The $523 Knee: Who Wins and Who Loses in Medicare’s 2027 Fee Schedule

Five hundred twenty-three dollars and forty-eight cents. Under the CY 2027 Medicare Physician Fee Schedule proposed rule, that’s what the physician work of a total knee replacement would pay: 15.94 proposed work RVUs multiplied by the proposed $32.8409 conversion factor.¹ A total hip comes to $504.76. The figure covers the operation itself, the decision-making, the risk, and every postoperative visit for 90 days. Ben Schwartz, whose read on the rule I recommend following, pegged the surgeon’s effective take-home at roughly $550 per joint; my arithmetic lands a shade lower.² Either way, the order of magnitude is the story. The full professional fee, the part that also has to cover overhead and malpractice, runs about $1,160 today for the joint and its 90 days of care; this rule takes roughly another tenth off the top of that.²

Last week I published a code-by-code walkthrough of what this rule does to orthopedics, and a companion piece on what it does to health technology companies.³ This piece asks a different question: the fee schedule is budget neutral by statute, so if my specialty is down 7 percent, someone else is up. Who? By how much? And is CMS right to move the money?

1.Every cut in this rule is somebody else’s raise

Section 1848 of the Social Security Act requires that changes to RVUs projected to move spending by more than $20 million be offset so the roughly $91.4 billion fee schedule pool stays flat.¹ The politics of every fee schedule cycle obscure this arithmetic. The 2027 proposed rule is blunt about it. In the regulatory impact analysis, after cataloguing the specialties facing significant decreases, CMS writes: “Most other specialties receive a small increase due to the redistribution of those RVUs.”¹ The rule is less of an austerity document and more of a direct transfer ledger.

Two proposals do the heavy lifting, by CMS’s own attribution: the 50 percent payment reduction for a separately billed E/M visit on the same day as a procedure (the modifier -25 policy), and the removal of the Indirect Practice Cost Index from the practice expense methodology.⁵ Layer the arthroplasty work-RVU revaluations on top and you get the ledger below. The conversion factor cuts (−1.19% for qualifying APM participants, −1.68% for everyone else) then apply to winners and losers alike, outside budget neutrality; CMS estimates the CF update alone transfers about $2.1 billion from clinicians to the trust fund in 2027.¹

2.The ledger: every specialty, one chart

Table D-B5 of the proposed rule, drawn in full. Impacts are budget-neutral RVU redistributions on total allowed charges and exclude the conversion factor change. Hover or tap any bar for the work/PE/malpractice decomposition and the size of each specialty’s Medicare pool.

Read the ledger for a minute before moving on, because it falsifies the easy narrative. This is not a clean generalists-versus-specialists story. Vascular surgery gains 3 percent. Interventional radiology gains 3. Radiation oncology gains 3. Cardiac surgery and thoracic surgery come out ahead. The cuts concentrate on two specific exposures: specialties that bill office visits alongside same-day procedures (dermatology −9, otolaryngology −9, podiatry −4, hand surgery −5), and the operating-room specialties whose flagship codes were revalued (orthopedics at −7 overall, the only specialty whose overall impact includes a malpractice-RVU cut). The facility-side number I took note of: −8 percent, the worst facility impact of any specialty in the rule.¹

3.The losers’ column runs deeper than the chart shows

The ledger understates orthopedics’ position, for three reasons.

The second wave is already drafted. Buried in the potentially misvalued services section, CMS entertains a nomination, built on Maryland all-payer claims data and NSQIP operative times, arguing that intraservice times for 13 codes remain too long, naming 27130, 27447, and total shoulder 23472 again, and cites a RAND-NSQIP analysis flagging 97 musculoskeletal codes whose assumed times “were likely too long.” CMS asks whether it should act on this empiric data “for CY 2027, or for future rulemaking.”¹ Separately, it proposes eight Harvard-era codes as potentially misvalued, and the list reads like an orthopedic clinic schedule: large-joint injection (20610), deep implant removal (20680), open humeral shaft fracture treatment (24515), carpal tunnel release (64721), shoulder arthroscopy with distal claviculectomy (29824). This year’s cut is the beginning of a program, and the program has a target list.

