Every physical therapy practice manager has learned to treat “new year, new codes” as a recurring January headache — updated CPT descriptors, shifted RVUs, a fresh set of denial reasons nobody’s front desk has seen before. The 2027 cycle is shaping up to be a bigger version of that headache than usual, with changes that go beyond routine code maintenance into a genuine restructuring of how PT services get valued and how one of the profession’s fastest-growing service lines gets billed.
One important caveat before diving in: as of this writing, none of this is finalized. CMS released the proposed rule on July 14, 2026, the public comment period closed September 14, 2026, and the final rule isn’t expected until early November 2026. Everything below reflects what’s on the table — not what’s guaranteed to take effect January 1, 2027.
The Conversion Factor Cut That Isn’t What It Looks Like
The headline number is a decrease: CMS has proposed a 1.68% cut to the Medicare conversion factor for physical therapists and most other non-APM clinicians. That cut breaks down into three components — a 0.53% boost from the budget neutrality factor, a 0.25% update factor, and a 2.5% reduction tied to the scheduled expiration of a congressional funding provision at the end of 2026.
Read in isolation, that’s bad news. But — and this is the part that makes 2027 unusual for PT specifically — CMS is simultaneously proposing a separate change to how practice expense RVUs get calculated, and that change is projected to more than offset the conversion factor cut for physical therapy specifically. Taken together, CMS estimates physical therapy codes could see a net payment increase of roughly 1-3%, even while the conversion factor itself is falling.
Why Physical Therapy Benefits More Than Other Specialties
The mechanism behind that increase is worth understanding, because it’s genuinely specific to how PT services are structured. CMS is proposing to phase out the indirect practice cost index from the practice expense RVU calculation over a two-year period starting in 2027. Every code’s practice expense RVU is built from direct costs — labor, supplies, equipment — and indirect costs, which cover overhead like rent, billing systems, and administrative infrastructure.
Physical therapy has historically carried unusually high direct labor costs relative to indirect overhead compared to most other specialties, which means the indirect cost index has consistently pulled PT code values down more than it should. Removing that index from the calculation corrects an imbalance that’s worked against the profession for years. APTA’s own modeling of the proposal, based on data CMS released after the proposed rule, projects a 35-45% increase in practice expense RVU values for the most commonly billed PT codes over the next eight years — which is where that 1-3% annual increase estimate comes from.
It’s a rare case where a methodology fix, rather than a straightforward rate increase, does the real work of moving reimbursement in the right direction.
The Bigger Story: Remote Therapeutic Monitoring Is Getting Overhauled
If the practice expense change is the good news buried in the proposed rule, the Remote Therapeutic Monitoring proposals are the part practices actually need to plan around. This is described as the most consequential set of RTM changes since the code set was created in 2022, and it touches both the codes themselves and who’s allowed to deliver the services behind them.
CMS is considering bundling a long list of existing monitoring-related codes — spanning RPM and RTM code families including 99453, 99454, 99457, 99458, 98975, 98976, 98977, 98978, 98980, and 98981, among others — into new consolidated codes that describe initial setup and monthly monitoring or management as single units rather than separate billable components. Under one version of this proposal, CMS would introduce new HCPCS G-codes to replace pieces of the current structure, including codes describing RTM treatment assessment services in place of the current 98980 and 98981.
Beyond restructuring the codes, CMS is proposing new restrictions on who can furnish RTM services, including limits on the use of contracted support staff for these services — a change that could disrupt existing workflows for practices that have built RTM programs around outsourced or contracted monitoring support rather than in-house clinical staff.
For any PT practice that has invested in remote monitoring as a revenue stream over the past few years, this isn’t a minor coding footnote. It’s a potential structural change to how that revenue stream gets billed and staffed.
A Signal Worth Watching Beyond 2027
One detail in the proposed rule points further into the future than next January. CMS is signaling openness to moving away from the traditional AMA CPT and RUC valuation process for certain services, proposing new HCPCS G-codes in place of CPT codes across several specialty areas — not just PT. That’s a bigger structural shift than any single year’s rate changes, and it’s worth tracking regardless of how the 2027 cycle specifically resolves, because it suggests CMS is rethinking who controls code creation and valuation going forward.
What Practices Should Actually Do Right Now
With the comment period closed and the final rule roughly six weeks out at the time of writing, this is the window for preparation rather than reaction:
- Don’t assume the 1-3% increase is locked in. It’s a projection based on a proposed methodology change, not a finalized rate. Build financial plans around a range, not a single number, until the final rule is published in November.
- Audit RTM billing workflows now, particularly if contracted or outsourced staff deliver any part of the monitoring service. If the restrictions on contracted support survive into the final rule, practices will need lead time to restructure staffing before January 1.
- Watch for the specific new code numbers in the final rule, since proposed G-codes and bundled code structures can shift meaningfully between the proposed and final versions — billing systems and EHR templates shouldn’t be updated against proposed code numbers that may not survive intact.
- Track the practice expense phase-in specifically, since it’s scheduled to unfold over two years rather than landing all at once — that timeline affects revenue forecasting well beyond just the 2027 fiscal year.
The Kaizen Take
This is exactly the kind of year where the gap between “the rule proposed” and “the rule finalized” matters more than usual — and where practices that wait until January to reconcile their billing systems against the actual final code set will lose weeks of clean claims to a code structure they never confirmed. The discipline that matters here isn’t reacting fast in November. It’s tracking the proposal now, in September and October, so the transition in January is a checklist rather than a scramble.
