For Community Oncology, Good News in PFS Offset by Potential Wreckage of MFP Proposal

This article has been updated.

The 2026 Physician Fee Schedule (PFS), proposed Monday by CMS, offers proof that regulators are listening at last to pleas from community oncology practices to even the playing field with hospitals.¹

That’s the good news.

The bad news, according to the Community Oncology Alliance (COA), is that this progress is offset by an interpretation of the Inflation Reduction Act (IRA) that could devastate practice finances, as the Trump administration follows through on its pledge to rein in drug costs.²

Nicolas Ferreyros | Image: AJMC

Calling the proposed PFS “a mixed bag,” in an interview, COA Managing Director Nicolas Ferreyros praised CMS for taking the first steps toward correcting longstanding payment disparities based on where a patient receives care. In particular, he cited an increase in “practice expense relative value units” for nonfacility services, which support things such as scheduling and clinical coordination, while reducing high facility payments to hospitals.

“This reflects an important, overdue shift toward site neutrality, and we encourage the agency to continue advancing policies that better align payments across sites of care,” he said in a statement.

On the flip side, Ferreyros said COA is “deeply alarmed” by plans to include the negotiated, reduced cost of key drugs—known as Maximum Fair Price (MFP) under the IRA—in calculations that determine what practices are paid to administer high-cost cancer drugs. Projections show that using MFP in the drug calculation could cost practices nearly half the revenue they are paid for administering Part B drugs.³

In short, he said in an interview, the near-term wins don’t cancel out the looming threat of CMS’ interpretation of MFP policy, which Ferreyros called “an incredible threat to practices.”

How Medicare Part B Payment Works

Based on a 2003 law, physicians who administer Medicare Part B drugs are reimbursed based on a formula tied of the Average Sales Price, known as ASP. Originally, physicians were paid ASP plus 6%; the “add on” payment funds the cost of administering complex drugs that require special handling and storage, as well as training for staff.

In 2020, oncology drugs accounted for 22.5% of all spending in Medicare Part B, a share that was projected to rise. Due to sequestration, payment in recent years dropped to ASP plus 4.3%.⁴

CMS, for its part, said the PFS would promote the administration's goals of reducing wasteful spending while shifting resources toward chronic disease prevention.

Mehmet Oz, MD, MBA | Image credit: HHS

“We are taking meaningful steps to modernize Medicare, cut waste, and improve patient care,” said CMS Administrator Mehmet Oz MD, MBA, said in a statement. “We’re making it easier for seniors to access preventive services, incentivizing health care providers to deliver real results, and cracking down on abuse that drives up costs. This is how we protect Medicare for the next generation while helping Americans live longer, healthier lives.”

Effects of the IRA, MFP on Reimbursement

Under the IRA, starting in 2028 payment from Medicare would be based not on the original price of the drug, but on MFP, projected to be considerably lower than ASP.

A year ago, Avalere estimated that negotiated MFPs for the 10 selected drugs compared with estimated 2023 net prices would result in an average discount of 20%. Of the 15 drugs first selected for negotiation under Part B, 4 are oncology/hematology drugs: enzalutamide (Xtandi), used in prostate cancer; pomalidomide (Pomalyst), used for patients with multiple myeloma; palbociclib (Ibrance), used for breast cancer; and acalabrutinib (Calquence), which treats several types of blood cancer.

Through COA and in published commentaries,⁵ oncologists have warned of the pending financial disaster to come, noting that because both the original reimbursement scheme and the IRA are based on statute, they cannot fix it themselves. Avalere has further warned that historically commercial payers have copied Medicare’s reimbursement patterns; they estimate that drug price reductions in oncology/hematology tied to MFP could range from 13% to 21%.⁶

“This change would destabilize the ASP system and cause severe cuts to reimbursement for physician-administered drugs,” Ferryros said. “This is a major policy mistake that must be reversed before it causes lasting damage to patient access and the stability of the nation’s cancer system.”