The global package is being disassembled in public. CMS proposes to publish a file showing what every 10- and 90-day global surgical payment would look like with the imputed postoperative visits stripped out, citing claims data that only 4 percent of 10-day globals and 67 percent of 90-day globals show even one reported postoperative visit.¹ Surgeons who treat 99024 reporting as optional paperwork should understand what that file is for. It is the actuarial groundwork for paying us less, and our own documentation habits are supplying the evidence.

The floor keeps moving. Inflation-adjusted reimbursement for primary hip and knee arthroplasty fell 56 percent from 2000 to 2024, and about 53 percent across all arthroplasty, before this rule was written.⁴ The AMA’s long-arc figure for all physicians is a 33 percent real-terms decline since 2001 while practice costs rose 59 percent.⁶ OrthoForum, representing 96 independent orthopedic groups, calls the arthroplasty proposal a 20 percent cut stacked on last year’s 8 percent.⁷ Whatever the merits of any single revaluation, the trajectory is what a payment system looks like when it has concluded a service will keep being delivered no matter what it pays. So far, we keep proving that conclusion right.

The other names in the losers’ column

Remote monitoring vendors, as currently constructed. The proposal’s staffing rule will be devastating for some business models: RPM and RTM management codes would be billable only when furnished by clinical staff the billing practice actually employs. That single sentence disqualifies the turnkey vendor model that built this industry from roughly 55,000 Medicare users in 2019 to 570,000 in 2022, with payments growing from $15 million to over $300 million.⁸ Cadence, one of the category’s largest operators, warns that a blanket direct-employment requirement “would make it harder for even the country’s largest health systems to deliver RPM at scale.”⁹ CMS also proposes stripping the practice-expense inputs out of the monthly management codes and floats collapsing all seventeen remote monitoring codes into four bundled G-codes. The quiet winners inside this loss: practices and health systems that internalized monitoring into their own care teams, who inherit a market their outsourced competitors are being regulated out of. And perhaps ACCESS participants, who may now serve as critical clinical infrastructure, with a co-management setup that makes these organizations the natural void-filler for the turnkey model.²⁰

Independent laboratories. Statutory rather than discretionary, but real: private-payer-based repricing under PAMA finally resumes, with cuts capped at 15 percent per year for 2027, 2028, and 2029.¹ Three consecutive years of double-digit exposure.

Solo practitioners. The MIPS tables in the impact analysis are bleak. A majority of solo practitioners (52.5 percent) submit no MIPS data and absorb the full −9 percent penalty, while the maximum bonus for everyone who does report is an estimated +1.34 percent on a $330 million redistribution pool.¹ Nine points of downside chasing one point of upside is not an incentive program. It is a tax on smallness with paperwork.

Large ACOs that harvested regional benchmarks. The losers’ column includes some value-based players. CMS proposes cutting the maximum positive regional benchmark adjustment in the ENHANCED track from 50 to 35 percent, observing that only about 2 percent of ENHANCED ACOs owed losses in PY 2024 while 90 percent collected savings, and that favorable regional adjustments let ACOs “maximize earnings… without taking on a high degree of real risk.”¹⁰ CMS is learning to distinguish earned savings from benchmark arbitrage. Surgeons should notice that this is the same distinction we asked for in bundles, applied in the other direction.

Hospital-employed physicians, prospectively. The rule seeks comment on whether the facility-setting indirect practice expense allocation should fall below 50 percent, potentially to zero, for physicians employed by hospitals, possibly tracked through a new modifier identifying employment status.¹ If that idea matures, the economics of hospital employment change for every proceduralist reading this.

