2027 Medicare Payment Cut for Psychiatry: What the Proposed Fee Schedule Means for Your Practice

How Does the 2027 Medicare Fee Schedule Affect Psychiatry Billing?

As of September 2026, the CMS CY 2027 Medicare Physician Fee Schedule proposed rule (CMS-1848-P) would reduce the non-qualifying APM conversion factor from $33.40 to $32.84, a net decrease of 1.68%. This cut is driven by the expiration of the temporary 2.5% payment boost Congress authorized for CY 2026 under the Working Families Tax Cut Act. For outpatient psychiatry practices billing Medicare, the proposed decrease affects reimbursement on every CPT code paid through the fee schedule, including psychiatric evaluations, psychotherapy, and medication management visits.

• Conversion factor drop: The proposed CY 2027 conversion factor of $32.84 represents a $0.56 per-RVU decrease from the CY 2026 rate, reducing Medicare payment for most outpatient psychiatry services.
• Partial offset for collaborative care: CMS proposes increasing work RVUs for Psychiatric Collaborative Care Model (CoCM) codes 99492, 99493, 99494, and G2214, which could partially offset the conversion factor reduction for practices already billing CoCM.
• Comment deadline: The public comment period closes September 14, 2026. This is the last window for psychiatry practices and billing companies to submit feedback before CMS finalizes the rule.

What Changed in the CY 2027 Proposed Rule

On July 14, 2026, CMS released the Calendar Year 2027 Medicare Physician Fee Schedule proposed rule. The rule includes several provisions that directly affect how psychiatry services are paid under Medicare Part B. The most significant change is the proposed conversion factor reduction.

For CY 2026, Congress provided a one-time 2.5% payment increase through the Working Families Tax Cut Act. That temporary boost expires on December 31, 2026. Because the statutory update for CY 2027 is only +0.25% for non-qualifying APM clinicians (and +0.75% for qualifying APM participants), the net effect is a payment reduction compared to what practices received throughout 2026.

According to the CMS fact sheet published July 15, 2026, the proposed non-QP conversion factor of $32.84 reflects a projected decrease of $0.56 from the CY 2026 rate. The qualifying APM conversion factor would decrease by $0.40, to $33.17. CMS also proposes a +0.53% budget neutrality adjustment to account for changes in work relative value units, but that adjustment does not fully offset the loss of the temporary boost.

Beyond the conversion factor, the proposed rule includes changes to the practice expense RVU methodology that would reduce CMS reliance on specialty survey data. CMS proposes phasing out the Indirect Practice Cost Index over two years and capping annual PE RVU changes at 5% per code. For psychiatry, which relies heavily on E/M and psychotherapy codes with relatively modest practice expense components, the PE methodology change may have a smaller impact than it does for procedure-heavy specialties, but the full specialty-level modeling has not yet been released.

Who Is Affected by the Conversion Factor Decrease?

The conversion factor reduction affects every clinician who bills Medicare under the Physician Fee Schedule. For psychiatry, that includes psychiatrists, psychiatric nurse practitioners (PMHNPs), physician assistants furnishing psychiatric services, clinical psychologists, and licensed clinical social workers billing under Medicare Part B.

Practices with a high Medicare patient mix will feel the cut most acutely. A solo psychiatrist whose caseload is 40% or more Medicare will see a measurable per-visit revenue decline across psychiatric evaluations (90791, 90792), psychotherapy sessions (90834, 90837), and medication management visits billed through E/M codes. Group practices with multiple providers absorb a larger aggregate loss even if the per-visit decrease appears modest on paper.

In our experience matching psychiatry practices with billing partners, the practices that struggle most with payment changes are the ones still billing in-house without systematic denial tracking. They do not see the revenue erosion until the quarterly numbers come in, and by then the losses have already accumulated. Practices working with a dedicated psychiatry billing company typically catch payment discrepancies faster because the billing partner is monitoring reimbursement rates against fee schedule updates in near real time.

Why Psychiatry Payments Keep Falling

The CY 2027 proposed cut is not an isolated event. Medicare physician payments have failed to keep pace with inflation for more than two decades. According to the American Medical Association, Medicare physician payment rates have effectively declined by 29% since 2001 after adjusting for practice cost inflation measured by the Medicare Economic Index.

The structural problem is budget neutrality. Under the Physician Fee Schedule, any increase in RVUs for one set of codes must be offset by decreases elsewhere. When CMS revalues surgical codes, imaging codes, or new service categories upward, the conversion factor absorbs the adjustment downward. Psychiatry, which relies on time-based E/M and psychotherapy codes rather than procedures, has limited leverage in the revaluation process.

Congress has intervened with temporary payment patches in recent years, including the 2.93% increase for part of CY 2024 and the 2.5% increase for CY 2026. Each time, the patch expires and the baseline resumes. The pattern creates a cycle of short-term relief followed by effective cuts, making long-term revenue planning extremely difficult for psychiatry practices. CMS itself acknowledged in the proposed rule that current law requires an effective reduction relative to 2026 payment levels.

How Much Will Psychiatry Practices Lose in 2027?

The proposed 1.68% conversion factor decrease translates to specific dollar reductions on every CPT code psychiatry practices bill through Medicare. The table below estimates the per-visit impact on commonly billed psychiatry codes using the proposed CY 2027 non-QP conversion factor of $32.84 compared to the CY 2026 rate of $33.40. These estimates use current total RVUs and do not account for any proposed RVU changes to individual codes, which CMS has not yet published at the code level for all psychiatry services.

