CMS Proposes Transformational Medicare Reforms to Expand Accountable Care, Modernize Physician Payment, and Shift from Sick Care to Healthcare

Final Rule Reduces Burden and Strengthens Patient Safety

The Centers for Medicare & Medicaid Services (CMS) has proposed a sweeping set of reforms to Medicare’s physician payment and value-based care programs. The proposals are designed to expand accountable care organization (ACO) participation, modernize how physicians are paid, reduce administrative burden, and reorient Medicare’s incentive structure from reactive sick care toward proactive prevention.
We’re proposing some of the most significant Medicare reforms in recent years to strengthen primary care, expand accountable care, and modernize physician payment,” said CMS Administrator Dr. Mehmet Oz. “These changes would make it easier for clinicians to focus on prevention, improve coordination for patients, and ensure Medicare rewards better outcomes rather than more services.

Strengthening Medicare ACO Participation

The Shared Savings Program — the nation’s largest value-based payment program — recorded strong results in performance year 2024, with 75% of 476 participating ACOs earning shared savings payments totaling $4.1 billion, generating net savings of approximately $2.5 billion for the Medicare Trust Funds. The program has now delivered savings for eight consecutive performance years.
The proposed rule builds on that record with several key changes to the Shared Savings Program:
  • Increased opportunities to share savings for certain participating ACOs
  • New financial incentives for first-time program joiners
  • More predictable spending targets to support planning and participation
  • Reduced administrative burden through simplified technology requirements and streamlined patient notices
  • An option for ACOs with approved applications beginning April 1, 2027, to reduce or eliminate beneficiary out-of-pocket costs for certain items and services

Modernizing the Physician Fee Schedule

CMS is also proposing targeted updates to the Physician Fee Schedule (PFS) to better reflect how healthcare services are delivered today. The proposed changes would improve alignment between payment rates and the actual time, resources, and complexity of care delivery, account for efficiencies when multiple services are provided in a single encounter, and increase transparency into how physician payment rates are calculated. The proposals also aim to strengthen oversight of billing practices in areas where claims may not accurately reflect services rendered.

Sunsetting Traditional MIPS in Favor of Value Pathways

CMS is proposing to end traditional Merit-based Incentive Payment System (MIPS) reporting beginning with the 2029 performance period, transitioning clinicians toward MIPS Value Pathways (MVPs) — specialty-focused reporting options designed to reduce burden and generate more meaningful quality data.
Three new MVPs targeting diabetes, hypertension, and hospital-based care are proposed, which would bring the total inventory to a level covering approximately 98% of specialties. Beginning in 2027, a new MIPS Core Measures framework would require every clinician to report at least one measure considered fundamental to their specialty.

The rule also proposes to reform how APM incentive payments are calculated, closing a loophole that CMS estimates could otherwise result in approximately $2.38 billion in unwarranted payments to clinicians not actively participating in value-based care models.

What This Means for Healthcare Organizations

These proposals represent one of the most significant shifts in Medicare payment policy in recent years, with direct implications for physician practices, ACOs, and revenue cycle operations.
Clinicians currently reporting under traditional MIPS should begin planning their transition to MVPs ahead of the 2029 sunset. Practices participating in or considering ACO arrangements should review the proposed Shared Savings Program changes, particularly the updated benchmarking methodology and new entrant incentives.
Revenue cycle teams will need to monitor how PFS recalibration affects payment rates across service lines and assess any billing practice areas flagged for heightened CMS oversight. Public comments on the proposed rule are open — healthcare organizations are encouraged to engage before the comment period closes.
Sources: CMS Press Release, CMS PFS Fact Sheet, Shared Savings Program Fact Sheet, Federal Register, Quality Payment Program Fact Sheet