(July 18, 2025) – On July 15, 2025, the Centers for Medicare & Medicaid Services released the calendar year 2026 proposed rule for the Medicare Outpatient Prospective Payment System, Ambulatory Surgical Center Payment System and Hospital Price Transparency. The proposed rule represents far-reaching changes that include site-neutral payments for drug administration, new price transparency requirements and a range of other payment and quality updates. In addition to the regular updates to the market basket, key highlights proposed include:
- OPPS overall rate change: +2.4 percent
- Implements site-neutral payments for drug administration services furnished in off-campus hospital outpatient departments at the site-neutral rate of 40 percent of the OPPS rate and seeks comments on whether CMS should expand site-neutral payments to clinic visit services provided in on-campus hospital outpatient departments.
- Phases out the inpatient-only list over a three-year period, beginning with removing 285 mostly musculoskeletal procedures and enabling ambulatory surgery centers to provide more procedures under the ASC Covered Procedures List. In the CY 2021 OPPS/ASC final rule, in conjunction with the elimination of the inpatient-only list, CMS established a policy whereby procedures removed from the IPO list, beginning Jan. 1, 2021, would be exempt from certain medical review activities related to the two-midnight policy. CMS is proposing to continue this existing exemption for CY 2026 and subsequent years until the secretary determines the service or procedure is more commonly performed on the Medicare population in the outpatient setting.
- Accelerates the rate at which hospitals must "pay back" the government for the $7.8 billion in increased payments OPPS hospitals received for non-drug services between CYs 2018-2022 as a result of the CMS budget-neutral policy to cut payments to 340B hospitals, which was unanimously struck down by the Supreme Court.
- The prior policy for hospitals to repay the $7.8B was through an annual 0.5 percent reduction to the OPPS conversion factor starting in CY 2026, which was estimated to take 14 years.
- CMS now proposes to shorten the repayment timeline to six years by implementing a 2 percent annual reduction to the OPPS conversion factor.
- Announces a new drug acquisition cost survey beginning in late CY 2025 into early 2026 for all OPPS hospitals for separately payable drugs. The results of the survey will be compiled and used to establish payment rates for separately payable drugs beginning in 2027.
- This would be similar to the survey attempted previously during the pandemic, but it did not receive a high enough response rate.
- New price transparency requirements:
- Beginning Jan. 1, 2026, hospitals will be required to disclose the tenth, median, and ninetieth percentile allowed amounts in machine-readable files when payer-specific negotiated charges are based on percentages or algorithms, as well as the count of allowed amounts used to determine these percentiles.
- Requires hospitals to use electronic data interchange 835 electronic remittance advice transaction data to calculate and encode allowed amounts when a payer-specific negotiated charge is based on a percentage or algorithm.
- Requires hospitals to attest they have included all applicable payer-specific negotiated charges in dollars that can be expressed as a dollar amount, and for payer-specific negotiated charges that are not knowable in advance or cannot be expressed as a dollar amount, the hospital has provided in the MRF all necessary information available to the hospital for the public to be able to derive the dollar amount and included the name of the hospital's chief executive officer, president or senior official designated to oversee the encoding of true, accurate and complete data.
- Proposes to reduce the amount of a civil monetary penalty issued against a hospital when the hospital is noncompliant with the price transparency requirements by 35 percent when a hospital agrees with the CMS determination of their noncompliance and waives the right to a hearing by an Administrative Law Judge.
- Requires hospitals to publish the detailed ranges of rates they negotiate with health plans
- Proposes to collect the median payer-specific charges hospitals have negotiated with Medicare Advantage payers to use to determine relative Medicare payment rates for inpatient hospital services.
- Allows CMS to certify new organizations as accreditors of Graduate Medical Education programs, thereby increasing competition in physician residency accreditation.
- Unpackages skin substitute products from the application services and establishes several ambulatory payment classifications based on relevant product characteristics, rather than based on stated prices for provisions of these products when they are used during a covered application procedure paid under the OPPS (described by CPT codes 15271-15278).
- Continues temporary add-on payments for certain non-opioid treatments for pain relief by proposing five drugs and six devices to qualify starting in 2026.
- Prohibits hospitals from receiving a five-star rating in Medicare's Quality Star Rating program if they are in the lowest quartile of the Safety of Care measure group and reduces a hospital's Overall Star Rating by one star if they are in the lowest quartile of the Safety of Care measure group.
- Removes four measures from the Outpatient Quality Reporting Program that focus on COVID-19 staff vaccinations and health equity. Removes an additional two measures contingent upon the adoption of a new Emergency Care Access and Timeliness. Similar changes are proposed for the Rural Emergency Hospital Quality Reporting Program.
Program changes will take effect on or after Jan. 1, 2026, unless otherwise noted.
Comments on the proposed rule are due to CMS by Sept. 15, 2025, and can be submitted electronically at http://www.regulations.gov/ by using the website's search feature to search for file code "CMS-1834-P.
Please contact Shannan Flach or Jaron Caffrey if you have questions or feedback that you would like KHA to reflect in our comment letter to CMS.
--Jaron Caffrey