COA has sounded the alarm on the need to decouple physician payment from MFP since before the IRA passed in 2022. Last week, it applauded reintroduction of the Protecting Patient Access to Cancer and Complex Therapies Act, a bipartisan bill to make this change.⁷

Both Ferreyros and COA Executive Director Ted Okon, MBA, have noted that the MFP-based calculation is the most serious threat to practice finances, but far from the only one. The American Medical Association has presented data showing that payments after inflation from Medicare have dropped 33% since 2001.⁸

Ferreyros said overall, the steps taken across the 2026 PFS show that the current administration understands the long-term decline in physician payment, which has been cited as a factor in today’s physician shortage. The One Big Beautiful Bill Act, Ferreyros noted, offers a 2.5% payment increase—offsetting a cut in the original 2025 PFS—and that CMS has proposed a conversion factor increase of 3.62%.

In fact, Okon subsequently released a statement praising elements of proposed 2026 Hospital Outpayment Prospective Payment System, or HOPPS, which was released late Tuesday. HOPPS governs payments for hospitals and ambulatory surgery centers. In a statement, CMS estimated that the changes would save $280 million, with some savings flowing to individual beneficiaries. CMS said $210 million of the savings would accrue to Medicare, with seniors seeing $70 million in reduced coinsurance payments.

"At long last, CMS is proposing real meaningful action to address the outrageous payment disparities that reward hospitals for delivering the identical care at much higher costs than that provided in physicians’ clinics," Okon said. "Patients and taxpayers have been footing the bill for hospital overpayments for years and this proposal is a major step in the right direction."

Other provisions of the 2026 HOPPS proposal address a drug acquisition cost survey, which is tied to funds many hospitals receive through the 340B program. CMS also seeks to crack down on hospitals that are not following requirements for reporting their costs, which were enacted during the first Trump administration.

Still, Ferreyros emphasized, a “modest bump” does not address the ongoing financial pressures on community oncology. “Recognizing an imbalance in payments between physicians and hospitals—that’s a good first step. There’s a still a long way to go in addressing the shortfalls in our payments.”

References

1. Fact sheet: calendar year (CY) 2026 Medicare Physician Fee Schedule (PFS) proposed rule (CMS-1832-P). CMS. July 14, 2025, Accessed July 14, 2025. https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-pfs-proposed-rule-cms-1832-p
2. Fact sheet: President Donald J. Trump announces actions to lower prescription drug prices. The White House. April 15, 2025. Accessed July 15, 2025. https://www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-president-donald-j-trump-announces-actions-to-lower-prescription-drug-prices/
3. Shaw ML. Community oncology bracing for IRA impact. AJMC^®. May 31, 2025. Accessed July 15, 2025. https://www.ajmc.com/view/community-oncology-bracing-for-ira-impact
4. Kyle MA, Dusetzina SB, Keating NL. Evaluation of trends in oncology drug spending in Medicare, 2016 to 2020. JAMA Netw Open. 2022;5(7):e2221468. doi:10.1001/jamanetworkopen.2022.21468
5. Mullangi S, Eagle DA. The Inflation Reduction Act and community oncology practices. JAMA Oncol. 2023;9(12):1612-1613. doi:10.1001/jamaoncol.2023.4412
6. Sullivan M, Dilmanian M, Frazier L, Krupp G, Isaiah E. Commercial spillover impact of Part B negotiations on physicians. Avalere Health. September 16, 2024. Accessed July 15, 2025. https://advisory.avalerehealth.com/insights/commercial-spillover-impact-of-part-b-negotiations-on-physicians
7. COA applauds technical fix to IRA drug pricing policy that threatens cancer care. News release. Community Oncology Alliance. July 9, 2025. Accessed July 15, 2025. https://mycoa.communityoncology.org/news-updates/press-releases/coa-applauds-technical-fix-to-ira-drug-pricing-policy
8. Henry TA. Medicare physician pay has plummeted since 2001. Find out why. American Medical Association. April 21, 2025. Accessed July 15, 2025. https://www.ama-assn.org/practice-management/medicare-medicaid/medicare-physician-pay-has-plummeted-2001-find-out-why