Last year, the Peterson Center on Healthcare identified the potential health benefits and economic risks of how Medicare pays for remote monitoring services. Across our Peterson Health Technology Institute (PHTI) assessments of health technologies—from diabetes to musculoskeletal care—we find that the benefits of remote monitoring vary by condition and are generally time-limited during defined periods of active treatment. Yet, these “forever codes” that can be billed indefinitely risk increasing Medicare costs without delivering meaningful clinical benefits to beneficiaries. OIG has further warned that these codes are susceptible to fraud and abuse. Evidence shows that Medicare RPM spending continues to grow as more beneficiaries receive remote monitoring services for longer periods of time.

Earlier this month CMS released its proposed 2027 Medicare Physician Fee Schedule, which includes the most significant changes to Medicare payment for remote monitoring services since the codes were created—including eliminating contractor-delivered services on behalf of traditional providers and signaling an across-the-board rate cut.

Since its release, there has been a consistent sense of confusion from the media and other observers. Why would an Administration that has championed healthcare technology so boldly now devalue these technologies that have been the leaders of the digital health industry?

The answer is that it’s not a contradiction. This Administration is pro-technology, but only to the extent that technology drives value.

CMS has already signaled its commitment to change how Medicare pays for technology-enabled care with the ACCESS Model. Rather than paying for activities—collecting and transmitting physiologic data or reviewing readings—CMS’ ACCESS model ties payment to improvements in patient outcomes for cardiometabolic, musculoskeletal, and behavioral health conditions. Success is measured by results: lowering blood pressure, improving HbA1c, regaining physical function, and other clinically meaningful outcomes. The premise is straightforward: if a technology measurably improves patients’ health, Medicare should pay for it. If it does not, Medicare should not continue reimbursing simply because a service was delivered.

By prohibiting vendors from furnishing remote monitoring services in fee-for-service, CMS strengthens the relative appeal of participating in the ACCESS model. Companies that have built businesses around remote monitoring codes will need to reconsider how they participate in Traditional Medicare. Equally important, if health systems can no longer rely on vendors to furnish remote monitoring services, they now must decide if they build those capabilities internally or redirect patients to ACCESS. This means the 180+ already participating ACCESS organizations could receive more eligible Medicare beneficiaries to manage.

Many stakeholders have raised important concerns about these changes, including the rapid implementation timeline, the need to ensure a smooth transition for patients, whether payment rates are adequate to reward high-quality care models, and the ongoing role that clinicians play in delivering technology-enabled care. CMS will need to wrestle with this feedback and may continue to evolve and improve their approach to RPM payment and the ACCESS model.

Nonetheless, an outcomes-based payment model, like ACCESS, represents a more sustainable way to pay for technology-enabled care than traditional fee-for-service reimbursement. Moving payment for technology-enabled care out of fee-for-service is critical and time-sensitive.

The current fee-for-service payment system is ill-equipped to finance the next generation of health technologies. Companies that deliver remote monitoring, chronic care management, and other technology-enabled interventions are increasingly embedding AI into their products. Capital is following with investments concentrated among vendors building AI into workflows, signaling that AI will likely become core infrastructure for health technologies.

Over the past year, PHTI convened three workshops on AI applications in healthcare, bringing together senior leaders from health systems, health plans, technology developers, academia, investment firms, and federal agencies. Our latest report unpacked how to approach payment for clinical applications of AI.

AI is fundamentally different from previous health technologies. Over the next few years, AI will be technologically capable of diagnosing disease, managing chronic conditions, recommending treatments, and in some cases delivering care with limited to no human intervention. Yet today’s payment system was built to reimburse clinician time—not software that can increasingly perform clinical work.

Reimbursing AI under a traditional fee-for-service payment model risks significant increases in healthcare spending for both patients and taxpayers. If AI can monitor 1,000 or 10,000 patients as easily as 100, reimbursing each monitoring activity separately risks paying for automation rather than value.

What CMS’ 2027 Medicare Physician Fee Schedule proposed rule changes should make unmistakably clear is that the Agency is serious about redesigning Medicare payment for a new era of technology-enabled care and shifting Medicare’s investments in technology to be paid on outcomes. Change is hard for companies and their investors, but these shifts will push all technology innovators to build solutions that deliver proven benefits, rather than growing on the back of unaccountable payment models.