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What the 2025 CMS Updates Mean for Providers (and Their Implications for 2026) Pt. 1

2025 has been a pivotal year for healthcare policy, with several CMS updates poised to shape the landscape as we head into 2026. From a major court ruling that halted planned Medicare Advantage audits to new payment rules and telehealth extensions, providers must understand what these changes mean for their practice. Below, we break down the key updates and their implications for healthcare providers.

 

Medicare Advantage Audit Rule Vacated: Clawbacks on Hold (For Now)

A federal judge vacated CMS’s 2023 Risk Adjustment Data Validation (RADV) audit rule in September 2025, delivering a win for Medicare Advantage (MA) insurers and a pause in CMS’s plans to recoup billions in overpayments[1]. The rule would have allowed CMS to extrapolate audit findings from sample patient charts to entire MA plan populations and eliminate the “fee-for-service” adjuster that had tempered recoupments, enabling much larger clawbacks of MA payments[2][3]. CMS had estimated this approach could recover $4.7 billion over ten years from MA plans[4].

  • Court Decision: The U.S. District Court (N.D. Texas) found that CMS violated the Administrative Procedure Act by changing its rationale in the final rule without giving the industry a chance to comment[5]. In particular, CMS’s final justification – that actuarial equivalence standards don’t apply to RADV audits – was deemed a “surprise switch” from the proposal, making the rule procedurally invalid[6]. The court voided the rule entirely, halting CMS’s plan to apply these audits retroactively to 2018 payments[7][8].
  • Implications: In the short term, this ruling prevents immediate large-scale audit recoveries from MA plans[9], relieving pressure on insurers that feared owing hefty refunds. CMS’s recently announced “aggressive” plan to audit every MA contract annually[10] is now in limbo. For providers, this means MA plans are less likely to face sudden financial hits that could have translated into tighter plan budgets or reduced benefits in 2025-2026. However, the reprieve may be temporary. CMS is expected to fight back – the agency can appeal the decision or reissue the RADV rule through proper notice-and-comment, likely with similar goals of recouping overpayments[11][12]. In other words, “it ain’t over yet””[13][14]. Providers should remain vigilant: even without extrapolated audits, MA plans will continue routine RADV checks on documentation, and the industry consensus is that CMS will find a way to get their clawbacks eventually (either via courts or revised regulation)[12].

Medicare Physician Fee Schedule Updates: Modest Pay Bump in 2026

After several years of flat or declining Medicare physician payments, 2026 brings a slight reprieve. CMS’s proposed Physician Fee Schedule (PFS) for 2026 includes an overall increase in the conversion factor, thanks to recent legislative and policy changes[15]. This marks the first such increase after five consecutive years of cuts.

  • Conversion Factor Increases: For the first time, CMS proposed multiple conversion factors to implement provisions of the Medicare Access and CHIP Reauthorization Act (MACRA)[16]. Physicians in Advanced Alternative Payment Models (APMs) – those who qualify as Advanced APM participants – will receive a 0.75% permanent increase, while others (participating in MIPS) get a 0.25% increase[16]. In addition, Congress enacted a one-year 2.5% boost to the 2026 fee schedule as part of a budget package[17]. Taking into account these updates and budget-neutrality adjustments, the 2026 conversion factor for MIPS clinicians is projected at $33.42 (up from $32.35 in 2025)[18] – roughly a 3.3% raise. Qualifying APM participants would see a slightly higher CF (around $33.85) due to the larger MACRA update[19].
  • Implications for Providers: While any increase is welcome after years of erosion by inflation, these updates are only a partial fix. The AMA and provider groups note that Medicare physician pay, when adjusted for practice cost inflation, has plummeted since 2001, and the 2026 bump “remains a need for systemic… reform” to ensure long-term sustainability[20]. Providers should budget for a small uptick in Medicare rates for 2026, but also prepare for ongoing advocacy around fundamental payment reform. Notably, 2025 did not include the 5% Advanced APM bonus (that incentive expired and was replaced by the smaller update mentioned above), and the threat of future cuts returns in 2027 unless Congress intervenes again. In summary, expect a short-term breather in 2026 reimbursement followed by continued uncertainty thereafter.

