The Compensation Trap
The 2026 Medicare Physician Fee Schedule just reduced work RVUs for nearly all procedural and surgical codes — a 2.5% efficiency adjustment that cuts physician revenue not because practice patterns changed, but because CMS changed how it measures them. It landed on organizations already navigating financial strain from COVID-era volume losses, Medicaid funding uncertainty, and a value-based transition that was never designed around how physicians actually get paid.
The predictable response: pressure to increase volume, protect procedural revenue, and treat value-based programs as a parallel track. That response is understandable. It is also exactly the trap.
Physician compensation is the most direct signal an organization can send about what it actually values. And in most health systems, that signal is still volume — not by intention, but by design. The wRVU remains the dominant currency of physician productivity, and wRVUs measure procedures and encounters, not outcomes, cost efficiency, or longitudinal care. Reducing wRVU values doesn't change what's being rewarded. It just pays less for the same misaligned behavior.
What Is Actually Being Paid For
Physicians and clinical services represent 21% of total U.S. healthcare spending — $1.1 trillion of the $5.3 trillion spent in 2024.[1] Hospitals capture 31%. Yet primary care — the part of the system with the greatest influence over downstream cost and quality — receives only about 4.6% of total U.S. healthcare spending, compared to 17% for specialty care.[2]
This is the structural contradiction at the center of every value-based care conversation. The people with the greatest influence over population health outcomes are the most systematically underinvested part of the system. A primary care physician who manages a diabetic patient's A1C, prevents a hospitalization, and closes three preventive care gaps generates significant downstream value — and relatively few wRVUs. A specialist who performs a procedure generates significant wRVUs — and, on a population level, relatively limited upstream impact.
Premier's 2026 analysis found that physician compensation increased 8% more than volume over the past year, contributing to a 13% degradation in operating margins per provider. Simultaneously, primary care access bottlenecks now exceed 30 days across all specialties — rising to 40+ days in primary care — even as overall patient volumes grew 6%. More volume, less access, declining margins: the productivity model is failing on its own terms.[3]
This is not a physician problem. Physicians are responding rationally to the incentives they have been given. If we want different behavior, we need different incentives — and that requires an honest reckoning with what the compensation structure is actually rewarding, and whether that matches what the organization claims to be building.
The Payer Asymmetry
The 2026 wRVU reduction is hitting providers at a moment when payers are navigating their own margin dynamics — and the comparison is instructive. In 2024, gross margins per enrollee in the Medicare Advantage market reached $1,655 per member — more than double the $846 in the commercial group market, and higher than any other insurance segment.[4]
Payers have structural options that providers don't. They can choose which markets to enter or exit, which lines of business to offer, which services to cover. When utilization rises — when patients actually use the care they enrolled for — plans respond by cutting supplemental benefits, raising premiums, or withdrawing from markets. Providers absorb the patients who remain, often at rates that don't cover cost. In 2024, Medicare reimbursed hospitals at just 83 cents on the dollar, resulting in over $100 billion in underpayments.[5]
Payers are simultaneously shifting financial risk to providers through value-based contracts while claiming some of the highest-value clinical functions for themselves: disease management programs, care coordination, at-home risk capture visits, transportation benefits. These are most effective when delivered within an existing care relationship — the relationship that belongs to the provider, not the plan.
The result: provider organizations are penalized in their medical benefit ratio when payers launch programs that duplicate care management functions the provider is already performing — or take credit in risk adjustment for patient interactions the clinical team generated. Both sides are duplicating efforts and missing things simultaneously. The appropriate scope for each link in the chain remains poorly defined, and until it is, neither side can operate efficiently.
There is reason for cautious optimism that the current focus on appropriate risk adjustment will begin to sort this out — parsing the best scope for each participant in the care model rather than allowing the current overlap and gap to persist. Good healthcare should be about informed and efficient care delivery, not about coding optimization or credit capture.
What the PFS Change Is Actually Doing — And What It Misses
The 2026 fee schedule change is a blunt instrument. Reducing procedural wRVUs sends a signal — however imperfect — that the system intends to shift emphasis toward prevention and the most cost-effective sites of care. That intention is not wrong. The execution misses something critical: there are limited upstream options left to receive that emphasis.
The primary care workforce is shrinking. The 2025 Primary Care Scorecard found that the number of primary care clinicians decreased from 105.7 per 100,000 people in 2021 to 103.8 in 2022, with the percentage of NPs and PAs working in primary care also declining.[2] More than 76 million Americans currently live in designated primary care Health Professional Shortage Areas — with less than 50% of the country's primary care needs being met.[6]
Americans made approximately 139.8 million emergency department visits in 2024 — with ED volumes projected to grow another 5% over the next decade, driven significantly by access barriers and the inability to reach primary care in a timely way.[7] Among adults ages 18–64 who used the ED, 24% did so for non-urgent reasons — conditions appropriate for primary or urgent care settings.[8] These visits represent both a cost failure and a system design failure: the absence of accessible upstream care is showing up as expensive downstream utilization.
Redirecting financial pressure toward prevention without simultaneously investing in the capacity to deliver it is not a strategy. It is a squeeze that will accelerate the very utilization patterns it intends to reduce.
I am choosing to take an optimistic view. The PFS cut is a stick. The new outcomes-based models — LEAD's ten-year performance period, the Ambulatory Specialty Model's mandatory episode-based payment, the ACCESS Model's community health worker integration — are the carrot. Together they represent a shift toward rewarding a systemic approach over a siloed volume approach. The question is whether organizations can see that larger picture clearly enough to respond strategically rather than reactively.
Organizations that respond to the 2026 PFS cut by doubling down on procedural volume — or by treating new value-based models as a separate track from core operations — will find themselves caught between two systems, optimized for neither. Even integrated health systems, where significant tension between facilities and providers can persist despite shared ownership, are not immune to this dynamic.
The compensation structure has to change. Not because the incentive payment was reduced. Because the design was never aligned with the goal. And the goal — informed, efficient, patient-centered care that invests in health before it becomes crisis — is one the system claims to want. The question is whether organizations are willing to pay for it.
[1] CMS Office of the Actuary. National Health Expenditure Accounts, 2024. Health Affairs, January 2026.
[2] Robert Graham Center / Physicians Foundation. The Health of US Primary Care: 2025 Scorecard. February 2025. National average of 4.6% of healthcare spending allocated to primary care; specialty care 17%.
[3] Premier Inc. From Resilience to Reinvention: Reimagining the Physician Enterprise in 2026. March 2026.
[4] KFF. Health Insurer Financial Performance in 2024. February 2026. Gross margins per enrollee: Medicare Advantage $1,655 vs. group commercial $846 (NAIC data).
[5] American Hospital Association. Costs of Caring. 2025. Medicare reimbursed hospitals at 83 cents on the dollar in 2024; $100B+ in underpayments.
[6] HRSA. State of the Primary Care Workforce, 2025. More than 76 million Americans in primary care HPSAs; less than 50% of primary care needs met nationally.
[7] Vizient / Sg2. Emergency Department Overcrowding: From Every Angle. June 2025. 139.8 million ED visits in 2024; 5% volume growth projected over 10 years.
[8] NCQA. Emergency Department Utilization. 2025, citing Ziller et al., Maine Rural Health Research Center, April 2024. 24% of ED visits by adults 18–64 were non-urgent.
If your organization is navigating the intersection of compensation redesign and value-based transition — and needs help thinking through how to align what you pay for with what you're trying to achieve — Adverus Value Strategies works with leadership teams to design the structures that actually support the strategy.