And the RUC itself. The rule contains a request for information questioning federal reliance on the AMA’s CPT coding monopoly and the RUC’s survey-based valuations, and asks openly whether procedures should instead be paid through ICD-10-PCS groupings “similar to Medicare Severity Diagnosis Related Groups.”¹ DRG-style bundling of professional fees would be the largest structural change to surgeon payment since 1992. It is an RFI, no more. RFIs in this agency have a habit of becoming proposed rules within three cycles.

4.The winners’ column

Behavioral health gets the largest raise in the rule. Clinical social workers +12 percent, clinical psychologists +11, psychiatry +3, with the collaborative care management codes revalued upward as much as 46 percent.¹ After decades in which the payment system treated behavioral health as an afterthought, I find it hard to argue the money is misdirected.

Primary care’s raise is bigger than its +1 percent suggests. Family practice and internal medicine show modest ledger gains, geriatrics +4, nurse practitioners +2. The real move is structural. CMS proposes to delete the G2211 complexity add-on and replace it with a modifier, MOD1, worth 16 percent of the underlying office visit’s total RVUs. Percentage-based rather than flat, so it scales with visit level, and it compounds over a primary care panel. Rural health clinics gain stand-alone billing for diabetes education and nutrition therapy; new advance care planning codes let clinical staff time be billed; the prospective primary care payment discussion in the Shared Savings Program signals where CMS wants primary care economics to land. Primary care physicians have absorbed the same 33 percent real-terms decline as the rest of us with far less procedural revenue to cushion it.⁶ CMS is right to move money here.

Rehabilitation and post-acute clinicians win quietly. Physical and occupational therapy +3 percent. Geriatrics +4. The rule fixes a long-standing anomaly by setting facility practice expense equal to office-level for nursing facility visit codes 99304–99310, a direct raise for clinicians rounding in skilled nursing facilities.¹ If you came into this piece with the instinct that post-acute providers win, that instinct is right with one refinement: the win lands on the professional side of post-acute care. Facility rates for SNFs live in a different rulebook. And the measurement layer wins too: the rule proposes replacing seven legacy MSK functional-status quality measures with five PROMIS-based measures stewarded by a digital MSK company and its measure-development partner, which tells you outcome infrastructure is becoming its own market.¹

5.The biggest winner is a business model: accountable care, now priced into fee-for-service

Alongside MOD1 at 16 percent, CMS proposes MOD2, worth 32 percent of the office visit’s total RVUs, exclusively for services furnished within a Shared Savings Program ACO or the new LEAD model. The rule states the intent plainly: the modifier “is expected to increase payment for practitioners that furnish a higher percentage of their services in ACOs.”¹ On a level-4 established visit paying roughly $122, that is about $39 per visit inside an ACO versus about $20 outside one, by my estimate. Across a primary care panel running 3,000 Medicare visits a year, the differential alone is roughly $58,600. For the first time, ordinary fee-for-service claims pay double for being inside the accountable care architecture.

The rest of the Shared Savings Program package points the same direction. The BASIC track’s highest level would keep 60 percent of savings instead of 50, worth an average of $1.3 million per ACO by CMS’s own modeling. ACOs with a track record of real savings get 75 percent of them credited back at rebasing instead of 50, a direct concession to the ratchet complaint bundled-payment veterans know intimately. A new benchmark “growth adjustment” pays ACOs to recruit clinicians who have not been in a Medicare ACO within the past five years, projected to route $5.3 billion in additional shared savings over ten years. ACOs gain the ability to waive Part B cost sharing for their patients. Qualifying APM participants keep the higher conversion factor update, compounding roughly half a percent per year, plus a restored 3.1 percent lump-sum bonus in 2028.¹⁰ Add it up and the direction is unambiguous: CMS is paying clinicians to enter the accountable care tent, paying them more to stay, and paying the tent to grow.

The 2027 rule uses fee-for-service as the delivery vehicle for value-based incentives. That is exactly the right instinct. Which makes the omission at the center of it harder to excuse.

