Two physician groups asked CMS to exclude independent clinicians from the indirect practice expense reduction that went into effect Jan. 1 (
PBN 11/13/25). Their proposed solution includes the creation of a new modifier.
In the document “Policy Recommendation for Indirect Practice Expense Allocation & List of Current Indirect Practice Expenses,”
McDermott+, which requested the meeting, and its clients,
Envision and
SCP Health, acknowledged the importance of CMS’ goals in making the reduction, which included better payment accuracy and the reduction of consolidation. However, they believe the current rule is too broad and should not apply to clinicians who work in the facility setting, but who are not employees of the facility, such as anesthesia providers, emergency medicine specialists and hospitalists.
The policy assumes that the majority of facility-based clinicians are employed by the facility itself, when in fact, for some of the largest facility-based services, the majority of facility-based clinicians are employed independently (e.g., 75% of emergency medicine clinicians; 50% of hospitalist medicine clinicians).
When these specialists maintain independent practices, their expenses are similar to those of facilities and practices that aren’t facility-based, the petitioners observed, which in turn “unintentionally disadvantages independent practices that furnish services in hospitals and other facility settings,” and “the policy functions as a payment reduction that assumes fewer costs incurred or alternative funding for these costs, neither of which are accurate.” The payment cut also increases the risk of consolidation, according to the document.
To increase payment accuracy and help independent providers stay independent, the petitioners proposed a new modifier that practices would report with services performed by independent clinicians.
When reported on a qualifying claim, the modifier would trigger a targeted payment adjustment, more accurately reimbursing for these services using the CY 2025 PE RVU calculation methodology. For facility-based services billed without the modifier, indicating those services were rendered by a hospital-employed physician or clinician, the CY 2026 practice expense reduction would remain intact.
A second document titled “Examples of use of modifier” includes scenarios that show when the modifier would and would not apply.
For example, the modifier would apply when a physician is independent of the hospital, responsible for the indirect practice expense and receives payment under the Medicare physician fee schedule. It would not apply to specialists who are employed by an organization that is owned by a hospital, such as a hospital-owned organization that employs academic physicians who practice in the hospital.
Whether CMS accepts the proposal for 2027 or in the future remains to be seen, but it does show that organizations are thinking creatively about ways to support CMS policies while protecting providers from unintended consequences of those policies.