Telehealth Flexibilities: Extended Through 2024 (and What Happens After)

During the COVID-19 Public Health Emergency, Medicare implemented sweeping telehealth flexibilities – many of which have been temporarily extended through late 2024 and into 2025. Providers have enjoyed broadened telehealth privileges, but these rules are set to tighten in 2025-2026 absent further legislative action.

  • Extended Telehealth Policies: Congress and CMS authorized an extension of most PHE telehealth waivers through September 30, 2025 for non-behavioral health services[21]. Until that date, Medicare patients can receive telehealth in their homes (no “rural” requirement)[21], and geographic restrictions on originating sites are waived. All Medicare-approved providers (including therapists, audiologists, etc.) can continue to furnish telehealth visits, and audio-only telehealth (telephone visits) remains allowed for non-mental health needs through that time[21][22]. FQHCs and RHCs may serve as distant-site providers for non-behavioral telehealth visits through 2025 as well, with special payment rates in effect[23]. For mental health services, certain flexibilities are made permanent: Medicare now allows patients to receive behavioral/mental health telehealth at home on a permanent basis, including via audio-only platforms[24]. The requirement for an in-person visit within 6 months of initiating mental health telehealth has been delayed until 2026 (meaning it’s waived through the end of 2025)[25].
  • Post-2025 Uncertainty: Unless Congress acts, many telehealth flexibilities will expire after September 2025. That would mean reinstating pre-pandemic rules in 2026 – e.g. Medicare telehealth only for rural patients or those in approved facilities, no in-home telehealth for most medical services, and stricter limits on audio-only care. The provider community is pushing hard to prevent this rollback. The AMA and other stakeholders have urged lawmakers to “make telehealth flexibilities permanent”, warning that letting them lapse on Sept. 30, 2025 would undermine access to care[26]. Bills are already on the table (e.g. H.R. 4206) to extend telehealth coverage. For now, providers should plan that 2025 is the last year of full telehealth freedom and stay tuned for Congressional updates. It’s wise to inform patients that some telehealth options (especially routine medical televisits from home) hinge on future policy decisions. Ideally, 2025’s experience will reinforce telehealth’s value and prompt an extension – but that outcome is not guaranteed.

Prior Authorization Reforms and Data Sharing Initiatives

Administrative burden, especially from prior authorizations (PAs), remains a pain point for providers. In response, CMS finalized Interoperability and Prior Authorization reforms in early 2024 aimed at streamlining these processes by 2026-2027. Separately, pressure from providers has led some payers to voluntarily ease PA requirements. Here’s what’s changing:

  • CMS’s New Rule on PA and Data Exchange: In January 2024, CMS issued the Interoperability and Prior Authorization Final Rule (CMS-0057-F) to improve health data exchange and PA timelines[27][28]. This rule requires Medicare Advantage plans, state Medicaid and CHIP agencies, and Qualified Health Plans to implement electronic prior authorization APIs that can transmit PA requests and decisions. Impacted payers must implement certain provisions by Jan. 1, 2026, though full API functionality isn’t required until Jan. 1, 2027 (a grace period was given for the tech requirements)[29]. The rule also mandates that payers publicly report certain PA metrics (e.g. approval rates, average decision times) to increase transparency. For providers, this means that over the next year or two, you should start to see new tools integrated into your EHR systems to submit PAs and receive responses in real-time. The goal is a more efficient PA process – one that “keeps patients at the center of their care” by reducing unnecessary delays[27].

Implications for 2026: By late 2025 into 2026, as payers roll out these CMS-mandated changes, providers may notice gradual relief in PA hassle factors. For example, instead of faxing forms and waiting weeks, you might utilize an electronic portal for instant submissions and status checks. CMS’s requirements also include shorter turnaround times for certain prior auth decisions (such as 72 hours for urgent requests, as proposed) and that an approved PA remains valid for the duration of treatment (to avoid repetitive approvals). These specific policies were part of earlier MA rule changes for 2024 and 2025, and CMS is monitoring compliance. Additionally, some large insurers have announced “gold card” programs or PA exemptions for high-performing physicians. The trend going into 2026 is clear: less onerous prior authorization, through both regulation and voluntary insurer efforts. Providers should stay engaged with these initiatives (e.g., ensure your practice management software updates to support new PA APIs) as they promise to save time and allow more focus on patient care.

 

Stay tuned for part 2 with more updates.

 

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