6.CMS is half right, and the half it got wrong is the half that operates

Primary care undervaluation is absolutely real, and it is decades old. The evidence that longitudinal relationships and behavioral health integration produce downstream savings is credible. Budget neutrality is statute, so any correction must come from somewhere, and high-dollar procedural codes are where the money is. If survey-based time assumptions overstate how long a routine primary knee takes in 2026, revaluation is defensible on its own terms. I accept all of that.

The failure is in what the rule assumes about the services being cut. Hip and knee replacement are among the most cost-effective interventions medicine has ever produced, with implant survivorship now measured in decades, for a population that is aging into arthritis faster than the workforce treating it is growing. A payment trajectory of −56 percent in real terms with another 20 points proposed does not merely shave margin.⁴ It accelerates consolidation into hospital systems that charge commercial payers multiples of independent rates, pushes senior surgeons toward the exits, and thins access for exactly the beneficiaries CMS is trying to protect. AMGA’s reaction cut to the structural point: the update mechanism fails to track what care costs to deliver, year after year, by design.¹¹

And the deeper flaw: the rule builds an elegant on-ramp into accountable care for cognitive specialties and no procedural equivalent. If the strategy is to use fee-for-service to pull clinicians into value-based arrangements, the test of good faith is whether every clinician who wants accountability has a door to walk through. Run that audit for a surgeon and watch what happens.

7.The on-ramp audit, and the inconvenient history behind it

Where can an orthopedic surgeon directly hold Medicare episode risk in 2027?

Every door is either closed, held by a hospital, or built for someone else. This would be easier to accept if surgeons had never been offered accountability and failed to show up. The record says the opposite. When BPCI and BPCI Advanced let physician group practices hold joint replacement episodes directly, physician groups took on 73 percent of those episodes and outperformed hospitals by $242 per episode; earlier BPCI cohorts showed physician-group participation cutting $1,180 per episode, with the savings coming from post-acute care decisions surgeons are positioned to make better than anyone.^12,13 At NYU Langone, bundled joint replacement episodes saw discharges to institutional post-acute care fall from 44 to 28 percent while average episode cost dropped from $34,249 to $27,541.¹⁴ Musculoskeletal care did not resist value-based payment. We piloted it: preoperative optimization, surgical homes, outpatient migration that took Medicare’s inpatient share of primary joints from 100 percent to 29 percent in four years.¹⁵

What ended it was not performance. It was the benchmark ratchet: each year of savings reset the target lower until participants were penalized for their own efficiency, documented in the arthroplasty literature under the exact title the experience deserved, “From Winners to Losers.”¹⁶ BPCI Advanced then sunset at the end of 2025 with no physician-group successor. Notice the asymmetry in this year’s rule: CMS just fixed the ratchet for ACOs, crediting back 75 percent of prior savings at rebasing, while the population that proved the ratchet was a problem has no program left to apply the fix to. Ben Schwartz has published the most complete design for what a successor should look like, BPCI-X: fixed five-year benchmarks, honest risk stratification, an ASC track, mandatory gainsharing where hospitals hold the episode.¹⁷ The agency does not need new evidence. It needs to act on the evidence it already generated.

8.Treat specialists like a lever, not a cost center

The most frustrating part of this rule is not the arithmetic. It is the posture. CMS keeps treating specialty care as the cost to be managed, when the record above says specialists are the lever it keeps declining to pull. We are able and willing, and the infrastructure already exists. The ACCESS model, live as of this month, pays for technology-enabled longitudinal management of chronic musculoskeletal pain, and it already includes a co-management payment: a referring clinician, including a surgeon, can bill G0677 for co-managing a patient with an ACCESS participant, at thirty dollars a visit, up to three times a year.²⁰ That is a real hook. It just stops at the operating room door.

