026, and it takes effect for dates of service on or after January 1, 2027. For physical, occupational, and speech therapists, the headline is a split decision. The conversion factor drops, but changes to how practice expense is valued push therapy services up. For most private practices, the two roughly cancel out, with a small net gain on the timed codes you bill every day.

Here’s what changed, what it means per code, and what to do before January.

The conversion factor drops 2.31%

The conversion factor is the dollar amount Medicare multiplies by each code’s relative value units (RVUs). Most therapists are not qualifying APM participants, so the nonqualifying rate is the one that applies.

The cut comes from the expiration of the one-year 2.5% increase Congress provided for 2026. The 2027 statutory update (+0.25% for nonqualifying clinicians) and a -0.12% budget-neutrality adjustment don’t make up the difference. The final number also came in lower than the $32.84 CMS proposed in July.

Practice expense changes lift therapy about 3%

The bigger story for rehab therapy is practice expense (PE). CMS is phasing out the indirect practice cost index over two years. That index was built on specialty cost data from 2007 or earlier. CMS is replacing it with a PE stabilization adjustment that smooths year-to-year swings, and it will allocate indirect PE using both the work RVU and the clinical labor PE RVU.

In CMS’s specialty impact table, the physical/occupational therapy category gets an estimated +3% combined impact from RVU changes, almost entirely from PE. That figure excludes the conversion factor. Put the two together and the average net change is a small gain, roughly 0.5% to 1%. Your actual result depends on your code mix, locality, and how often the multiple procedure payment reduction (MPPR) trims additional units, since MPPR reduces the PE portion where most of the increase landed.

What it means per code

Using CMS’s final 2026 and 2027 RVU files, here are national non-facility rates for common PT codes. These are before geographic adjustment, MPPR, and sequestration.

Timed treatment codes gain around 1%, while evaluations are essentially flat. Your actual rates will depend on your MAC locality, which CMS hasn’t published yet (more on that below). For last year’s numbers, see our 2026 reimbursement rates guide.

KX modifier threshold rises to $2,540

The final CY 2027 MEI increase came in at 2.6%, which takes the KX modifier threshold from $2,480 to $2,540 for PT and SLP combined, and a separate $2,540 for OT. The targeted medical review threshold stays at $3,000 through 2027 and starts updating annually with the MEI in 2028. As always, you can treat past the threshold when care is medically necessary, as long as you append the KX modifier and the documentation supports it.

Telehealth runs through December 31, 2027

The Consolidated Appropriations Act, 2026 extended the expanded list of practitioners eligible for Medicare telehealth, which includes PTs, OTs, and SLPs, through December 31, 2027. CMS notes it has no authority to extend that date on its own, so another lapse is possible after 2027 unless Congress acts. SLPs should also note that CPT 92507 is replaced by ten new timed codes (92654–92663), which were added to the Medicare Telehealth Services List.

Remote therapeutic monitoring gets new rules

CMS finalized its RTM changes as proposed:

• Established patients only. RTM can no longer start with a new patient.

• Initiating visit required. You must furnish a separately reportable, face-to-face initiating visit (in person or via telehealth) tied to the start of RTM.

• Employed-staff rule delayed. The requirement that RTM be performed only by staff employed by the practice, not contractors, is pushed to January 1, 2029.

What stays the same

Several rules that drive day-to-day billing don’t change for 2027. Services furnished in whole or in part by a PTA or OTA (CQ and CO modifiers) are still paid at 85% of the fee schedule. GP, GO, and GN modifiers, the 8-minute rule, and MPPR on additional units all continue as before. The efficiency adjustment CMS introduced for 2026 doesn’t apply to time-based codes, and CMS doesn’t plan to apply it again until 2029.

The bigger picture

As APTA Private Practice put it when the proposal came out, 2027 is a modest gain inside a broken payment system. The PE reform is a real improvement for therapy, but the conversion factor keeps falling, and Medicare still has no automatic inflation update for clinicians. Wages, rent, and technology costs keep rising, while the 2027 conversion factor sits well below the $36.04 it was in 2019. APTA continues to press Congress for a permanent, inflation-based annual update.

What to do before January 1

The conversion factor and RVUs are final, but CMS hasn’t yet updated the actual 2027 payment amounts for each MAC locality and CPT code in its Physician Fee Schedule Look-Up Tool. Those locality rates, not the national figures above, are what your practice will be paid. Until they post, treat the per-code table as a directional estimate.

Stay tuned for the updated fee schedule. When CMS publishes the 2027 rates by MAC, PatientStudio will update our Medicare reimbursement calculator so you can see exactly what changes for your locality and visit mix. In the meantime:

• Update KX tracking to the $2,540 thresholds so the modifier lands on the right visit.

• Review RTM workflows so every new episode starts with a qualifying initiating visit.

• Plan for telehealth after 2027, since the therapist flexibility ends December 31, 2027 unless Congress extends it.

Fee schedule changes are easier to absorb when your billing system updates rates, tracks thresholds, and flags modifiers automatically. See how PatientStudio’s billing tools help PT practices stay ahead of Medicare changes, or schedule a demo to walk through it with our team.

Sources: CMS CY 2027 PFS final rule fact sheet; CMS-1848-F final rule, Addendum B RVU files, and estimated specialty impact table; APTA Private Practice; PT Practice Pro. Rates shown are national non-facility amounts. This article is for general education. Always confirm locality rates and requirements with your MAC.