Dermatologists Face Estimated 6% Medicare Payment Cut in 2027

By Daniel Okafor

An estimated 6% Medicare payment reduction could hit dermatologists in 2027, the American Academy of Dermatology Association says.

The Centers for Medicare & Medicaid Services (CMS) finalized the 2027 Medicare Physician Fee Schedule in November 2026. The AADA issued its response that month.

The specialty cites lower conversion factors, revised modifier 25 payments, and new practice-expense calculations.

Those changes followed dermatology advocacy. CMS revised several disputed provisions, but not to the AADA's satisfaction.

What changed for same-day E/M visits?

Modifier 25 allows physicians to report a separately identifiable evaluation and management (E/M) service performed on the same day as a procedure.

CMS narrowed the scope of its proposed payment reduction. The final policy applies only when a separately identifiable office or outpatient E/M visit occurs on the same day as a procedure with a 0-day global period.

CMS removed procedures with 10-day and 90-day global periods from the proposal.

Payment terms also changed. When an eligible E/M visit and procedure are billed for the same day, Medicare will pay 100% for the more expensive service. It will pay 80% for the second, rather than the proposed 50%.

The AADA described the revisions as partial relief. The association said it appreciated that “CMS listened to our concerns and partially addressed the modifier 25 payment policy,” but added: “We are disappointed that CMS chose to move forward with policies that will harm patients.”

The association credited thousands of members who participated in advocacy against the proposed changes. Their engagement helped shape the final revisions.

Takeaway: Selected same-day claims gain protection, but the broader 2027 payment decline remains.

How far do conversion factors fall?

Under the Medicare Access and CHIP Reauthorization Act, qualifying advanced alternative payment model participants get a different conversion factor.

• Nonqualifying participants: $32.63 in 2027, down $0.77, or 2.31%, from $33.40 in 2026.
• Qualifying A-APM participants: $32.95 in 2027, down $0.62, or 1.83%, from $33.57 in 2026.

Most dermatologists are expected to fall into the nonqualifying category. That makes the 2.31% decrease particularly relevant to the specialty.

For physicians outside qualifying A-APMs, the $0.77 drop from $33.40 to $32.63 exceeds the $0.62 decline that applies to qualifying model participants in the 2027 schedule.

Takeaway: Most dermatologists sit in the group facing the larger conversion-factor decrease.

Why can some services fall by more than 5%?

Practice expense (PE) covers the operational side of care. That includes staffing, equipment, and supplies.

CMS will phase out the Indirect Practice Cost Index over two years. It will add a 5% stabilization adjustment for certain services.

The adjustment aims to limit annual fluctuations in practice expense relative value units (RVUs).

Four groups sit outside it: new, revised, newly nationally priced, and revalued codes.

AADA warns that some services could face reductions exceeding 5%, because the 5% stabilization adjustment covers only a portion of the practice expense RVU calculation.

Together, these payment changes underpin the AADA's initial estimate of an approximately 6% reduction for dermatologists in 2027.

Takeaway: The 5% adjustment cannot cap every service's reduction.

What could happen to skin cancer access?

AADA says lower payments could affect access to timely dermatologic care. The group points to early skin cancer diagnosis and treatment.

The association stated: “The data we shared during our advocacy are clear: the facts do not support these changes, and these changes will have serious impact on patients’ access to early diagnosis and treatment of skin cancer.”

The announcement links practice pressure with patient access. It provides no numerical estimate of how many diagnoses, treatments, or patients could be affected.

Takeaway: The 6% figure is a payment estimate; the access warning remains an AADA projection without a quantified patient effect.

What happens next?

The AADA will continue advocating for payment reform. It also plans to work with Congress.

AADA is conducting an in-depth analysis of the final rule. It plans to issue additional guidance to dermatologists in the coming weeks.

On November 9 at 8 p.m. ET, AADA President Murad Alam, MD, will host an advocacy town hall. He will discuss the rule's implications and the organization's next steps.

The group says more changes are needed. Its priority is protecting dermatology practices and access to essential skin cancer services.

Takeaway: Detailed guidance and continued advocacy will shape how dermatologists prepare for the 2027 reductions while preserving timely skin cancer care.