Extend it through that door and the episode redraws itself. The diagram below is the care pathway I want CMS to price: the solid lines exist today; the gold dashed lines are the asks. Watch where the surgeon sits. Instead of a proceduralist whose global fee shrinks annually, the surgeon becomes a co-manager across the whole arc: optimizing patients upstream with the ACO and the ACCESS platform, collecting patient-reported outcomes as a paid clinical activity rather than an unfunded mandate, running remote recovery through practice-employed teams the 2027 rule itself now favors, and sharing in longitudinal condition management after the wound heals.

The G-code agenda: six asks, one architecture

Price this architecture correctly and three things follow. Integrated practice units stop being a Harvard case study and become a billing reality, because the payments finally line up with the team. Asynchronous care management technology gets a legitimate market, built on practice-employed teams rather than the arbitrage the 2027 rule just shut down. And orthopedic surgeons integrate upstream, into the longitudinal management CMS says it values, instead of being priced out of everything except the incision. The co-management hooks are live today; I would like to see more orthopedic surgeons enroll as ACCESS referrers now and build the muscle before the rules catch up.²⁴ This augments what the fee schedule is taking away, and it is a stronger negotiating position than nostalgia.

9.A better rallying cry than “opt out”

What kind of world cuts a physician’s fees nearly every year while the administrative cost of collecting those fees rises? What kind of world lets a venture fund own a hospital while a surgeon legally cannot open one? Those are not rhetorical flourishes. The ACA’s Section 6001 froze physician-owned hospitals in place in 2010; no comparable federal restriction exists on private equity or venture ownership of hospitals.¹⁸ This is not hypothetical: General Catalyst, a venture capital firm, closed its purchase of Summa Health, an entire Ohio health system, in October 2025 for $485 million.²¹ Meanwhile the evidence on physician ownership runs the other way from the moratorium’s premise: in the largest national comparison, physician-owned hospitals matched non-POHs on mortality, readmissions, and cost, and in CMS’s own arthroplasty data physician-owned hospitals delivered lower Medicare payments, lower risk-adjusted complication scores, and better patient experience than everyone else.^22,23 We say we want a competitive marketplace and then write rules that remove the people delivering the care from ownership and from risk-bearing at the same time. Let us take risk directly. Otherwise, yes, you will find specialists opting out of Medicare, and the independent physician landscape will become more fragmented, not less.

The tempting response is exit. Opt out, go cash, let CMS discover what a fee schedule with no surgeons on it accomplishes. I understand the impulse and think it is a mistake, strategically and morally. Medicare patients are 60-plus percent of a joint replacement practice and a majority of trauma call. Exit abandons them to the consolidated systems driving the prices CMS is trying to control, and it forfeits the argument we are currently winning on the evidence. The stronger play is voice, with receipts. Between now and September 14, the comment window is open,¹⁹ and the asks should be specific:

One: a physician-group episode model, finalized. BPCI Advanced’s successor, with the ratchet fix CMS just proved it knows how to write for ACOs, an ASC track, and risk adjustment that does not punish surgeons for operating on sick patients. The agency’s own data says this saves money.¹² Two: pause the second wave. No further arthroplasty or MSK revaluation from empiric time data until that data’s limitations are worked through in public, with the specialty at the table. Three: extend the MOD2 logic to episodes. If a primary care visit inside an ACO is worth double the add-on, a surgical episode inside accountable arrangements deserves its own differential. Pay accountability wherever it lives. Four: tie the update to something real. An MEI-linked floor, as MedPAC has recommended and AMGA reiterated last week.¹¹

And while we argue, build. The winners in this rule share one trait: they were already standing inside the architecture when the money moved. Run your episodes as if you hold the risk now. Collect the PROs. Formalize the primary care relationships. Own your post-acute pathways. At RevelAi we are building MSK care around exactly that thesis, so discount my enthusiasm as you see fit, but the ledger above is not my opinion. It is CMS’s arithmetic. The 2027 rule tells us the system pays people who show up inside accountable structures. Surgeons built the first ones. The rallying cry is not “let us out.” It is “let us back in, and this time keep the benchmarks honest.”