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November 25, 2025 – Last Friday (November 21), the Centers for Medicare & Medicaid Services (CMS) issued the calendar year (CY) 2026 Outpatient Prospective Payment System (OPPS) final rule, the major Medicare payment rule impacting hospital outpatient payments. Medicare rules are usually required to be released 60 days prior to their effective date (which in this case would have been November 1, 2025, for a January 1, 2026 effective date). Although the rule came out “late,” the effective date of the rule will still be January 1, 2026. The final rule is open for comment until January 20, 2026. Although the policies are already finalized by then, CMS could still take any comments into account for future rulemaking.
To help me highlight some of the main themes in the CY 2026 OPPS final rule, I’m bringing in my colleague Deborah Godes.
For CY 2026, CMS increased payment rates under the OPPS and the Ambulatory Surgical Center (ASC) Payment System by 2.6%. This increase factor is based on a hospital market basket percentage increase of 3.3%, reduced by a productivity adjustment of 0.7 percentage points. This update is slightly higher than the proposed 2.4% update. Based on the finalized policies, CMS estimates that total payments to OPPS and ASC providers (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix) for CY 2026 will be approximately $101.0 billion and $9.2 billion, respectively. This growth represents an increase of approximately $8.0 billion and $450 million, respectively, from CY 2025 payment levels.
Even with this increase, hospitals are facing other financial pressures, including the ongoing Medicare sequester of 2% and the “340B remedy” reduction of 0.5% to the OPPS conversion factor for non-drug items and services (discussed more below). Further, other policies in the final rule, such as the expansion of the existing site neutral policy and the elimination of the inpatient only (IPO) list, will impact overall hospital payments.
As discussed in a previous Regs & Eggs blog post, CMS has a long history of trying to move Medicare towards more site neutrality payments, whereby Medicare would pay the same rate for the same services regardless of where they are performed. 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.
In 2019, under the first Trump administration, CMS used its authority to control “unnecessary increases in volume” to reduce OPPS payments to a PFS-equivalent rate for clinic visits. In this year’s rule, CMS uses the same authority to expand the policy to include drug administration services furnished in excepted off-campus provider-based departments (PBDs). CMS will apply the PFS-equivalent payment rate for any Healthcare Common Procedure Coding System (commonly referred to as HCPCS) code assigned to the drug administration ambulatory payment classifications (APCs) when provided at an excepted off-campus PBD. CMS will exempt off-campus PBDs of rural sole community hospitals (SCHs), as it has done in the past.
CMS will not be implementing this policy in a budget-neutral manner, and estimates that this policy will save $290 million in 2026, with $220 million of those savings accruing to Medicare and $70 million to Medicare beneficiaries. CMS estimates savings of $11 billion over 10 years (from 2026 to 2035).
CMS finalized its proposal to phase out the IPO list beginning in CY 2026 with a three-year transitional period. The agency will remove 285 codes from the IPO list, most of which are musculoskeletal procedures.
CMS also will exempt procedures that are removed from the IPO list 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 alignment, CMS clarifies 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.
CMS emphasizes through this section of the rule that eliminating the list will enable physicians to use their best clinical judgment about what the most appropriate setting is for the patient to receive care (including in an inpatient setting). In other words, services taken off the list can still be performed in an inpatient setting and do not have to be performed in an outpatient setting.
For CY 2026, CMS is revising review criteria currently in place for the ASC CPL to allow 276 proposed procedures to be added to the list. CMS also adds 271 codes that it removed concurrently from the IPO list for CY 2026. Finally, CMS has finalized the addition of 13 additional procedures for which it received requests as part of the proposed rule comment period. CMS believes that these policy changes will increase flexibility for patients while maintaining safety by positioning physicians to exercise medical judgment. The review process will 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 is added, physicians could assess whether specific patients could safely receive it in an ASC setting.
CMS also will 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.
CMS is finalizing its proposal to unpackage skin substitutes and pay for them separately as incident-to supplies to align with the final payment policy change in the Medicare PFS. As discussed in this Regs & Eggs blog post, in the PFS, CMS finalized its policy to change the way it pays for skin substitutes. Instead of paying for these products based on average sales price (ASP) plus 6%, CMS will treat skin substitute products (excluding those licensed under Section 351 of the Public Health Service Act) as “incident-to supplies” when used as part of a covered application procedure in the physician office or hospital outpatient department. CMS will categorize products into three groupings, and, for CY 2026, will apply a single national payment rate of $127.28 per cm² for all three of them, a 1.5% increase over the proposed rate. CMS stated that the PFS policy is expected to reduce spending by around $19 billion in CY 2026, and believes that the policy prevented Medicare beneficiaries from paying an additional $11 in Part B premiums in CY 2026. In other words, while Medicare Part B premiums are set to increase by $17.90 in CY 2026 (from $185 in 2025 to $202.90), CMS believes they would have been $11 higher than that if not for this policy.