Estimates based on CY 2026 national non-facility rates and proposed CY 2027 conversion factor. Final rates may differ based on RVU adjustments in the final rule. Source: CMS CY 2027 PFS Proposed Rule, July 2026.

For a psychiatrist seeing 25 Medicare patients per day across a mix of these codes, the cumulative loss could reach $50 to $75 per day, or roughly $13,000 to $19,500 annually. For a group practice with three or four providers, that figure scales quickly. The losses are individually small per visit but collectively significant over a full year of billing.

Providers often come to us after a fee schedule change when they realize their in-house billing team did not update the expected reimbursement benchmarks. The claims went out, the payments came back lower, and nobody flagged the variance for weeks. That is how small per-visit cuts compound into major revenue gaps.

What to Do Before the September 14 Deadline

The CMS comment period for the CY 2027 PFS proposed rule closes on September 14, 2026. Whether or not your practice submits a formal comment, there are concrete steps to take now to prepare for the payment change.

1. Model the revenue impact using your actual payer mix. Pull your Medicare claims volume by CPT code from the last 12 months and apply the proposed 1.68% reduction. This gives you a practice-specific dollar figure rather than a generic estimate.
2. Review your CoCM billing eligibility. CMS proposes increasing work RVUs for psychiatric collaborative care codes. If your practice is not currently billing 99492, 99493, or 99494, this is the time to evaluate whether the model fits your workflow.
3. Audit your telehealth documentation. The proposed rule extends telehealth flexibilities through December 31, 2027, and delays the in-person visit requirement for mental health telehealth to January 1, 2028. Make sure your claims include the correct modifiers (95 for video, 93 for audio-only) and place of service codes.
4. Submit a public comment if the cut affects your viability. Comments can be submitted through regulations.gov under docket CMS-1848-P. CMS reads every comment, and volume from specialty practices influences final rule adjustments.
5. Tighten denial management now. When per-visit reimbursement drops, every denied or underpaid claim costs more relative to revenue. Run a denial analysis on your last 90 days and prioritize the correctable categories: missing modifiers, documentation gaps, and untimely filings.
6. Benchmark your commercial payer rates against Medicare. Commercial contracts often use Medicare as a reference point. A lower Medicare conversion factor can influence future commercial renegotiations if your payer contracts are pegged to a percentage of Medicare rates.
7. Evaluate whether your current billing setup is optimized for the new reality. Practices absorbing a payment cut with clean claims, low denial rates, and fast AR cycles are in a fundamentally different position than practices carrying 60-day accounts receivable and a 10% denial rate.

Common Misreads of the Proposed Rule

The most common misread we see across billing companies and providers is treating the proposed rule as final. The CY 2027 PFS is a proposed rule, not a final rule. CMS will publish the final rule in November 2026. Payment rates, RVU changes, and policy provisions can and often do change between the proposed and final versions. Planning is appropriate. Panic is premature.

A second misread is assuming Congress will not intervene. While there is no guarantee of a patch, Congress has provided temporary payment increases in four of the last five years. Multiple medical associations, including the American Psychiatric Association, have already begun advocacy for a legislative fix. Practices should plan for the cut while recognizing that a partial or full patch remains possible.

The third misread is treating the CoCM RVU increase as automatic new revenue. The proposed work RVU increases for collaborative care codes only benefit practices that are actively billing CoCM. If your practice does not have a care manager and a consulting psychiatrist arrangement in place, the RVU increase does not create any additional reimbursement. Building a CoCM program takes months of infrastructure work, not a billing switch.

Finally, the proposed rule does not affect Medicare Advantage reimbursement directly. MA plans set their own rates. However, some MA contracts reference the Medicare fee schedule, and a lower conversion factor can create downward pressure on MA rates during contract renewals.

In-House Billing vs. Outsourced Support

When Medicare reimbursement decreases, the margin for billing errors shrinks. A practice that was absorbing a 6% denial rate at 2026 rates will feel that same denial rate more sharply at 2027 rates because the revenue baseline is lower. Every dollar lost to a preventable denial or a delayed claim represents a larger percentage of total collections.

One question we hear constantly from practice managers is whether it makes more sense to invest in fixing their in-house billing or to bring on a billing partner after a fee schedule cut. The answer depends on the practice’s denial rate, days in AR, and staffing stability. If the in-house team is already running a clean operation with denial rates below 4% and AR under 35 days, the payment cut is manageable. If the operation has gaps, the cost of those gaps just increased.

Across the billing companies we vet, the ones that perform best for psychiatry practices during payment contractions are the ones that focus on three things: clean first-pass claim submission, aggressive denial follow-up within 48 hours, and proactive fee schedule monitoring so payment variances get caught the week they appear, not the quarter after.

Frequently Asked Questions

Next Steps

Model your practice’s revenue exposure using the proposed conversion factor of $32.84 and your actual Medicare claims volume. Review our guide to CPT code 90833 psychotherapy add-on billing and psychiatric collaborative care billing for 2027 to identify coding opportunities that offset the payment decrease. If your billing operation needs tightening before the 2027 rates take effect, connect with a psychiatry-focused billing partner through Psychiatry Billers.