Category: Member News

The Centers for Medicare & Medicaid Services (CMS) recently released a proposed rule to update the Medicare fee-for-service outpatient prospective payment system (OPPS) effective Jan. 1, 2026.

The proposed rule:

• Provides a net 0.9% increase to the OPPS conversion factor from $89.17 to $89.96 for hospitals enrolled in Medicare before Jan. 1, 2018. The update includes a 3.2% market basket update, mandated 0.8 percentage point productivity adjustment, other budget neutrality adjustments and a 2% reduction for the 340B remedy offset (described below). Hospitals that fail to meet outpatient quality reporting program requirements are subject to an additional two-percentage point reduction.
• Shortens the timeline for OPPS hospitals to repay the $7.8 billion received through higher payments for non-drug services in 2018-2022 due to the CMS’ budget-neutral policy that cut payments to 340B hospitals. The CMS proposes a 2% annual reduction to the OPPS conversion factor to repay the full $7.8 billion by 2031, up from the initially proposed 0.5% annual reduction over 16 years.
• Implements a site neutral payment policy for drug administration services provided in grandfathered off-campus hospital outpatient departments. The CMS proposed to pay a physician fee schedule equivalent rate for 61 HCPCS codes assigned to drug administration ambulatory payment classifications, which equates to roughly 40% of the OPPS rate. Rural sole community hospitals are exempt from this cut.
• Includes a new drug acquisition cost survey for all OPPS hospitals in late 2025 or early 2026 for separately payable drugs, with survey results to be used to set 2027 rates for separately payable drugs.
• Eliminates the inpatient only (IPO) list over three years, beginning with the removal of 285 mostly musculoskeletal services in 2026, making these procedures payable in outpatient settings.
• Decreases the outlier fixed-dollar threshold by 11.2% from the current $7,175 to $6,450.
• Updates the Outpatient, Rural Emergency Hospital (REH) and Ambulatory Surgical Center (ASC) Quality Reporting Programs, including removing four measures related to COVID-19 vaccination of health care personnel and health equity. For the Outpatient and REH programs, the CMS proposes a new e-measure on timeliness of emergency department care and establishing requirements for REHs to report e-measures. The CMS also proposes updates to the methodology used to calculate the Overall Hospital Star Ratings that would limit any hospital in the bottom safety quartile to a maximum of four stars and in 2027, drop such hospitals one full star.
• Updates the ASC covered procedures list to add 276 procedures plus an additional 271 procedures proposed for removal from the 2026 IPO list.
• Requires hospitals to report payer-specific Medicare Advantage payment rates on their Medicare cost report for periods ending on or after Jan. 1, 2026. The CMS plans to use this data for a proposed fiscal year 2029 methodology change in calculating inpatient Medicare severity diagnosis related group (MS-DRG) relative weights to reflect relative market-based pricing.
• Requires hospital to disclose detailed ranges of rates negotiated with health insurance plans (known as allowed amounts) by updating hospital price transparency regulations beginning Jan. 1, 2026, to require four new data elements. Hospitals must publish 10th-percentile, median and 90th-percentile allowed amounts (plus counts) instead of a single estimated allowed amount.
• Revises the definition of direct supervision for cardiac rehabilitation, intensive cardiac rehabilitation and pulmonary rehabilitation services and diagnostic services (excluding service with a global surgery indicator of 010 or 090) provided to hospital outpatients to permanently allow virtual direct supervision.

The MHA will provide a hospital-specific impact analysis within the next few weeks and encourages hospitals to contact Vickie Kunz by Sept. 2, regarding issues identified. Hospitals are encouraged to review the proposed rule and its impact on operations and submit comments to the CMS by Sept. 15. The CMS is expected to release a final rule in early November for the Jan. 1, 2026 effective date. Members with questions may contact Vickie Kunz at the MHA.