AADA Warns of 6% Medicare Payment Cut for Dermatologists in 2027

The American Academy of Dermatology Association (AADA) has expressed concern over the Centers for Medicare & Medicaid Services' (CMS) finalized 2027 Medicare Physician Fee Schedule, estimating that dermatologists could experience an approximately 6% reduction in Medicare payments under the new policies.

Although CMS modified several controversial provisions following advocacy from the dermatology community, the AADA maintains that the final rule could negatively affect physician reimbursement and patient access to essential dermatologic services, particularly early skin cancer diagnosis and treatment.

"While we at the American Academy of Dermatology Association (AADA) appreciate that CMS listened to our concerns and partially addressed the modifier 25 payment policy in the final 2027 Medicare Physician Fee Schedule released today, we are disappointed that CMS chose to move forward with policies that will harm patients," the organization stated.

The AADA credited thousands of its members who participated in advocacy efforts opposing the proposed changes, noting that their engagement contributed to revisions in the final policy.

CMS Revises Modifier 25 Payment Reductions

One of the most significant changes involves modifier 25, which allows physicians to report a separately identifiable evaluation and management (E/M) service performed on the same day as a procedure.

Under the finalized policy, CMS narrowed the scope of its proposed payment reduction and decreased the magnitude of the reimbursement adjustment.

The policy will now apply 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 the originally proposed inclusion of procedures with 10-day and 90-day global periods.

Additionally, CMS reduced the proposed payment adjustment. Rather than reimbursing the second service at 50%, Medicare will pay 100% for the more expensive service and 80% for the second service when an eligible E/M visit and procedure are billed on the same day.

Although these modifications represent a partial response to physician concerns, the AADA emphasized that the remaining reductions could still place financial pressure on dermatology practices.

Medicare Conversion Factors Decline for 2027

The final rule also establishes lower Medicare conversion factors for 2027, affecting reimbursement calculations across physician services.

Under the Medicare Access and CHIP Reauthorization Act, physicians participating in qualifying advanced alternative payment models (A-APMs) receive a different conversion factor from those who do not qualify.

For 2027, the finalized conversion factors include:

• Nonqualifying participants: $32.63, representing a $0.77 decrease, or 2.31%, from the 2026 conversion factor of $33.40.
• Qualifying A-APM participants: $32.95, representing a $0.62 decrease, or 1.83%, from the 2026 conversion factor of $33.57.

According to the AADA, most dermatologists are expected to fall into the nonqualifying participant category, making the larger conversion factor reduction particularly relevant to the specialty.

Practice Expense Changes Add Reimbursement Concerns

CMS also finalized changes to the methodology used to calculate practice expense (PE), which accounts for the operational costs associated with providing medical services, including staffing, equipment, and supplies.

Under the new methodology, CMS will phase out the Indirect Practice Cost Index over 2 years and introduce a 5% stabilization adjustment intended to limit annual fluctuations in practice expense relative value units (RVUs) for certain services.

However, the adjustment excludes new, revised, newly nationally priced, and revalued codes.

The AADA also cautioned that some services could experience reductions exceeding 5%, as the stabilization adjustment applies to only a portion of the practice expense RVU calculation.

These changes, combined with lower conversion factors and revised modifier 25 reimbursement, contribute to the organization's initial estimate of an approximately 6% overall payment reduction for dermatologists in 2027.

AADA Raises Concerns About Patient Access to Skin Cancer Care

Beyond the financial implications for physicians, the AADA emphasized that the finalized policies could affect patients' ability to access timely dermatologic care.

"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 organization stated.

The AADA indicated that it will continue advocating for payment reforms and working with Congress to address concerns surrounding Medicare reimbursement.

The organization is conducting an in-depth analysis of the final rule and plans to provide additional guidance to dermatologists in the coming weeks.

As part of these efforts, AADA President Murad Alam, MD, will host an advocacy town hall on November 9 at 8 PM ET to discuss the rule's implications and outline the organization's next steps.

Despite the revisions secured through physician advocacy, the AADA maintains that further changes are necessary to protect dermatology practices and preserve patient access to essential skin cancer services.

References

1. American Academy of Dermatology Association. AADA statement on the final 2027 Medicare Physician Fee Schedule. November 2026. Source statement provided to Dermatology Times.
2. Centers for Medicare & Medicaid Services. Calendar Year 2027 Medicare Physician Fee Schedule Final Rule. November 2026. Referenced in AADA communication.