KZA Alert: CMS 2.5% Physician Fee Schedule Efficiency Adjustment

CMS has implemented a 2.5% “efficiency adjustment” to most non-time-based CPT and HCPCS codes under the CY 2026 Physician Fee Schedule—and for many procedural and surgical specialties, the impact may be greater than it initially appears. In this KZA Alert, we break down what the adjustment means, why surgeons and procedural practices may be disproportionately affected, and how the change could influence Medicare and commercial payer reimbursement moving forward.This rapid-response update explores the financial and operational implications of the new rule, including pressure on procedural RVUs, rising fixed costs, site-of-service strategy, and the growing reliance on commercial payer cross-subsidization. We also discuss practical action steps practices should take now to evaluate payer contracts, assess reimbursement risk, and prepare for the long-term effects of continued Medicare payment erosion.Resources:CY 2026 PFS Final RuleCMS Modernizes Payment Accuracy and Significantly Cuts Spending WasteAMA Comments on 2026 Medicare Fee Schedule