Analysis based on CMS's CY 2027 Physician Fee Schedule proposed rule, the July 14 CMS fact sheet, the agency's specialty-impact file, and the public docket for CMS-1848-P.
In brief
- CMS proposes 2027 conversion factors of $33.17 for qualifying APM participants and $32.84 for other practitioners, down 1.19% and 1.68%, respectively, from 2026.
- CMS's practitioner-impact file places 93% of the combined physical and occupational therapy category in the 2% to under-5% total-RVU gain range, before conversion-factor and geographic adjustments.
- The proposal would set OT's KX threshold at $2,540, keep the targeted medical-review threshold at $3,000, and add established-patient, initiating-visit, and direct-employment conditions to remote therapeutic monitoring.
The conversion factor is only half the payment story
CMS proposes a qualifying APM conversion factor of $33.17 for 2027, a 1.19% decrease from 2026, and a nonqualifying APM conversion factor of $32.84, a 1.68% decrease. The drop largely reflects the expiration of a one-year 2.5% statutory increase that applies in 2026. Most OT practices will need to identify which conversion factor applies before estimating next year's Medicare revenue.
A conversion factor turns relative value units into dollars, so the lower base does not settle the result for an individual therapy code. Work, practice-expense, and malpractice RVUs can change at the same time. Geographic practice-cost indices, the therapy multiple-procedure payment reduction, assistant modifiers, sequestration, and the practice's service mix also shape the allowed amount and the payment that reaches the clinic.
CMS's practitioner-impact file gives therapy a favorable directional signal. In the combined physical and occupational therapy category, 93% of practitioners fall in the 2% to under-5% total-RVU increase bucket, with nearly all of the remainder in higher positive ranges or near flat. That table groups two professions together and reports RVU movement rather than final receipts. Practices should wait for code-level analysis before writing the gain into a budget.
Practice expense is driving the therapy movement
CMS proposes a broad rewrite of the practice-expense calculation. The agency would give clinical-labor RVUs a role in allocating indirect expense, phase the Indirect Practice Cost Index out over two years, and add a stabilization adjustment intended to limit annual practice-expense RVU movement to 5% for many established codes.
The IPCI has been a consequential number for private-practice therapy. CMS's 2027 file lists the occupational therapy IPCI at 0.89862 and the private-practice physical therapy index at 0.81915. Under the proposal, CMS would apply only half of the measured IPCI variation in the first transition year and remove the index in the second. The rule says this would allow code-level inputs to carry more weight than historic specialty survey data.
The 5% stabilizer has boundaries. CMS says it would apply before a separate statutory phase-in rule, and it would exclude new, revised, newly nationally priced, and revalued codes under the current proposal. A clinic should therefore review the actual codes it bills instead of treating the specialty average as a uniform rate increase. Splinting, evaluation, self-care, therapeutic activity, neuromuscular reeducation, and remote-monitoring codes can move differently.
The KX line would move to $2,540
CMS proposes a $2,540 KX modifier threshold for occupational therapy services in 2027, up from $2,480 in 2026. OT keeps its own threshold; physical therapy and speech-language pathology share a separate $2,540 threshold. The calculation uses a proposed 2.5% increase in the Medicare Economic Index and may be updated with newer economic data in the final rule.
Crossing the KX threshold does not end coverage. It changes the claim and documentation responsibility. For medically necessary OT above the threshold, the provider appends KX to attest that the record supports reasonable and necessary services. Claims above the threshold without KX are denied.
The targeted medical-review threshold remains $3,000 for OT through 2027. CMS may target review based on factors such as denial history, unusual billing patterns, new enrollment, the condition treated, or a relationship to another provider flagged for review. Billing systems should keep separate alerts for the KX and medical-review levels and preserve the OT-specific accumulator.
RTM would become an in-house responsibility
The proposal would add three conditions to remote therapeutic monitoring. RTM would be limited to established patients. The billing practitioner would have to initiate it during a separately reportable face-to-face visit, either in person or by telehealth, and the visit would need to address RTM. The rule would also require the practitioner or practice to directly employ the clinical staff whose time supports the remote-monitoring claim.
CMS would no longer allow billable RPM or RTM clinical-staff time to be contracted to a third-party company. Direct employees could work away from the practice, and the beneficiary would not need to be on site. General supervision and the other incident-to requirements would continue to apply. CMS says the change is aimed at cold-call enrollment, fragmented monitoring, and weak clinical oversight identified in federal reviews.
OT practices using a remote-monitoring vendor should map the workflow before commenting. Identify who owns the device platform, who performs setup, who reviews data, who supplies the 20-minute treatment-management work, who communicates with the patient, and which workers are employed by the billing practice. A software license may remain usable; a vendor-supplied clinical team presents the sharper payment risk under the proposal.
Telehealth authority runs through 2027
The rule also proposes conforming regulatory changes for telehealth provisions Congress extended in the Consolidated Appropriations Act, 2026. Occupational therapists would remain eligible Medicare distant-site practitioners through December 31, 2027, and the usual geographic restrictions would remain waived through that date.
Two-way audio-only communication would continue to qualify as an interactive telecommunications system for a telehealth service furnished to a patient at home through 2027. After that date, CMS's proposed text would retain a narrower audio-only route when the practitioner can use video and the patient cannot or does not consent to video. The service itself still needs to appear on Medicare's telehealth list and meet its coding and documentation rules.
The extension gives practices a planning horizon rather than a permanent guarantee. Licensure, scope, privacy, payer enrollment, originating and distant-site rules, code eligibility, and clinical appropriateness still need review. Remote therapeutic monitoring also has its own billing framework; the telehealth extension does not erase the proposed RTM initiation and employment requirements.
The comment window is built for operational evidence
Comments on file code CMS-1848-P are due September 14, 2026. CMS accepts electronic comments through docket CMS-2026-2377. The agency asks for feedback on the practice-expense methodology and on how the direct-employment proposal could affect access to remote monitoring, including how often third-party billing arrangements are used.
Useful comments can show the code, setting, staffing pattern, minutes of skilled and administrative work, supply or equipment cost, current vendor arrangement, patient population, and likely access consequence. A clinic describing RTM should distinguish the technology contract from clinical labor and explain how the billing practitioner supervises care. A practice-expense comment should connect overhead to specific services instead of relying on a specialty-wide assertion.
The proposal offers OT practices a credible chance at higher relative values while lowering the conversion factor and tightening several operating rules. The final effect will be code specific. Download the CMS files, model the clinic's own service mix, update the KX alert only after the final rule, and use the comment period to put real occupational therapy costs into the public record.