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

The Centers for Medicare & Medicaid Services' (CMS) proposed 2026 Physician Fee Schedule (PFS) and Hospital Outpatient Prospective Payment System (HOPPS) present a mixed financial outlook for community oncology practices. While the Community Oncology Alliance (COA) acknowledges positive steps towards site neutrality by adjusting payments to favor non-facility settings, the primary concern stems from CMS's interpretation of the Inflation Reduction Act (IRA). COA warns that including Maximum Fair Price (MFP) in Part B drug administration reimbursement calculations could drastically cut practice revenues by nearly half, threatening the stability of the cancer care system and patient access.

Analysis

The proposed 2026 CMS Physician Fee Schedule (PFS) and Hospital Outpatient Prospective Payment System (HOPPS) introduce significant regulatory crosscurrents for the community oncology sector. On one hand, CMS is addressing long-standing payment disparities by increasing practice expense relative value units for non-facility services, a move toward site-neutrality praised by the Community Oncology Alliance (COA) as a positive first step. This adjustment, along with a proposed 3.62% conversion factor increase, aims to rectify payment imbalances with hospital-based settings. However, this progress is substantially overshadowed by a looming financial threat from the Inflation Reduction Act (IRA). The COA is 'deeply alarmed' by the proposal to use the negotiated Maximum Fair Price (MFP) in the reimbursement formula for administering Medicare Part B drugs. Projections indicate this change, effective in 2028, could slash practice revenues from these drug administrations by nearly half. This policy is viewed as a major mistake that could destabilize the entire cancer care system, overriding the modest benefits of the PFS adjustments and exacerbating the 33% inflation-adjusted decline in Medicare payments physicians have faced since 2001.

Key Decisions for Investors

• Investors with exposure to community oncology providers should view the proposed IRA interpretation as a significant forward-looking risk, as the potential margin compression from the Maximum Fair Price reimbursement model could outweigh the near-term benefits of site-neutral payment adjustments.
• Closely monitor the legislative progress of the 'Protecting Patient Access to Cancer and Complex Therapies Act,' as its passage would represent a material de-risking event for the sector by negating the most severe financial threats outlined in the CMS proposal.
• Anticipate potential consolidation in the oncology market, as the financial pressure from the proposed reimbursement changes could render smaller independent practices unviable, creating acquisition opportunities for larger, more capitalized health systems.
• Consider the secondary risk to pharmaceutical companies with key Part B oncology drugs, as disruption and financial instability within their primary administration channel—community oncology practices—could negatively impact patient access and drug utilization.