The Centers for Medicare & Medicaid Services (CMS) recently released the calendar year (CY) 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System proposed rule, which includes proposals to update payment rates and regulations affecting Medicare services furnished in hospital outpatient and ASC settings beginning in CY 2026.
During our July 31, 2025, webinar, the McDermott+ team discussed key policy proposals and potential impacts on industry.
Watch the recording here, and read on for key takeaways:
The rule proposes to increase payment rates for OPPS and ASC providers by 2.4% but continues a downward trend compared to the previous calendar year.
CMS estimates that total payments to OPPS and ASC providers for CY 2026 would be about $100 billion and $9.2 billion, respectively. This represents an increase of about $8.1 billion and $480 million, respectively, from CY 2025 payment levels. However, CY 2026 would be the third consecutive year in which the payment rate update was lower than the previous CY.
CMS proposes to eliminate the Inpatient Only (IPO) List over the next three years, beginning with the removal of predominantly musculoskeletal-related services from the list.
CMS believes that more procedures can be performed on an outpatient basis with shorter recovery times because of technological advances and other factors. In CY 2026, CMS proposes to remove 285 codes from the IPO list, most of which are musculoskeletal procedures. CMS also proposes a new level 7 in the musculoskeletal ambulatory payment classification (APC) family for CY 2026. CMS would assign procedures coming off the IPO list to clinical APCs, including the new level 7 musculoskeletal APC. This proposal would be implemented in a budget neutral manner.
CMS proposes to revise the annual reduction to the OPPS conversion factor for non-drug items and services from 0.5% to 2% effective January 1, 2026.
In 2022, the US Supreme Court ruled that CMS’s decision to cut reimbursement amounts on 340B drugs paid under the OPPS was unlawful. Following this ruling, 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. In the November 2, 2023, 340B Remedy final rule, CMS finalized a policy to recoup the amount that hospitals were overpaid for non-drug items and services by reducing the OPPS conversion factor by 0.5 %. CMS now proposes to revise the OPPS conversion factor reduction from 0.5% to 2% in order to recoup the overpayment amount of $7.8 billion faster. The 2% 340B remedy offset would affect 92% of hospitals on the CY 2026 OPPS impact file.
CMS proposes site neutral payments for drug administration services furnished by excepted off-campus outpatient provider-based departments.
CMS would apply the Physician Fee Schedule (PFS)-equivalent payment rate to drug administration services (APCs 5691 – 5694) when provided at an excepted off-campus provider-based department. This change would reduce Medicare payments to these sites by an estimated $280 million. CMS proposes to exempt rural sole community hospital outpatient provider departments from this payment rate reduction. CMS requests stakeholder feedback on expanding site neutral payment policies to on-campus clinic visits, imaging services, and services predominantly performed in the ASC or office setting.
CMS proposes to unpackage skin substitutes and pay for them separately as incident-to supplies, aligning with the proposed payment policy change in the Medicare PFS.
Currently, skin substitutes are bundled with the underlying application procedure code and are separated into high-cost and low-cost groups. To use a consistent payment approach for skin substitute products across the different sites of service, CMS proposes a per unit payment rate of $125.38, based on a volume-weighted average sales price of products used in the hospital outpatient setting in Q4 2024. CMS proposes to group skin substitutes by US Food and Drug Administration regulatory status.
Hospitals would be required to report median payer-specific negotiated charges by Medicare severity diagnosis-related group (MS-DRG) from Medicare Advantage plans to be used in a market-based MS-DRG relative weight methodology.
CMS proposes to use median Medicare Advantage payer-specific negotiated charges by MS-DRG to calculate the Inpatient Prospective Payment System (IPPS) MS-DRG relative weights, instead of charges found on the hospital’s chargemaster and Medicare cost report data. If this policy is finalized, CMS would require the necessary data to be reported on cost reports ending on or after January 1, 2026, and would incorporate the data into IPPS rate-setting for FY 2029.
Stakeholders seeking to comment or further understand the rule’s effects should contact McDermott+ for assistance.
When:
Jul 31, 2025
Where:
Webinar
