CMS's CY2027 Fee Schedule Would Create Medicare's First Payment Category for Clinical AI Software

CMS released its CY2027 Medicare Physician Fee Schedule proposed rule in mid-July, and it is the most consequential annual rulemaking for digital health reimbursement in years: five new codes on the Medicare Telehealth List, two new telehealth modifiers, teaching-physician telehealth billing flexibility, a sweeping overhaul of remote monitoring rules, and — most notably — a proposed new "Software as a Medical Service" (SaMS) category for algorithm-based clinical decision support.

A first for clinical AI

The SaMS category would be Medicare's first standing payment pathway for standalone clinical AI software. For an industry where reimbursement — not regulatory clearance — has been the binding constraint, a durable payment category could reshape which AI products get built and bought. The rule also adds two new MIPS improvement activities covering clinician AI use.

Remote monitoring's reckoning

The remote monitoring proposals are the rule's sharpest edge. Beyond consolidating seventeen RPM and RTM codes into four G-codes with recalculated (lower) payments, CMS would require services be furnished by clinical staff directly employed by the billing practitioner — a provision that would upend the outsourced RPM vendor model — and would require an established patient relationship plus a separate initiating visit for RTM. The proposals respond to HHS OIG reports flagging inadequate service delivery and improper enrollment in Medicare RPM.

Rate-wise, the proposed conversion factors decline 1.19% for qualifying APM participants and 1.68% for others as the one-year 2.50% statutory boost expires. ATA Action called the digital health provisions "constructive" in initial comments while pressing Congress to act on the December 31, 2027 telehealth cliff. Comments on the rule are due September 14, 2026.

Reporting: American Hospital Association; ATA Action initial comments; CMS fact sheet.