CMS increases Medicare hospital outpatient department payment rates by 2.6% in CY 2026

The Centers for Medicare & Medicaid Services Nov. 21 issued a final rule that, among other provisions, increases Medicare hospital outpatient prospective payment system rates by a net 2.6% in calendar year 2026 compared to 2025. This includes a 3.3% market basket update, offset by a 0.7 percentage point cut for productivity. The rule includes payment reductions via site-neutral payment policies, the elimination of the inpatient-only list and other changes.

In a statement shared with the media, Ashley Thompson, AHA senior vice president of public policy analysis and development, said, “The AHA is disappointed that CMS has finalized cuts to hospitals and health system services, including those in rural and underserved communities. Combined with its continued inadequate market basket updates, the agency is exacerbating the challenging financial pressures under which hospitals are operating to serve their patients and communities."

SITE-NEUTRAL, INPATIENT-ONLY LIST, ASC COVERAGE CHANGES

CMS finalized its proposal 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. Rural sole community hospitals will be exempt from this payment reduction. The agency estimated this policy will cut OPPS spending by $290 million in CY 2026.

CMS also finalized the phase-out of the inpatient-only list over a three-year period. Moreover, CMS finalized its proposal to weaken the criteria for excluding services from coverage in ambulatory surgical centers, and as a result, will add 547 procedures to the ASC-covered procedures list.

“Specifically, we oppose expanding ‘site-neutral’ cuts and eliminating the inpatient-only list,” said Thompson. “Both policies ignore the important differences between hospital outpatient departments and other sites of care. The reality is that hospital outpatient departments serve Medicare patients who are sicker, more clinically complex, and more often disabled or residing in rural or low-income areas than the patients seen in independent physician offices.”

REPAYMENT FOR NON-DRUG SERVICES AND NEW DRUG ACQUISITION COST SURVEY

CMS maintains its original 340B recoupment policy, which will reduce payments to all OPPS hospitals through an annual 0.5% reduction in the OPPS conversion factor starting Jan. 1, 2026. This policy stems from the increased payments all OPPS hospitals 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 finalizing this adjustment, the agency has abandoned the accelerated recoupment timeline it had proposed. Importantly, however, CMS made clear that this 0.5% reduction will exist only for 2026. The agency expressly stated that hospitals should plan for greater reductions, up to 2%, in 2027 and beyond.

Thompson said AHA was “grateful that the agency accepted our position that an accelerated 340B remedy recoupment would harm hospitals that relied on the previous timeline. However, we are concerned that it intends to move forward with an accelerated timeline next year. An accelerated timeline, either now or in the future, is both bad policy and unlawful.”

In a related proposal, CMS also finalized 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 the CY 2027 rulemaking. Notably, the agency conceded that it could not force hospitals to complete the survey, although it may attempt to consider non-responses in any future rate reduction.

“Finally, we remain concerned with the burdensome drug acquisition cost survey finalized by the agency, especially if the agency uses the results of the survey next year to drastically reduce Medicare payments to the hospitals that serve our nation’s most vulnerable communities,” said Thompson.

PRICE TRANSPARENCY, OTHER POLICY CHANGES

CMS finalized, with only minor adjustments, its proposed changes to the hospital price transparency requirements, including new data elements and updated affirmation statement language. These changes go into effect on Jan. 1, 2026, but CMS will delay enforcement until April 1, 2026.

CMS finalized several changes to the Outpatient, Rural Emergency Hospital and ASC Quality Reporting programs as proposed, including the removal of four measures related to health equity and COVID-19 vaccination of health care personnel. For the Outpatient and REH programs, the agency adopted a new e-measure on timeliness of care in the emergency department. CMS also established requirements for REHs to report e-measures. For the ASC program, CMS did not finalize its proposal to adopt a new patient-reported outcome measure. Finally, CMS will update the methodology used to calculate the Overall Hospital Star Ratings to emphasize the Safety of Care measure group starting in 2026.

Finally, the agency will move forward with its proposal to collect market-based payment rate data on the Medicare cost report for cost reporting periods ending on or after Jan. 1, 2026. It then will use the submitted information to set inpatient prospective payment system relative weights beginning in fiscal year 2029.