Under the OPPS, since 2014, CMS has divided skin substitutes into high-cost and low-cost groups to ensure “adequate resource homogeneity among APC assignments.” Providers have been instructed to bill high-cost skin substitutes with HCPCS codes 15271 through 15278, and to bill low-cost skin substitutes with HCPCS codes C5271 through C5278. The cost of the skin substitute is packaged into the cost of the procedure and reflected in the APC payment rate for the administration codes.
Under the CY 2026 final OPPS policy, all skin substitutes will be assigned new payment status indicator “S1” and assigned to one of three new APCs based on their Food and Drug Administration (FDA) regulatory category:
For CY 2026, the payment rate will be based on a volume-weighted average Q4 2024 ASP. CMS used utilization patterns found in the Q4 2024 outpatient hospital claims data for weighting. In the future, CMS plans to use skin substitute volume from both hospital and non-facility providers. For the first year of the policy, CMS found the highest weighted ASP among the three APCs to be $127.14 per unit for APC 6002 and applied that payment rate to all three APCs. It is important to note that the per-unit amount of $127.14 differs slightly from the amount of $127.28 that was finalized in the PFS.
CMS also deletes the low-cost HCPCS codes C5271 through C5278, as there is no longer a need for them. CPT codes 15271 through 15278 will remain and be used for all skin substitute administrations, however.
In a reversal from the proposed rule, CMS is NOT finalizing its proposal to revise the annual reduction to the OPPS conversion factor for non-drug items and services from 0.5% to 2.0%. As background, on November 2, 2023, CMS finalized the Medicare Program; Hospital Outpatient Prospective Payment System: Remedy for the Calendar Years 2018 – 2022 rule to address how the agency will restore payments to hospitals affected by a 2018 decision to cut reimbursement amounts on 340B drugs paid under the OPPS. This rule was responsive to a US Supreme Court ruling that the 2018 payment cuts were not consistent with CMS authority to set Medicare payments to hospitals for outpatient drugs. CMS announced that it would provide hospitals with a one-time lump sum payment intended to account for the difference in what was paid to the hospitals and what should have been paid had the cuts not been implemented. CMS estimated that the total payments would be $9 billion.
CMS also estimated that hospitals were paid $7.8 billion more for non-drug items and services from CY 2018 through September 27, 2022, because the cuts’ budget-neutral implementation increased rates on all other OPPS items and services to all hospitals. To maintain budget neutrality for the payment cuts remedy, CMS offset the $7.8 billion by adjusting the OPPS conversion factor by -0.5% starting in CY 2026. CMS said it would continue to make this adjustment until the full $7.8 billion is recouped, which CMS estimated would take 16 years.
In this rule, CMS delays its proposed changes to the recoupment payment percentage clawback. CMS had proposed revising the annual reduction to the OPPS conversion factor for non-drug items and services from 0.5% to 2.0% effective January 1, 2026. While CMS is not finalizing the proposal, the agency states in the final rule that it anticipates implementing a larger percent reduction (such as 2.0% or other reduction greater than 0.5 percent) beginning in CY 2027.
CMS is required by law to set payment rates for specified covered outpatient drugs (SCODs) beginning in 2006 at average acquisition costs for a drug when certain hospital acquisition cost survey data is available. The Government Accountability Office (GAO) conducted surveys in 2004 and 2005 that were used to set rates in 2006. GAO also recommended that CMS conduct its own surveys “possibly every 5 or 10 years” going forward. However, CMS has not conducted a subsequent survey of acquisition costs for each SCOD for all hospitals paid under the OPPS.
In this final rule, CMS states that it intends to conduct a survey, from January 1, 2026, through March 31, 2026, on hospitals paid under the OPPS for their drug acquisition costs, including for SCODs, and for drugs and biologicals CMS historically treats as SCODs. CMS will survey hospitals only about drugs that are separately paid under the OPPS but also will ask hospitals to separately list their acquisition costs for drugs acquired through the 340B program from those acquired outside of the 340B program to ensure that all discounts are accurately captured and represent the hospital’s acquisition costs. CMS states it intends to collect and analyze the data in time to help determine Medicare Part B drug payment rates starting in 2027.
CMS will be hosting two webinars, one on December 9, 2025, and another on December 11, 2025, both at 1:00 pm Eastern Standard Time (EST). These webinars will be used to educate hospital representatives on the survey, how to prepare, and where to find resources. Questions can be sent in advance of the webinar to OPPSdrugsurvey@cms.hhs.gov, with “Outpatient Drug Survey Webinar” in the subject line.
