CMS proposes increasing Medicare hospital outpatient department payment rates by 2.4% in CY 2026
The Centers for Medicare & Medicaid Services July 15 issued a proposed rule that would increase Medicare hospital outpatient prospective payment system rates by a net 2.4% in calendar year 2026 compared to 2025. This includes a proposed 3.2% market basket update, offset by a 0.8 percentage point cut for productivity.
In a statement shared with the media, Ashley Thompson, AHA senior vice president of public policy analysis and development, said the AHA was disappointed with the “inadequate” payment update “as many hospitals — especially those in rural and underserved communities — operate under challenging financial pressures.”
SITE-NEUTRAL AND INPATIENT ONLY LIST PROPOSALS
CMS proposes to pay for drug administration services furnished in grandfathered off-campus hospital outpatient departments at the site-neutral rate of 40% of the OPPS rate. The agency estimates this policy would cut OPPS spending by $280 million in CY 2026. It also requests comments on whether it should expand site-neutral payment to clinic visit services provided in on-campus HOPDs.
The agency also proposes phasing out the inpatient only (IPO) list over a 3-year period, beginning with removing 285 mostly musculoskeletal procedures for CY 2026. The IPO list details procedures that Medicare deems safe only in an inpatient setting.
“We oppose the proposal to expand ‘site-neutral’ cuts and eliminate the inpatient-only list, as both policies fail to account for the real and crucial differences between hospital outpatient departments and other sites of care,” Thompson said. “Studies show hospital outpatient departments are more likely to serve Medicare patients who are sicker, more clinically complex, and more likely to be disabled or living in poorer, rural communities than patients treated in independent physician offices.”
EXPEDITED TIMELINE FOR REPAYMENT FOR NON-DRUG SERVICES AND NEW DRUG ACQUISITON COST SURVEY
CMS is reconsidering the timeline for which all OPPS hospitals must repay the government for the $7.8 billion in increased payments they received for non-drug services between CYs 2018-2022 as a result of the agency’s budget-neutral policy to cut payments to 340B hospitals that was unanimously struck down by the Supreme Court. In prior rules, the agency had finalized repayments through an annual 0.5% reduction to the OPPS conversion factor starting in CY 2026 until the full $7.8 billion was repaid, which the agency had estimated would take 14 years. The agency now proposes to shorten the timeline so that the $7.8 billion is repaid by CY 2031 through a 2% annual reduction to OPPS conversion factor.
“We are also concerned with CMS’ proposal to claw back billions of dollars from hospitals at a far faster rate than originally promised,” Thompson said. “It is important to remember that this clawback punishes 340B hospitals for the agency’s own mistake in implementing a policy that a unanimous Supreme Court held to be unlawful. Doubling down on that unlawfulness, the proposed recoupment is both illegal and unwise, and it should not be finalized.”
In a related proposal, CMS also announces a new drug acquisition cost survey beginning in late CY 2025 into early CY 2026 for all hospitals paid under the OPPS for separately payable drugs. The results of the survey would be compiled and used to set payment rates for separately payable drugs in CY 2027 rulemaking.
Thompson said AHA was “concerned about the proposal to pursue a burdensome acquisition cost survey, especially if the agency’s goal is to drastically reduce Medicare payments to hospitals that serve the nation’s most vulnerable communities.”
OTHER PROPOSALS
CMS proposes to weaken the criteria for excluding services from coverage in ambulatory surgical centers. It also proposes making several changes to the hospital price transparency requirements including negotiated rate calculations, accuracy and completeness attestation, and enforcement processes.
CMS proposes several changes to the Outpatient, Rural Emergency Hospital, and ASC Quality Reporting Programs, including the removal of four measures related to COVID-19 vaccination of health care personnel and health equity. For the Outpatient and REH programs, the agency proposes adopting a new e-measure on timeliness of care in the emergency department. CMS also proposes establishing requirements for REHs to report e-measures. For the ASC program, CMS proposes adopting one patient-reported outcome measure. CMS also proposes updates to the methodology used to calculate the Overall Hospital Star Ratings to emphasize the Safety of Care measure group.
CMS will accept comments on the proposed rule for 60 days following publication in the Federal Register.
“We look forward to reviewing these proposals in more detail and participating in the comment process with the agency,” Thompson said.