The administrative portion of a Medicare payment for a telehealth visit relies on data from a study performed in 2007. Approximately half of the amount Medicare pays for a standard visit covers practice expenses rather than medical labor – those expenses include rent, employees, supplies, medical tools, software and general operational costs. The calculation for general costs depends on the Physician Practice Information Survey from 2007, a time before clinicians used mobile phones or digital systems for medical visits. The CY 2027 Medicare Physician Fee Schedule proposed rule intends to change this – removing the Indirect Practice Cost Index over two years. It also limits any change to the practice expense relative value units for a single code to 5% per year.
What are practice expense RVUs, and why is there no line item for a video platform?
Relative value units for every code consist of three parts – work, practice expense (PE) and malpractice. Practice expense is divided into direct and indirect categories.
- Direct PE is listed by specific items, which include the minutes worked by clinical employees, disposable items and equipment with a documented price and period of utility.
- Indirect PE is not listed by item – administrative wages, rent, utilities and general office costs are assigned to codes through an index instead of individual pricing.
The structure of this system is the reason the fee schedule contains no specific entry for “video platform”, “bandwidth” or “secure patient messaging”. Digital tools for virtual care are not direct inputs for any service – those costs are part of a general allocation based on data regarding what medical offices spent in total nearly two decades ago.
The result of this system is that the fee schedule does not provide payment for a telehealth platform – this has always been the case and the CY 2027 proposal maintains that policy.
Why does 2007 survey data still set your overhead payment?
The Physician Practice Information Survey from 2007 established the foundation for how general costs are assigned to different medical specialties. No other study of that size has replaced those figures. In the CY 2027 payment policies proposed rule, published in the Federal Register on July 16, 2026, CMS states that this data may no longer represent current costs for a medical office.
Expenses for a medical office have changed since 2007 to include scheduling software, online portals, video technology, messaging systems and security tools. Employees must also spend time managing the digital systems. Such expenses were not standard monthly costs for a small office in 2007 but they are common now.
The proposed update uses the 2017-based Medicare Economic Index. By doing this the rule attempts to decrease the use of the data from the 2007 survey.
What does the CY 2027 proposal actually change?
The proposed changes for CY 2027 are summarized here:
| Element | Current Status | Proposed for CY 2027 |
|---|---|---|
| Indirect Practice Cost Index | Used, based on 2007 survey data | Removed over two years |
| Yearly PE RVU change per code | Significant fluctuations possible | Limited to 5% per year |
| Direct cost inputs for digital tools | None | None |
| Telehealth platform payment | No specific item | No specific item |
The proposal changes how old data affects the calculation – it does not create a new category for the technology that a virtual office uses.
What do the proposed 2027 numbers look like?
CMS proposes a conversion factor of $33.17 for participants in qualifying alternative payment models, which is a decrease of $0.40 or 1.19%. For non-qualifying participants, the proposed factor is $32.84, a decrease of $0.56 or 1.68% – those figures result from the end of a temporary 2026 increase and a standard reduction of 2.50%.
The fee for a telehealth originating site, code Q3014, is proposed at $32.65 – this number is based on a 2.5% increase in the Medicare Economic Index.
As the Q3014 fee increases with general inflation, it follows the costs of rent and wages. It does not follow the costs of digital infrastructure because the formula does not include those specific expenses.
What should a 2-50 clinician practice do with this?
The situation requires four actions and one instance of disregard.
- The 5% cap is useful if a revision decreases the PE RVUs for a code that clinicians bill frequently. In this case the stabilization adjustment distributes the reduction over multiple years. It provides time for clinicians to plan.
- The cap is a disadvantage if a medical specialty has received insufficient funds since 2007. In this scenario the limit delays an increase in payment that clinicians desire. The same mechanism causes both results.
- It is necessary for you to calculate how the change to the conversion factor affects your specific list of codes. The reduction is not equal for every code. A decrease of 1.19% or 1.68% results in different outcomes depending on the services you bill.
- You should provide feedback or track the final rule – the period for public comments ended in September 2026. The final rule appears in the CMS-1848-P regulation notice – those details are proposals until the agency confirms them.
As for what to ignore, those changes do not alter the financial logic of building a platform versus buying one. Reimbursement is not a factor in that calculation.
There is a practical reason to buy a platform instead of building one. A platform is effective because it manages high volumes of appointments and reduces the number of patients who do not arrive for visits. With such a system, employees spend less time on phone calls. A practice does not need to pay a permanent group of engineers. On the side of clinicians who review white label telehealth platforms with HIPAA compliance, the speed of setup and the total expenses are compared against a project that takes months to build internally. The platform from Healee is in use by over 200 clinics and more than 1M patients with over 5M appointments – this is the data that clinicians should request from any software provider. If you are making this comparison, you can request a demo.
Frequently asked questions
Does Medicare pay practices for telehealth platform costs?
No. The fee schedule does not include a specific payment for video software, internet capacity or electronic messages – those expenses are part of the indirect practice expense. The agency assigns the funds using an index instead of paying for specific items.
What is the Physician Practice Information Survey?
It is a data collection from 2007 regarding the costs of running a practice. It is the basis for how the Medicare Physician Fee Schedule distributes indirect practice expenses. There is no new survey to replace it. Because of this lack of new data, the information from 2007 still affects payments in 2027.
What is the practice expense stabilization adjustment?
It is a limit that stops the PE RVU for any code from changing by more than 5% in one year. It is a way for CMS to lower sudden changes while the agency stops using old data.
What are the proposed 2027 conversion factors?
The factor is $33.17 for clinicians who participate in qualifying APMs. It is $32.84 for those who do not qualify – those amounts are reductions of 1.19% and 1.68%.
Is the Indirect Practice Cost Index being eliminated?
The proposal from CMS is to remove it over two years – as a proposal, the change is not permanent until the publication of the final rule.
Sources:
- Calendar Year (CY) 2027 Medicare Physician Fee Schedule Proposed Rule fact sheet – CMS, 2026
- Medicare & Medicaid Programs – CY 2027 Payment Policies Under the Physician Fee Schedule (CMS-1848-P) – Federal Register, July 16, 2026
- CMS-1848-P federal regulation notice – CMS, 2026