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July 24, 2025 – Last week, the Centers for Medicare & Medicaid Services (CMS) issued two major regs: the calendar year (CY) 2026 Medicare Physician Fee Schedule (PFS) proposed rule and the CY 2026 Outpatient Prospective Payment System (OPPS) proposed rule. Regs & Eggs last week focused on the PFS reg and its plethora of policies. The OPPS proposed reg is also quite a mouthful, and McDermott+ will host a webinar on July 31, 2025, to cover its major proposals. A significant theme in the OPPS reg is one that Regs & Eggs previously hinted might be included (I can thank my former colleague Leigh Feldman for the foresight): site neutrality. To help me dig into the OPPS reg’s site-neutrality-related proposals, I’m bringing in my colleague Deborah Godes.
Site neutrality means paying the same rate for the same services regardless of where they are performed. CMS has a long history of trying to move Medicare payments in this direction, and Congress and other stakeholders such as the Medicare Payment and Advisory Commission have made many policy proposals. There are also “site neutral lite” policies that aren’t site neutral in the true sense of the term but aim to provide more flexibility to provide services in less expensive care settings.
CMS under the first Trump administration introduced a few site neutral and site neutral lite policies. The Biden administration reversed course on some of them, so CMS under President Trump’s second term is reverting back to the initial policies.
What happened during the first Trump administration? In the 2019 OPPS rule, CMS used its “method to control for unnecessary increases” authority to apply a PFS-equivalent payment rate for clinic visits – the most common service billed under the OPPS – when furnished at an off-campus provider-based department (PBD). Effectively this meant that payment for clinic visits was reduced at all off-campus PBDs, even those that previously were excepted or grandfathered from site neutral payment policies. CMS phased in the payment reduction over two years.
CMS also used OPPS rulemaking during the first Trump administration to institute changes to the inpatient-only (IPO) list and the ambulatory surgical center (ASC) covered procedures list (CPL) to allow Medicare to pay for services furnished in less acute settings. The first Trump administration removed total knee arthroplasty and five other procedures from the IPO list in its first OPPS rule, paving the way for them to be performed on an outpatient basis. In the CY 2020 OPPS rule, the administration removed total hip arthroplasty, six spinal surgical procedures, and certain anesthesia services from the list. And in its final OPPS rule, the CY 2021 reg, the administration finalized its proposal to eliminate the IPO list entirely over a three-year period, beginning with 300 primarily musculoskeletal-related services.
In CY 2019, CMS also added 12 cardiovascular codes to the ASC CPL, making the services payable when furnished in that setting. In CY 2020, CMS added total knee arthroplasty, knee mosaicplasty, and six additional coronary intervention procedures to the list. In CY 2021, the administration added 11 more procedures, including total hip arthroplasty. CMS also finalized changes to the criteria for adding covered surgical procedures to the list, resulting in the addition of 267 surgical procedures.
The Biden administration halted the implementation of several of these policies. CMS withdrew the planned phased elimination of the IPO list in CY 2022 and added back all but a few of the 298 codes removed for CY 2021. In CY 2022 rulemaking, CMS restored the ASC CPL criteria that were in place before 2021, resulting in the removal of 255 procedures (out of 267) that had been added to the ASC CPL in CY 2021 rulemaking.
Against that background, CMS proposes the following policies for CY 2026:
Site neutral payment rates and PBDs
Using the same “unnecessary increases in volume” authority as it did in CY 2019 to reduce OPPS payments to a PFS-equivalent rate for clinic visits, CMS proposes to expand this policy to include drug administration services furnished in excepted off-campus PBDs. CMS would apply the PFS-equivalent payment rate for any HCPCS codes assigned to the drug administration ambulatory payment classifications (APCs) when provided at an excepted off-campus PBD. CMS proposes to exempt off-campus PBDs of rural sole community hospitals (SCHs), as it has done in the past.
CMS solicits input on whether the agency should apply the PFS-equivalent payment policy to other services, noting concerns about volume increases related to services within the imaging without contrast APCs (APCs 5521 – 5524). The proposed rule also includes a request for information on a potential policy to pay the PFS-equivalent rate (40% of the OPPS rate) for clinical visit services furnished in on-campus hospital outpatient departments. CMS requests feedback on whether and to what extent clinic visits performed in outpatient departments are necessary and how CMS could identify which clinic visits should be provided on campus, how providers and beneficiaries would be impacted by the policy, whether any additional costs are associated with on-campus clinic visits, and how rural SCHs should be treated under such a policy. CMS also requests input on the development of a more systematic site neutral payment policy for ambulatory services at high risk of shifting to the hospital setting based on financial incentives rather than medical necessity.
IPO list
CMS proposes to revert to the initial Trump-era policy to phase out the IPO list. CMS proposes to eliminate the IPO list beginning in CY 2026 with a three-year transitional period – the same timeline proposed in CY 2021 rulemaking. For CY 2026, CMS proposes to remove 285 codes from the IPO list, most of which are musculoskeletal procedures.
When CMS instituted this policy in CY 2021, CMS established that procedures removed from the IPO list would be exempt from certain medical review activities related to the “two midnights” policy, which generally considers inpatient stays appropriate if the patient is expected to remain in the hospital for at least two nights. For CY 2026 and onward, CMS proposes to maintain this indefinite exemption, which means that services removed from the IPO list would remain excluded from these reviews until the secretary determines that a service or procedure is more commonly performed in the outpatient setting. For alignment, CMS proposes to clarify that inpatient admissions for procedures on the IPO list remain appropriate for payment under Medicare Part A, while claims for services removed from the list may be paid under Part A if they meet applicable inpatient criteria.
For CY 2026, CMS proposes to revise review criteria currently in place for the ASC CPL to allow 276 procedures to be added to the list. CMS also proposes to add 271 codes that it concurrently proposes to remove from the IPO list in CY 2026. CMS believes that these policy changes would increase flexibility for patients while maintaining safety by positioning physicians to exercise medical judgment. The proposed review process would allow CMS to add new surgical procedures to the ASC CPL through rulemaking when they meet the proposed criteria. CMS states that the public could suggest procedures for CMS to review through the pre-proposed-rule recommendation process or the public comment period. Once a procedure was added, physicians could assess whether specific patients could safely receive it in an ASC setting.
CMS proposes to maintain the existing rule that prevents IPO-designated procedures from being added to the ASC CPL as the IPO list is phased out. However, once a procedure is removed from the IPO list, the general exclusion would no longer apply.
The policymaking back-and-forth between administrations is not unique. There are plenty of cases where administrations reverse or alter policies that the previous administration put into place. However, what is clear here is that the Trump administration feels strongly about reducing the overall cost of care – and using site-neutral-related policies to achieve that goal. The fact that this administration introduced these policies in its first round of OPPS rulemaking is also telling, as it signals that the administration is wasting no time to move in this policy direction.
Until next week, this is Jeffrey (and Deborah) saying, enjoy reading regs with your eggs.
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