What Is the CY2026 Efficiency Adjustment and How Does It Impact Internal Medicine Billing?

The CY2026 Efficiency Adjustment is one of the important changes introduced under the 2026 Medicare Physician Fee Schedule. Effective January 1, 2026, CMS finalized a 2.5% reduction to the work RVUs of most non-time-based services. However, the adjustment does not apply broadly to every service billed by an internal medicine practice. Time-based services, including many evaluation and management (E/M) and care management services, are excluded.

For internal medicine practices, understanding which services are affected is important because the adjustment can change reimbursement for certain procedures and ancillary services even when claims continue to process normally.

For a detailed overview, practices can review What Is the CY2026 Efficiency Adjustment and How Does It Impact Internal Medicine Billing?.

What Is the CY2026 Efficiency Adjustment?

CMS finalized the efficiency adjustment as part of the CY2026 Physician Fee Schedule. The policy applies a -2.5% adjustment to the work component of affected non-time-based services. CMS based the adjustment on a five-year productivity look-back using the Medicare Economic Index.

CMS's rationale is that certain services may become more efficient to perform over time as technology, clinical workflows, and practitioner experience improve.

Importantly, this is not a blanket 2.5% reduction in every Medicare payment. The effect depends on the specific code and its RVU components.

Which Internal Medicine Services Are Most Relevant?

Internal medicine practices should first separate their services into affected and excluded categories.

Service Category	General CY2026 Treatment
Office E/M services	Generally excluded
Care management services	Generally excluded
Behavioral health services	Generally excluded
Certain telehealth services	Generally excluded
Non-time-based procedures	Subject to adjustment
Certain diagnostic and procedural services	Review specific code
Other non-time-based services	Review CMS code list

CMS specifically excluded time-based services such as E/M, care management, behavioral health, Medicare telehealth-list services, and certain other categories from the efficiency adjustment.

Therefore, an internal medicine practice should not assume that its entire Medicare revenue will decline by 2.5%.

Why the Adjustment Matters for Internal Medicine

The direct financial effect may be concentrated in specific services rather than routine office visits.

An internal medicine practice that primarily provides E/M and care management services may have limited direct exposure. However, practices that frequently bill non-time-based procedures or diagnostic services should review their code mix carefully.

For example, a practice could provide office visits along with other separately billable services. The E/M service may be excluded while another non-time-based service on the same claim may be subject to the adjustment.

Without code-level reporting, that difference can be difficult to see.

A Payment Change Is Not the Same as a Denial

One important distinction is that the efficiency adjustment is not a denial-management issue.

A claim can be:

• submitted correctly,
• accepted by the payer,
• adjudicated normally, and
• paid according to the applicable fee schedule,

while the reimbursement is still different because the affected code's valuation has changed.

That means traditional denial reports will not necessarily identify the financial impact.

Practices need to compare expected reimbursement against actual payment at the code level.

How Internal Medicine Practices Can Measure the Impact

Start by identifying every Medicare code your practice billed during 2025 and early 2026.

Then classify those codes as:

Excluded: Services not subject to the efficiency adjustment.

Affected: Services included in CMS's final efficiency-adjustment list.

Uncertain: Codes requiring additional review based on their specific classification or payer.

Next, compare historical utilization with 2026 reimbursement.

A simple analysis can show:

2025 volume × 2025 expected payment

versus

2026 volume × 2026 expected payment

This helps distinguish the impact of the efficiency adjustment from changes caused by volume, payer mix, coding, utilization, or other reimbursement changes.

CMS has published an updated list of codes subject to the efficiency adjustment as part of the CY2026 final-rule supporting files.

Review Your Ancillary Service Mix

Internal medicine practices should pay particular attention to non-time-based services.

