Provider Reimbursement Stability Act of 2026

Summary of Bill HR 8163 (119th Congress) — Provider Reimbursement Stability Act of 2026

Purpose and overall aim

• The bill seeks to ensure greater stability in Medicare provider payments by modifying how budget neutrality adjustments are calculated and applied to the Physician Fee Schedule (PFS) and related payment systems under the Medicare program.
• It focuses on updating thresholds, improving handling of estimated utilization, timing of input cost updates, and limiting year-to-year swings in the conversion factor.

Key provisions and changes

1) Updating the budget neutrality threshold (Section 2)

• Replaces the current threshold language with a clearer, defined sequence:
  • Establishes a new defined threshold amount (item (bb)).
  • For years:
  • 2027: threshold is $54,300,000.
  • Before 2027: threshold remains $20,000,000.
  • 2028 and onward: threshold equals the amount specified in the prior year (i.e., a rolling, year-over-year approach).
• Introduces an indexing mechanism:
  • Beginning in 2032 and every five years thereafter, the threshold (item (bb)) would be increased by the cumulative percentage increase in the MEI (Medicare Economic Index) related to physician services for the five years ending the preceding year.

2) Budget neutrality corrections relating to estimated utilization (Section 3)

• Adds a new budget neutrality correction mechanism tied to estimated utilization for a given year (starting with 2027).
  • If an adjustment is needed due to differences between estimated and actual utilization for a specified service, the bill requires adjusting the PFS conversion factor during the “assumption correction period” (the second year after the year in question).
  • Defines key terms:
  • Assumption correction period: the second year following the year being adjusted.
  • Estimated utilization: utilization used for applying certain budget neutrality adjustments.
  • Specified service: a service with expenditures based on estimated utilization exceeding the threshold and/or services whose payment had been bundled into another service in the prior year.
  • Threshold amount: defined as 0.1% of total estimated expenditures under Medicare Part B for the year.
• Limits adjustments to only those cases where the delta between estimated and actual expenditures exceeds the threshold.

3) Nonapplication of certain reconciliation adjustments (Section 3)

• Excludes the budget neutrality adjustments tied to assumption correction periods from reconciliation adjustments in later computations, to prevent double-counting.
• Adds a new subclause to address reductions attributable to the assumption correction period.

4) Timely updates to direct costs used to calculate practice expense RVUs (Section 4)

• Requires updates to direct cost inputs for calculating practice expense relative value units (RVUs) at least every five years, on a category-wide basis.
• Categories include: clinical staff wage rates, prices of medical supplies, prices of equipment, and other direct cost inputs used in the physician’s services methodology.
• Updates must be applied in the same year across all direct cost categories, with Secretary of Health and Human Services coordinating consultation with relevant stakeholders (including physician specialty societies).

5) Limitation on year-to-year conversion factor variance (Section 5)

• Beginning in 2027, restricts annual budget neutrality adjustments so that the physician conversion factor (the dollar amount used to convert RVUs into payments) cannot vary by more than 2.5% from the previous year’s conversion factor, after adjustments already provided under the Act.
• The overall budget neutrality requirement remains in place; this section simply caps volatility year-to-year.

Who/what is affected

• Medicare Part B physicians and other providers reimbursed under the Medicare Physician Fee Schedule and related direct costs RVU calculations.
• Entities involved in determining and applying budget neutrality adjustments, physician services utilization modeling, and cost-input updates (e.g., CMS, medical specialty societies, and related stakeholders).

Procedural and timeline aspects

• Introduced in the House on March 30, 2026, and referred to the Committee on Energy and Commerce and the Committee on Ways and Means.
• Key effective periods:
  • 2027 triggers new budget neutrality correction mechanisms tied to estimated utilization.
  • 2027 onward: potential annual budget neutrality adjustments are constrained by the 2.5% annual conversion factor variance cap (subject to ongoing budget neutrality requirements).
  • Five-year update cadence for direct cost inputs, at least every five years, with category-wide synchronization.

Potential impact (high-level)

• Aims to reduce volatility in Medicare physician payments by:
  • Setting explicit, higher initial budget neutrality thresholds (with escalation over time).
  • Introducing a mechanism to correct for misestimates in utilization, aligning expenditures more closely with actual practice patterns.
  • Limiting year-to-year swings in the conversion factor to improve payment predictability for providers.
  • Codifying regular, stakeholder-informed updates to the cost inputs underlying RVUs, potentially moderating input cost shocks to physician practice expenses.