Payment Rates
In accordance with statutory requirements, CMS is finalizing an update to the OPPS payment rates for hospitals that meet applicable quality reporting requirements by 2.6%. This update is based on the hospital market basket percentage increase of 3.3%, reduced by a 0.7 percentage point productivity adjustment.
Controlling Volume
In the 2019 OPPS final rule with comment period, CMS adopted a method to control unnecessary increases in the volume of the clinic visit service furnished in excepted off-campus provider-based departments (PBDs). This method prevents Medicare and beneficiaries from paying significantly more in the excepted off-campus PBD setting than in the physician office setting for some services. The 2026 final rule expands this policy to include drug administration services furnished in excepted off-campus PBDs. Specifically, CMS will apply the Physician Fee Schedule (PFS) equivalent payment rate for any codes assigned to the drug administration ambulatory payment classifications (APCs) when provided at an off-campus PBD excepted from section 603 of the Bipartisan Budget Act of 2015.
Inpatient Only List
In order to give beneficiaries more choices on where to obtain care with the potential for lower out-of-pocket expenses, CMS is finalizing its proposal to phase out the inpatient only (IPO) list over a 3-year period, beginning with the removal of 285 mostly musculoskeletal procedures for CY 2026. This policy allows for these services to be paid by Medicare in the hospital outpatient setting when determined to be clinically appropriate, giving physicians greater flexibility in determining the most appropriate site of service.
In the 2021 OPPS final rule with comment period, in conjunction with the elimination of the IPO list, CMS established a policy in which procedures removed from the IPO list beginning January 1, 2021 would be exempted from certain medical review activities related to the two-midnight policy. CMS is finalizing its proposal to continue this existing exemption for 2026 and subsequent years until the Secretary determines that the service or procedure is more commonly performed for the Medicare population in the outpatient setting than the inpatient setting.
Prospective Adjustment to Payments
The 340B Final Remedy rule finalized changes to the calculation of the OPPS conversion factor applicable to non-drug items and services beginning in CY 2026. Specifically, the rule codified a 0.5 percent reduction in the OPPS conversion factor applicable to non-drug items and services, excluding hospitals that enrolled in Medicare after January 1, 2018. This 0.5 percent reduction would remain in effect until the estimated aggregate payment reduction reached the $7.8 billion of increased non-drug item and services payments made from CY 2018 through CY 2022, which at the time CMS estimated would occur in CY 2041. Based on commenter feedback, CMS is not finalizing its proposal at this time. While the agency anticipates finalizing a larger reduction (such as 2 percent or other reduction greater than 0.5 percent) beginning in 2027, it will instead implement the previously finalized 0.5 percent reduction for 2026.
Skin Substitutes
Since 2014, CMS has unconditionally packaged skin substitute products furnished in the outpatient hospital setting into their associated application procedures as part of a broader policy to package all drugs and biologicals that function as supplies when used in a surgical procedure. The agency currently divides the skin substitutes into a high-cost group and a low-cost group, to ensure adequate resource homogeneity among APC assignments for the skin substitute application procedures. This payment approach differs from the payment policy for skin substitutes furnished in the non-facility setting, where skin substitute products are paid under the ASP plus 6 percent payment methodology.
For 2026, CMS finalized the proposal to unpackage skin substitute products from the application services and establish several APCs based on relevant product characteristics, rather than based on stated prices for provision of these products when they are used during a covered application procedure paid under the OPPS (described by CPT codes 15271-15278).
In addition, CMS finalized the proposal to align skin substitute categorization for payment purposes consistent with their FDA regulatory status for 361 Human Cells, Tissues, and Cellular and Tissue-Based Products (HCT/P) and the device types: Pre-Market Approvals (PMAs) and 510(k)s. For CY 2026, CMS will use a single payment rate for these three categories of skin substitute products. These policies are applicable in both the hospital outpatient department and physician office settings. The finalized payment policy for skin substitutes in the physician office setting is provided in the 2026 PFS final rule.