If a practice provides diagnostic testing, procedures, or other services affected by the final code list, administrators should determine:

• How frequently each affected code is billed
• Which providers perform the service
• Which payers reimburse the service
• Average reimbursement before 2026
• Expected 2026 reimbursement
• Actual 2026 payment
• Whether commercial payers have adopted similar changes

This creates a more accurate picture of the financial exposure.

Do Not Assume Commercial Payers Follow Medicare Automatically

The Medicare efficiency adjustment applies to Medicare's Physician Fee Schedule.

Commercial insurers may use different contracts, fee schedules, and reimbursement methodologies.

Therefore, internal medicine practices should not automatically apply the Medicare reduction to every payer.

Instead, review each payer's contracted rates and payment activity separately.

This is especially important for practices with a large commercial-payer population.

Review Provider Compensation Models

The efficiency adjustment may also matter when physician compensation is tied to work RVUs.

A reduction in the work RVU for affected services can influence productivity calculations even if the practice's overall cash collections do not decline by the same percentage.

Administrators should therefore review whether affected services influence:

• Physician productivity
• RVU-based compensation
• Bonus calculations
• Provider benchmarks
• Service-line profitability

The American College of Obstetricians and Gynecologists similarly notes that the adjustment affects work RVUs rather than representing a direct 2.5% payment reduction, illustrating why practices should evaluate both reimbursement and productivity implications.

Build a Code-Level Revenue Report

A useful monthly report can include:

Metric	What to Review
CPT/HCPCS code	Affected service
Units	Volume billed
Work RVU	2025 vs. 2026
Expected payment	Contracted/fee-schedule amount
Actual payment	Amount received
Variance	Expected vs. actual
Payer	Medicare/commercial/etc.
Provider	Rendering provider
Revenue impact	Estimated dollar difference

This report allows administrators to see exactly where payment changes are occurring.

Watch for Underpayments Separately

An efficiency adjustment should not become an excuse for unexplained underpayments.

If the expected Medicare payment for an affected service is lower because of the finalized RVU valuation, that is different from a payer paying less than the applicable fee schedule.

Your billing team should therefore maintain a clear distinction between:

CMS valuation changes

and

payment variances or underpayments.

This distinction becomes particularly important when reviewing contracts and payer performance.

What Should Internal Medicine Practices Do Now?

A practical approach is to follow five steps.

1. Identify Affected Codes

Compare your 2025 and 2026 billing data against CMS's final efficiency-adjustment code list.

2. Quantify Your Exposure

Calculate how much Medicare revenue comes from affected services.

3. Compare Expected and Actual Payments

Look for differences that cannot be explained by the RVU change.

4. Review Provider Compensation

Determine whether affected work RVUs influence physician productivity or compensation.

5. Monitor Monthly

Do not wait until the end of the year to determine whether the adjustment is affecting your practice.

Why Billing Visibility Matters

The CY2026 Efficiency Adjustment demonstrates why revenue-cycle management needs to go beyond claim submission and denial tracking.

A practice can have a strong clean-claim rate and still experience reimbursement changes because the underlying valuation of certain services has changed.

That is why internal medicine practices should combine:

Claim-level reporting

with

payment variance analysis

and

code-level revenue monitoring.

This approach can identify financial changes earlier and help administrators determine whether the issue is related to CMS valuation, payer behavior, coding, utilization, or another factor.

Practices evaluating specialized billing support can also review Best Internal Medicine Billing Companies 2026.

Final Thoughts

The CY2026 Efficiency Adjustment is a targeted change, not a blanket 2.5% cut to internal medicine reimbursement.

CMS finalized a -2.5% adjustment to the work RVUs of most non-time-based services, while excluding several time-based service categories.

For internal medicine practices, the right response is not to assume a fixed percentage revenue loss. Instead, identify the affected codes, measure their utilization, compare expected and actual payments, review payer contracts, and monitor the impact on both revenue and provider productivity.

The key is visibility. When practices know which services are affected and how those changes translate into actual payments, they can make better decisions about billing, contracts, provider compensation, and overall revenue-cycle performance.