As with the PFS rule, CMS is continuing to expand current flexibilities around direct supervision of telehealth services. CMS is finalizing its proposal to permanently adopt a definition of direct supervision that would allow “immediate availability” of a supervising practitioner using audio/video real-time communications technology (excluding audio-only) for all services described as incident-to a physician’s professional services, except for select global surgery codes. To ensure consistency with PFS, the final rule permanently allows direct supervision of most cardiac rehabilitation, intensive cardiac rehabilitation, pulmonary rehabilitation services, and diagnostic services to be available via audio/video real-time communications technology (excluding audio-only). This flexibility does not require a virtual presence instead of in-person but allows providers to use their clinical judgment to determine the mode of supervision on a case-by-case basis.
The OQR program is a pay-for-reporting quality program that requires hospital outpatient departments to report data on certain quality measures specified by CMS. Hospitals that fail to submit the required quality data receive a two-percentage-point reduction to their annual payment update. CMS finalizes the following updates to the program:
As described in a previous Regs & Eggs blog post, on February 25, 2025, President Trump issued Executive Order 14221, “Making America Healthy Again by Empowering Patients with Clear, Accurate, and Actionable Healthcare Pricing Information,” aimed at strengthening existing price transparency requirements for hospitals and health plans.
Since 2021, hospitals have been required to make public:
In the executive order, the president called on CMS and other federal agencies to make “more meaningful price information available to patients to support a more competitive, innovative, affordable, and higher quality healthcare system,” which includes requiring the “disclosure of the actual prices of items and services, not estimates.” The executive order also calls on federal agencies to ensure pricing information is standardized and easily comparable across hospitals.
This final rule carries out the executive order by requiring that hospitals list actual dollar amounts rather than estimates and ensure information on their MRFs can be comparable across other MRFs. Specifically, CMS is finalizing its proposal to require hospitals to replace the estimated allowed amounts that are currently used on MRFs with the median allowed amount and to add the 10th and 90th percentile allowed amounts to their MRFs. Hospitals will be required to disclose the 10th percentile, median, and 90th percentile allowed amounts, as well as the count of allowed amounts, in MRFs when payer-specific negotiated charges are based on percentages or algorithms. Hospitals will also be required to attest that they provided all possible information that can be expressed as an actual dollar amount on their MRFs (and, in cases where charges could not be expressed as a dollar amount, that they provided as much information as they could to help the public derive a dollar amount). To help ensure that the information on MRFs is comparable, CMS is requiring that hospitals encode their organizational national provider identifiers on the MRFs. Finally, CMS modifies the current civil monetary penalty (CMP) process used to penalize hospitals that are found to be out of compliance with the requirements in attempt to encourage faster resolution of these cases. This includes reducing the amount of a CMP by 35% when a hospital waives its right to a hearing before an administrative law judge.
All of these modifications will be officially effective on January 1, 2026. However, CMS will delay actual enforcement of these requirements for three months, until April 1, 2026, to give hospitals more time to prepare for these changes.
CMS finalizes an Inpatient Prospective Payment System (IPPS)-related proposal to use the reported median payer-specific negotiated charge by MS-DRG from Medicare Advantage in a market-based MS-DRG relative weight methodology. Eventually, these data would replace the use of charges that are found on the hospital’s chargemaster and Medicare cost report data for the calculation of the IPPS MS-DRG relative weights. Reporting will be required for FY 2026 cost reports submitted by hospitals paid under the IPPS and utilized in the MS-DRG weight calculation for FY 2029. CMS had finalized a similar policy under the first Trump administration, but it was repealed under the Biden administration. The collection and reporting of median charges align with the price transparency requirements, as hospitals are already required to provide this information. CMS believes that, at least initially, there would be “minimal impacts to the relative weights under this proposed market-based MS–DRG relative weight methodology.”
CMS finalized its policies around the use of non-opioid treatment for pain relief. CMS believes that expanding access to non-opioid pain relief options will help reduce opioid reliance and lower the risk of opioid-use disorder, thereby helping to prevent this chronic disease among Americans.
Specifically, CMS will continue to provide temporary separate payments for certain non-opioid treatment for pain relief in the HOPD and ASC settings for CY 2026. The agency is finalizing five drugs and 13 medical devices to qualify as non-opioid treatments for pain relief with separate reimbursement in both the HOPD and ASC settings in CY 2026. CMS’s final list of qualifying products for separate payment is included in Table 134 of the final rule.
There is a lot to digest in this major rule, here are some key resources:
McDermott+ will be conducting further analyses of the rule in the coming weeks. You can also explore the CY 2026 payment rates and trends using our interactive dashboard.
Until next week, this is Jeffrey (and Deborah) saying, enjoy reading regs with your eggs.
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