DEEP DIVE
💰 Why Derm's 9% Medicare Cut Won't Compress to 3% This Year
Every summer a Medicare proposed rule lands with an ugly specialty number, and every spring that number gets smaller. Dermatology has watched proposed cuts in the 3-to-5% range shrink to 1 or 2% by the time the fee schedule actually loads. The reflex is to wait it out. This year the reflex is wrong, and the reason is arithmetic, not optimism.
On July 14, 2026, CMS released the proposed CY2027 Physician Fee Schedule (CMS-1848-P). The AAD's estimate puts derm's hit near 9%, and practices are already forwarding it with a familiar note: proposed cuts always land around 3 to 4%, so we'll ride it out. That expectation is anchored to a mechanism this rule doesn't run on.
What the 9% actually contains
CMS publishes the conversion factor and the specialty-impact table separately, and the "9%" is the specialty-impact table: the changes to work, practice-expense, and malpractice RVUs. It excludes the conversion factor entirely.
The dominant piece inside that 9% is not modifier 25 and not a rate cut. It's a practice-expense (PE) methodology overhaul. CMS is phasing out the part of the PE formula tied to 2007-or-earlier survey data, replacing the final step of PE RVU assignment with a "PE stabilizer," and reweighting facility versus non-facility indirect costs. All of it runs under budget neutrality, which means every specialty CMS lifts has to be paid for by a specialty it cuts. Derm's code mix lands on the losing side. Layered on top is the proposed modifier 25 change: when a separately identifiable E/M is billed the same day as a 0-, 10-, or 90-day global procedure, CMS would pay the highest-valued service at 100% and every other same-day service at 50%, even with modifier 25 documented perfectly. That's a payment-adjudication cut, not an RVU-table entry, so it sits on top of the 9%, not inside it.
Practices will map this onto the Multiple Procedure Payment Reduction they already run, and that model is wrong. MPPR only cuts additional procedures: bill 99213, 11102, and 17000, and the E/M and first procedure pay at 100% while the additional procedure drops to 50%. The CY2027 proposal reaches a claim with a single E/M and a single procedure, 99213-25 plus 11102, and takes the 50% cut on the lower-valued service. Medicare would be joining commercial payers that already run it, most familiarly Horizon BCBS.
Now layer the conversion factor. The proposed non-QP CF is $32.84, down 1.68%; the QP CF is $33.17, down 1.19%. Add the CF cut to the 9% specialty-table figure the way CMS computes them, separately and additively, and the all-in proposed hit for a non-QP practice lands near 10.7%. That total is arithmetic, not a figure CMS prints, and a modifier-25-heavy practice faces more.
Why the patch can't reach it
The "it always lands at 3 to 4%" memory is real. It's just a conversion-factor story.
Cycle | CF outcome | What happened |
|---|---|---|
CY2022 | $33.60 → $34.61 | Congress added ~3% [cms.gov] |
CY2023 | $33.06 → $33.89 | CAA raised the CF 2.5%, turning a 4.5% cut into ~2% [AAD] |
CY2024 | $32.74 → $33.29 | Split-year retroactive patch |
CY2025 | $32.35 | Unpatched. It stood. [AAD] |
CY2026 | $33.40 non-QP | Temporary +2.5% bump, now expiring |
In every one of those years, derm's own RVU-table component was close to neutral, so the conversion factor was effectively the whole cut. A year-end Congressional patch fixed most of it because the patch touches the CF, and the CF was the story. Here's the honest limit: nobody has published derm's actual proposed-to-final specialty-table percentages for those years, so the 3-to-4% memory rests on the conversion-factor record, not a sourced derm-specific one.
CY2027 inverts the composition. Of the roughly 10.7 all-in points, only about 1.7 is the conversion factor. The other 9 or so is budget-neutral RVU and PE redistribution. A Congressional patch changes the conversion factor; by construction, it cannot reach budget-neutral RVU redistribution. Best case, a full CF restoration moves derm from about -10.7% to about -9%, and CY2025 is the reminder that even the CF patch isn't guaranteed.
The two ways the number can still shrink
There are exactly two, and they aren't the same bet.
The first is the Congressional CF patch, a small lever this year: at most those 1.7 points, arriving after the final rule and sometimes retroactively.
The second is CMS softening its own rule when the final rule publishes, expected around November 2026. That's the only channel that can move the 9%, and there's real precedent: in CY2019, CMS proposed a nearly identical same-day E/M reduction and withdrew it after specialty opposition. But the odds are uneven: the PE overhaul is framed as a multi-year commitment, which makes it the least likely piece to give, and it's the biggest.
One more channel operators forget: the cut doesn't stop at Medicare. Dermatology commercial contracts are commonly indexed to the Medicare fee schedule, so a finalized cut transmits into commercial reimbursement on a 0-to-18-month lag.
Takeaways
Compute three numbers from your own book before you react to the 9%. Your QP versus non-QP status sets which conversion factor applies. Your share of same-day E/M-plus-procedure encounters sets your modifier-25 exposure. Your true Medicare revenue share sets the size of the whole thing; confirm whether it folds in Medicare Advantage, which does not reprice with the PFS cut.
File a comment before September 14. CMS asked, on the record, whether the second same-day service should be reduced 25% instead of 50%, which makes this an unusually winnable comment. Formal comments go through the proposed rule's Federal Register page via the "Submit a Formal Comment" button, and AAD publishes comment templates you can start from. The comment window is the one point in this cycle where the number is movable from the outside.
Watch the November final rule, not the year-end patch, for the number that matters. The RVU, PE, and modifier-25 figure becomes knowable at the final rule. Any conversion-factor patch comes later and touches only those 1.7 points.
Bottom line: the proposed number is a ceiling, not a forecast. But the practices treating this like the last five years, assuming a patch and sitting still until spring, are budgeting off the wrong mechanism. This year the number that matters gets decided at the final rule, not on the Hill.
Further reading: a practice-facing breakdown of the same rule from Clarity RCM, and Ashwin Krishnan's operator take on why the wait-for-the-patch instinct misreads this cycle.
UPCOMING EVENTS + REMINDERS
📆 Mark your calendars:
Elevate-Derm Summer Conference — July 29-August 2, 2026, San Diego, CA. Clinical and practice-management CME aimed at dermatology PAs and NPs, at the Gaylord Pacific Resort. (Elevate-Derm Summer)
AAD World Congress of Dermatology program application deadline — August 3, 2026. Applying to present requires an abstract submitted with the application. (AAD World Congress)
Dermsquared PANP360 Boston — August 14-16, 2026, Boston, MA. Regional dermatology conference for clinical care, practice management, and aesthetics at the Boston Marriott Copley Place. (Dermsquared Conferences)
CMS CY2027 Physician Fee Schedule comment period closes — September 14, 2026. The one window to weigh in on the proposed conversion factor, PE overhaul, and modifier-25 payment change covered in this week's deep dive. (CMS-1848-P Fact Sheet)
Until next week,
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