CMS Proposes Significant Medicare Payment Changes Affecting Orthopaedic Practices

CMS has released the proposed Calendar Year (CY) 2027 Medicare Physician Fee Schedule (PFS), the annual rule that establishes how physicians and other clinicians are paid for services delivered to Medicare beneficiaries.

For MSK practices, the proposed rule contains several concerning policies that could result in substantial reimbursement reductions for musculoskeletal care. Beyond the overall reduction to the conversion factor, CMS is proposing a series of methodological changes that could disproportionately impact MSK practices and further strain access to orthopaedic care for Medicare beneficiaries.

Key Orthopaedic Concerns in the 2027 Proposed Rule

• Significant Reductions to Orthopaedic Surgical Service: AAOE's preliminary review indicates that many orthopaedic surgical procedures would experience substantial payment reductions under the proposed rule. Orthopaedic surgery is slated for approximately a 9% cut.
• Cuts to Joint Replacement Procedures: Initial analyses indicate that payments for certain hip, shoulder, and knee replacement services could decline by approximately 20%.
• Phase-Out of the Indirect Practice Cost Index (IPCI): CMS is continuing its transition away from historical practice expense methodologies, including changes associated with the Indirect Practice Cost Index (IPCI). Orthopaedic practices rely heavily on costly infrastructure, specialized equipment, clinical staffing, information technology systems, and regulatory compliance resources. The IPCI phase-out could reduce recognition of the real-world costs required to operate a modern orthopaedic practice, especially for independent physician-owned groups.
• Ambulatory Surgical Model (ASM): CMS continues its plan to implement the Ambulatory Surgical Model (ASM), a new mandatory value-based payment model that would require participation from selected providers and facilities in certain geographic areas, in 2027. While CMS intends the model to promote efficiency and quality in surgical care, mandatory participation models can create significant operational, reporting, and financial burdens for physician practices. Practices may face additional administrative requirements, increased financial risk, and new care coordination obligations without corresponding resources to support implementation. 

What AAOE Is Doing

AAOE is actively reviewing the proposed rule and working with the Advocacy Council, AAOE members, and other advocacy organization partners to ensure the concerns of orthopaedic practices are heard.

Our advocacy efforts include:

• Developing and submitting a comprehensive comment letter to CMS outlining the impact of the proposed payment reductions and methodological changes on orthopaedic and MSK care.

• Organizing a grassroots letter-writing campaign directed to both Congress and the Administration, urging policymakers to preserve access to musculoskeletal care and address the ongoing instability in Medicare physician payment.
• Providing members with advocacy resources and tools that can be used to communicate directly with policymakers about the impact these proposals could have on their practices and patients.
• Coordinating with orthopaedic stakeholders to identify the most problematic aspects of the rule and develop practical policy alternatives.

Use the AAOE Advocacy Toolkit

To support these efforts, AAOE is developing an advocacy toolkit that will provide members with guidance on how to engage with policymakers to make your voice heard. 

The experiences and perspectives of AAOE members are critical to these advocacy efforts. Policymakers are often most persuaded by concrete examples demonstrating how federal payment policies affect patient access, staffing decisions, technology investments, and practice sustainability.

Download Here

We Need Your Feedback

As AAOE develops its formal comments to CMS, we encourage members to share specific concerns, data, and examples related to the proposed rule.

In particular, we welcome member feedback regarding:

• Proposed reductions affecting orthopaedic surgical services
• Cuts to hip, knee, and shoulder replacement procedures
• The IPCI phase-out and practice expense methodology changes
• New Mandatory Ambulatory Surgical Model (ASM)
• Any additional provisions that could affect orthopaedic and MSK care delivery

Please contact advocacy@aaoe.net with your thoughts and recommendations. Your feedback will help ensure that AAOE's comment letter reflects the real-world experiences of orthopaedic practices and the patients they serve.