Site-neutral pay, 340B clawback to offset new 2.6% OPPS boost

Medicare will cut hospital outpatient payments by hundreds of millions of dollars in 2026 while implementing a controversial "recoupment" policy that reduces rates by 0.5% annually until $7.8 billion in previous overpayments are recovered, according to the final rule released by the Centers for Medicare & Medicaid Services.

Released on Friday, the Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Final Rule for calendar year (CY) 2026 will increase OPPS payment rates by 2.6% for the upcoming year, provided hospitals meet the applicable quality reporting requirements. The update is based on a 3.3% increase to the hospital market basket percentage, reduced by a 0.7 percentage point productivity adjustment.

The Centers for Medicare & Medicaid Services (CMS) also finalized a 2.6% increase in ASC payment rates in CY 2026 using the same formula.

The final rule affects approximately 4,000 hospitals and 6,000 ASCs that bill Medicare.

However, hospitals and ASCs will see cuts in other Medicare payment areas, including for outpatient care delivered at off-campus, provider-based departments (PBDs). CMS anticipates saving $11 billion for Medicare and its beneficiaries over the decade as a result of these policies.

CMS said in the final rule that it will adopt a site-neutral payment method to "control unnecessary increases in the volume of outpatient services" furnished outside of the inpatient setting. Site-neutral payments align Medicare rates for covered outpatient services with rates under the Medicare Physician Fee Schedule, which are generally lower than the rates hospitals would bill under the OPPS.

Specifically, in CY 2026, CMS will expand site-neutral payment rates to drug administration services done in off-campus PBDs that are not exempted by federal law. Exempted PBDs include those billing the OPPS prior to Nov. 2, 2015.

CMS estimates in the final rule that this policy change will reduce OPPS spending by $290 million, resulting in $220 million returned to Medicare and $70 million to beneficiaries due to lower coinsurance.

The final rule also eliminates Medicare's inpatient-only list, which specifies the procedures that Medicare will only cover when performed in an inpatient hospital setting. CMS plans to phase out the list over three years, with 285 procedures exiting in CY 2026. The procedures are largely tied to musculoskeletal services.

Next year, Medicare will cover these services when performed in the hospital outpatient setting, provided they are clinically appropriate. CMS intends for this policy change to give providers and beneficiaries more flexibility while lowering costs.

However, both policy changes have upset the American Hospital Association (AHA), which has opposed the expansion of site-neutral payments and the elimination of the inpatient-only list.

"Both policies ignore the important differences between hospital outpatient departments and other sites of care," Ashley Thompson, senior vice president of public policy analysis and development at the AHA, said in a statement. "The reality is that hospital outpatient departments serve Medicare patients who are sicker, more clinically complex, and more often disabled or residing in rural or low-income areas than the patients seen in independent physician offices."

Thompson also expressed ongoing concerns about the 340B Drug Pricing Program remedy plan despite CMS bypassing a proposed increase in the recoupment percentage.

CMS will proceed with the original 0.5% annual offset for non-drug items and services affected by a 340B policy that unlawfully reduced payments to hospitals participating in the program between 2018 and 2022. The federal agency had floated a 2% offset starting next year to accelerate recoupment until it reached the $7.8 billion owed.

Based on hospital feedback, CMS stated that it would not finalize the larger offset in CY 2026; however, it will consider a reduction of up to 2% beginning in CY 2027.

The AHA also raised concerns about an upcoming drug acquisition survey, finalized in the latest OPPS rule, which aims to determine payment rates for covered outpatient drugs. The survey will launch on Jan. 1, 2026; however, AHA said the survey will be burdensome, particularly if CMS uses the results to lower Medicare payment rates next year.

"The AHA is disappointed that CMS has finalized cuts to hospital and health system services, including those in rural and underserved communities. Combined with its continued inadequate market basket updates, the agency is exacerbating the challenging financial pressures under which hospitals are operating to serve their patients and communities," Thompson stated.

Additionally, the Hospital OPPS and ASC Payment System Final Rule for CY 2026 also includes significant updates to hospital price transparency requirements. The final rule will require hospitals by Jan. 1, 2026, to calculate and encode the median, 10th and 90th percentile allowed amounts for all payer-specific negotiated charges and include a count of claims for those calculations. The new requirements replace estimated allowed amounts with actual median allowed amounts when payer-specific negotiated charges are based on percentages or algorithms.

Hospitals must also start including more in-depth contact information in their machine-readable files, such as the name of the hospital's CEO or president and the hospital's national provider identifier number. This will be part of the enhanced attestation hospitals must include.

While the updated requirements take effect at the start of the new year, CMS has announced a three-month grace period, extending through April 1, 2026, before enforcement begins. Hospitals face civil monetary penalties for noncompliance; however, CMS finalized a 35% discount in the latest rule for hospitals that accept the violation and waive their right to a hearing.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.