CMS Proposes to Ban Outsourced RPM/RTM Staff and Mandate New Telehealth Modifiers Starting January 1, 2027

What this means for your practice

This proposed rule is one of the most operationally disruptive CMS actions in recent memory for practices that have built RPM or RTM programs around third-party vendor relationships. If finalized as written, the outsourcing model that underpins the majority of commercial RPM/RTM arrangements — where a vendor's centralized staff handles monitoring, data analysis, triage, and patient communications — would no longer be eligible for Medicare reimbursement. Telehealth platforms, medspas, and multi-specialty practices that bill Medicare for RPM or RTM must immediately audit their staffing arrangements and vendor contracts. The undefined 'direct employee' standard creates additional legal risk for common structures like Management Services Organizations (MSOs) and exclusive independent contractor arrangements. Factor in proposed rate cuts and potential future code consolidation, and many practices will need to model whether RPM/RTM remains financially viable at all. The comment period is the immediate priority — industry stakeholders must engage now to seek clarity on the direct employee definition and push back on provisions that would eliminate viable care delivery models.

CMS Proposes Sweeping Changes to RPM and RTM Under CY 2027 Physician Fee Schedule

The Centers for Medicare & Medicaid Services (CMS) released its Calendar Year 2027 Physician Fee Schedule proposed rule — formally designated CMS-1848-P, published at 91 FR 43842 — on or around September 17, 2026. While the rule spans a wide range of Medicare payment policies, its most consequential provisions target Remote Patient Monitoring (RPM) and Remote Therapeutic Monitoring (RTM) — and they caught the industry largely off guard.

For any practice currently billing Medicare for RPM or RTM services through a third-party vendor model, this proposed rule demands immediate attention.

The Core Proposal: An Effective Ban on Outsourced Clinical Monitoring Staff

The centerpiece of the RPM/RTM changes is a proposed prohibition on Medicare reimbursement for monitoring services performed by clinical staff who are not direct employees of the billing practitioner or practice.

Under the current policy environment, many practices — including telehealth platforms, primary care groups, and specialty practices — contract with third-party remote monitoring companies. These vendors typically supply the devices, software, and centralized clinical staff who handle:

• Patient device setup and onboarding
• Ongoing data monitoring and analysis
• Patient triage and outreach
• Communications on behalf of the billing provider

CMS has proposed ending this model entirely. The agency cited Office of Inspector General (OIG) findings that outsourced delivery fragmented care, weakened practitioner oversight, and led to billing for services not fully rendered.

Under the proposed rule, practices could still purchase devices, software, and technology platforms from vendors — but the clinical work that generates Medicare reimbursement must be performed by staff employed directly by the billing entity.

New Patient Relationship and Initiating Visit Requirements

CMS also proposes to extend the established patient requirement — already applicable to RPM — to RTM services. This means a pre-existing patient relationship would be required before RTM monitoring services can be billed.

Additionally, both RPM and RTM would require a separately billable, face-to-face initiating visit (either in-person or via telehealth) before monitoring can begin. At that visit, the billing practitioner must:

• Discuss the monitoring plan with the patient
• Determine clinical appropriateness of RPM or RTM
• Document patient consent

Critically, CMS specifies that a visit at which remote monitoring is not actually discussed does not qualify as an initiating visit. CMS analogizes this approach to its existing framework for chronic care management services.

The 'Direct Employee' Definition Problem

One of the most practically significant gaps in the proposed rule is CMS's failure to define what qualifies as a 'direct employee.'

The rule creates clear poles: - A W-2 employee of the billing practice is plainly inside the requirement. - A contractor supplied by an outside vendor is plainly outside it.

But a significant portion of real-world healthcare staffing arrangements fall between these poles. CMS has not addressed scenarios such as:

• Clinical staff employed by a Management Services Organization (MSO) affiliated with, but legally separate from, the billing entity holding the NPI
• Independent contractors who work exclusively on-site under the practice's supervision
• Multi-specialty group structures where the employing entity differs from the billing entity

The proposed rule offers no guidance on these common structures. Whether the final rule will provide additional clarity remains to be seen, but providers operating in gray-area arrangements face meaningful legal risk in the interim.

Proposed Rate Reductions

Compounding the structural changes, CMS proposes downward revaluations of practice expense inputs for RPM and RTM setup, device supply, and treatment management codes. CMS's position is that current reimbursement rates overstate what practices actually pay for monitoring devices and related services.

For practices already weighing whether to restructure their staffing models, these rate reductions add another variable to the financial calculus. The final reimbursement rates will depend on the administrative record developed during rulemaking.

Possible Future Code Consolidation: Four Bundled G-Codes

While not formally proposed in the CY 2027 rule itself, CMS has solicited comment on a potential future restructuring of RPM and RTM billing codes. The agency is considering replacing the current 17 RPM and RTM billing codes with four bundled HCPCS G-codes.

Under the contemplated bundled approach, each monthly code would require: - Device supply - At least two days of data transmission - 20 minutes of treatment management - At least one real-time patient interaction

This would require practices to deliver a complete monthly monitoring service before billing any code — eliminating the ability to bill individual components separately. This concept has not yet been formally proposed, but providers should monitor subsequent CMS rulemaking closely.

