Signature
CF_new = CF_prev * BN * (1 + u) * (1 + k)
| Inputs | Definition | Unit |
|---|---|---|
CF_prev | Factor from which the new year's factor is built; for 2026 the single 2025 factor, 32.3465 | US dollars per relative value unit |
BN | Adjustment that offsets the spending effect of changes in relative value units; 1.0049 for 2026 | multiplier |
u | Update for the year written as a proportion; 0.0075 for qualifying participants and 0.0025 for others in 2026 | proportion |
k | One-year increase written as a proportion; 0.025 for 2026, and minus 0.02439 (1 / 1.025 minus 1) to remove it the following year | proportion |
CF_new | Conversion factor for the payment group in the new year | US dollars per relative value unit |
|---|
Function
Medicare physician fee schedule payment from relative value units and the conversion factor
Turns the relative value units of a service, adjusted for local practice costs, into a dollar payment by multiplying by the conversion factor, and updates the factor each year by a chain of statutory and budget neutrality adjustments. Relative values set the ratios between services; the conversion factor sets the money level of all of them. Notation follows the Conversion Factor article, with its 2026 factors from the CMS final rule.
Try this function
Implementations
Excel
Qualifying and non-qualifying conversion factors from named update components
With PrevCF, BNAdj, UpdateQP, UpdateOther and OneYearInc named, the formulas return the two factors rounded to four decimals as CMS publishes them, held in CFQualAPM and CFNonQualAPM.
=ROUND(PrevCF*BNAdj*(1+UpdateQP)*(1+OneYearInc),4); =ROUND(PrevCF*BNAdj*(1+UpdateOther)*(1+OneYearInc),4)
Assumptions
Multiplicative chain in the order CMS applies it
CMS multiplies the 2025 factor by the budget neutrality adjustment, then the update, then the 2.50 per cent increase; because the steps multiply, their order does not change the result, but adding the percentages does.
Budget neutrality multiplier estimated by CMS
BN is CMS's estimate from prior-year utilisation of what keeps spending within 20 million dollars of what it would have been without the revaluations; HE-FM-CVF-003 shows the logic in simplified form.
Worked examples
2026 conversion factor for practitioners who are not qualifying participants
32.3465 times 1.0049 times 1.0025 times 1.0250 gives 33.4009, the factor CMS generally treats as the default, as in the article and the final rule.
CF_prev = 32.3465; BN = 1.0049; u = 0.0025; k = 0.025; CF_new = 33.4009
2026 conversion factor for qualifying participants
Replacing the 0.25 per cent update with 0.75 per cent gives 33.5675, as in the article and the final rule.
CF_prev = 32.3465; BN = 1.0049; u = 0.0075; k = 0.025; CF_new = 33.5675
2027 proposed factor for qualifying participants rebuilt from the fact sheet
Starting from 33.5675, the proposed budget neutrality adjustment of 0.53 per cent, the 0.75 per cent update and removal of the 2.50 per cent increase give about 33.1693, matching the proposed 33.17; the same chain from 33.4009 with the 0.25 per cent update gives 32.84 (computed here for illustration; the final 2027 rule may differ).
CF_prev = 33.5675; BN = 1.0053; u = 0.0075; k = -0.024390; CF_new = 33.1693
Common errors
Adding the percentage changes
Adding 0.49, 0.75 and 2.50 per cent to the 2025 factor gives 33.5563 for qualifying participants instead of 33.5675 (computed here for illustration); the components compound.
Adding the per centage changes
Adding 0.49, 0.75 and 2.50 per cent to the 2025 factor gives 33.5563 for qualifying participants instead of 33.5675 (computed here for illustration); the components compound.
Carrying the one-year increase into the next year
The 2.50 per cent increase applied to 2026 only; the 2027 proposed rule gives factors of 33.17 and 32.84, below the 2026 values, so a model priced in 2027 should not inflate 2026 fees by the update alone.
Reading a higher factor as higher resource costs
The factor is a price level chosen under statutory updates and budget neutrality; a rise does not show that the resources used per service cost more, and a fall does not show greater efficiency.
Sources
Construction of the CY 2026 conversion factors in the final rule
Centers for Medicare & Medicaid Services. CY 2026 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies. Final rule CMS-1832-F. Federal Register. 2025;90:49266 (5 November 2025) (full text read). Pages 49960 to 49961: beginning in CY 2026 there are two conversion factors; the update is 0.75 per cent for the qualifying APM CF and 0.25 per cent for the nonqualifying APM CF; CMS took the CY 2025 conversion factor, multiplied it by the budget neutrality adjustment, then by the updates, then applied the 1-year increase of 2.50 per cent; the qualifying APM CF is 33.5675 and the nonqualifying APM CF 33.4009, each reflecting a 0.49 per cent positive budget neutrality adjustment. Page 49960: RVU changes may not move Part B expenditures by more than 20 million dollars, and the estimates use CY 2024 Medicare utilisation. Summary of Costs and Benefits: the current conversion factor is 32.3465.
CY 2027 proposed conversion factors after the one-year increase ends
Centers for Medicare & Medicaid Services. Calendar Year (CY) 2027 Medicare Physician Fee Schedule Proposed Rule. Fact sheet; July 2026 (full text read). The changes for CY 2027 include the 0.75 and 0.25 per cent updates and an estimated 0.53 per cent adjustment for proposed changes in work RVUs; the one-year 2.50 per cent increase for CY 2026 will no longer be in effect; the proposed qualifying APM conversion factor is 33.17 and the nonqualifying APM conversion factor 32.84.
Canonical Identity
Stable URI · Machine-readable · Resolvable · CC BY 4.0