Payment Rates
In accordance with Medicare law, CMS proposes updating OPPS payment rates for hospitals that meet applicable quality reporting requirements by 2.4%. This update is based on the projected hospital market basket percentage increase of 3.2%, reduced by a 0.8 percentage point productivity adjustment.
Controlling Unnecessary Volume Increases
In the 2019 OPPS final rule, 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. For 2026, CMS is proposing to expand this policy to include drug administration services furnished in excepted off-campus PBDs.
Specifically, CMS is proposing to use the agency’s authority under section 1833(t)(2)(F) of the Act to apply the Physician Fee Schedule equivalent payment rate for any HCPCS 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. For 2026, CMS estimates this provision will reduce OPPS spending by $280 million.
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 proposing to phase out the Inpatient Only (IPO) list over a 3-year period, beginning with removing 285 mostly musculoskeletal procedures for 2026.
In the 2021 OPPS final rule, 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 proposing to continue this existing exemption for 2026 and subsequent years until the Secretary determines that the service or procedure is more commonly performed in the Medicare population in the outpatient setting.
340B Payment Policy
The 340B Final Remedy rule finalized changes to the calculation of the OPPS conversion factor applicable to non-drug items and services beginning in 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 2018 through 2022, which CMS estimated would occur in 2041. This prospective offset aimed to balance the goal of restoring hospitals to their financial position had the original 340B policy never existed, while avoiding burdening them with an immediate single year recovery.
After subsequent reconsideration of balancing these two goals, CMS has determined a shorter timeframe to be more appropriate. Consequently, CMS is proposing to revise the annual offset percentage for non-drug items and services from 0.5 percent to two percent effective 2026, excluding hospitals that enrolled in Medicare after January 1, 2018. This two percent reduction would remain in effect until the estimated payment reduction reaches $7.8 billion, which CMS estimates will occur in 2031.
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 is proposing 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). CMS is also proposing to align skin substitute categorization consistent with their FDA regulatory status.
For 2026, CMS is proposing to use a single payment rate for these three categories of skin substitute products. In future years, the agency intends that payment rates would differentiate between the three FDA regulatory categories. The proposed payment policy for skin substitutes in the physician office setting is provided in the 2026 Physician Fee Schedule (PFS) proposed rule.