New Telehealth Claim Modifiers BB and BC

As part of the broader CY 2027 Physician Fee Schedule, CMS has also proposed mandating new telehealth claim modifiers — BB and BC — for platform-affiliated telehealth claims starting January 1, 2027. These modifiers are intended for claims associated with certain telehealth platform arrangements. Importantly, the proposed modifiers would not directly change payment amounts, but would add a new claims-level data collection requirement for affected telehealth providers.

What Providers Must Do Now

CMS has framed this as a binary decision for affected practices: restructure by January 1, 2027, or discontinue RPM/RTM services. The following action steps are critical:

1. Audit your current RPM/RTM staffing model. Determine whether your clinical monitoring staff are W-2 employees of the billing entity, or whether clinical functions are performed by a third-party vendor, contractor, or affiliated entity. If the latter, your current model may not survive finalization.

2. Evaluate MSO and independent contractor arrangements. If staff are employed through an affiliated MSO or serve as exclusive independent contractors, engage healthcare counsel to assess whether your arrangement would satisfy — or could be restructured to satisfy — the direct employee standard.

3. Model the financial impact of rate reductions. Evaluate whether your RPM or RTM program remains financially viable at the proposed lower reimbursement levels, factoring in the cost of transitioning to in-house staffing.

4. Engage in the rulemaking process. The comment period is the most immediate lever available. Providers, vendor companies, and industry associations should submit comments — particularly seeking clarification on the direct employee definition and flagging unintended consequences for common healthcare staffing arrangements.

5. Monitor for code consolidation developments. While the four bundled G-code framework is not yet formally proposed, it signals CMS's direction. Practices should build flexibility into program designs.

Bottom Line

The CY 2027 Physician Fee Schedule proposed rule, if finalized as written, would fundamentally restructure how RPM and RTM services can be delivered and billed under Medicare. The practical effect would be to disqualify the dominant third-party vendor model from Medicare reimbursement — a model that much of the remote monitoring industry has been built upon. Providers have a narrow window to engage in rulemaking, seek legal counsel, and begin restructuring before January 1, 2027.

Source: CMS CY 2027 Physician Fee Schedule Proposed Rule, CMS-1848-P, 91 FR 43842. See also CMS Physician Fee Schedule resources at https://www.cms.gov/medicare/payment/fee-schedules/physician.

Key Facts

| Detail | Value | |---|---| | Rule Designation | CMS-1848-P, 91 FR 43842 (CY 2027 Physician Fee Schedule Proposed Rule) | | Effective Date (If Finalized) | January 1, 2027 | | Core Proposal | Prohibits Medicare payment for RPM/RTM services performed by clinical staff who are not direct employees of the billing practitioner or practice | | New Telehealth Modifiers | Modifiers BB and BC proposed for platform-affiliated telehealth claims; no direct payment change | | Reimbursement Impact | Downward revaluations proposed for RPM/RTM setup, device supply, and treatment management codes | | Future Code Consolidation (Under Consideration) | CMS soliciting comment on replacing 17 RPM/RTM codes with 4 bundled HCPCS G-codes; not yet formally proposed |

Frequently Asked Questions

Can my practice continue using a third-party RPM vendor to handle clinical monitoring if this rule is finalized?

No — if finalized as proposed, Medicare will not reimburse RPM or RTM services performed by clinical staff who are not direct employees of the billing practitioner or practice. You could still purchase devices and software from vendors, but the clinical monitoring work itself must be done by your own employed staff.

What if my monitoring staff are employed by an affiliated MSO or work as independent contractors under my supervision?

The proposed rule does not clearly address these arrangements. A W-2 employee of the billing practice is plainly compliant; a vendor-supplied contractor is plainly not. Arrangements like MSO-employed staff or exclusive independent contractors fall in a gray area CMS has not yet resolved. Practices in these situations should consult healthcare counsel and monitor the final rule for clarification.

Are there new visit requirements before RPM or RTM can be billed?

Yes. CMS proposes that both RPM and RTM require a separately billable, face-to-face initiating visit — either in-person or via telehealth — before monitoring begins. At that visit, the practitioner must discuss the monitoring plan, determine clinical appropriateness, and document patient consent. A general visit where monitoring is not discussed does not qualify.

What are the new BB and BC telehealth modifiers, and will they affect my reimbursement?

CMS is proposing modifiers BB and BC for platform-affiliated telehealth claims starting January 1, 2027. These are data collection modifiers and would not directly change payment amounts — but they would add a new claims-level reporting requirement for affected telehealth providers.

What should my practice do right now in response to this proposed rule?

Three immediate priorities: (1) Audit whether your RPM/RTM clinical staff are direct employees of your billing entity or supplied by a third-party vendor; (2) Model the financial viability of your program under proposed lower reimbursement rates; and (3) Engage in the CMS comment process — particularly to seek clarity on the 'direct employee' definition and flag the impact on common healthcare staffing structures like MSOs.

Source: natlawreview.com — CMS Proposes New Telehealth Modifiers BB and BC for 2027