CMS Final Rule: Key OPPS and ASC changes for CY 2026

Large wholesale regulations, like the Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgery Centers (ASC) final rule for calendar year (CY) 2026 (Final Rule), can often go unnoticed and the multiplicity of changes can be overwhelming. However, this Final Rule for OPPS and ASCs is significant and should be called out for its signal of major changes in reimbursement concerning hospital inpatient and outpatient procedures, 340B changes and major changes to how hospital transparency reporting must occur. While enforcement discretion may last for a few months, hospitals should take heed now: the attestations they will be required to execute could prove actionable by an inspector general and site-neutrality changes signify major shifts in how outpatient chemotherapy may be delivered in the future.

These wide-ranging annual payment rules affect approximately 4,000 hospitals and 6,000 ASCs, nearly 10,000 facilities nationwide. In 2023, approximately 60 percent of fee-for-service Medicare Part B beneficiaries received at least one OPPS service, underscoring the broad operational and financial reach of these updates. The Final Rule encompasses several consequential policy reforms that will have an immediate financial and operational impact for providers, including payment updates, enhanced hospital price transparency and targeted policy changes promoting site-neutral payment.

OPPS and ASC payment update

The Centers for Medicare & Medicaid Services (CMS) has finalized a 2.6 percent increase, up from the proposed 2.4 percent increase, in payment rates for both the OPPS and ASC services. This update is based on a hospital market basket percentage increase of 3.3 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), reduced by a 0.7 percent productivity adjustment. Hospitals that do not meet Outpatient Quality Reporting requirements will receive a 2 percent reduction in reimbursement.

Site-neutral payment for drug administration services

In Executive Order 14273, issued April 15, 2025, President Trump ordered the Secretary of Health and Human Services to “propose regulations to ensure that payment within the Medicare program is not encouraging a shift in drug administration volume away from less costly physician office settings to more expensive hospital outpatient departments.” In the Final Rule, CMS expanded its site-neutral policies to cover drug administration at all grandfathered (excepted) off-campus hospital outpatient departments (HOPDs). These services will now be reimbursed at 40 percent of the OPPS rate, consistent with the Medicare Physician Fee Schedule.

Drug administration includes the intravenous or intramuscular administration of a range of medications. Currently, Medicare pays 200 – 300 percent more for drug administration in an HOPD setting compared to a physician office. Cancer patients receiving chemotherapy are the primary utilizers of this service. In adopting site-neutral payment, CMS emphasized that there is no substantive or clinical difference between drug administration performed in HOPDs and physician offices. Rural Sole Community Hospitals are exempt from this policy and will continue to receive the full OPPS payment amount. Stakeholders must accommodate CMS’s continued expansion of site neutral-payment policies. Support for an expansion of site-neutral policies from Capitol Hill and the Trump administration means the push for site neutrality is not likely to abate.

Price transparency

CMS finalized its proposed revisions to hospital price transparency regulations with modifications. Under the Final Rule, hospitals must:

• Replace “estimated allowed amounts” with disclosure of the 10th percentile, median and 90th percentile allowed amounts, plus the count of allowed amounts, when payer-specific negotiated charges are based on percentages or algorithms.

• Use EDI 835 ERA remittance data (or an equivalent source with the same information) and follow the specified methodology and lookback requirements (no less than 12 months and no longer than 15 months prior to posting) to calculate these values.
• Attest that, to the “best of their knowledge and belief,” all required standard charge information is complete and accurate as of the file date, and that all payer-specific negotiated charges are presented as dollar amounts or include sufficient detail for the public to derive a dollar amount (including referenced fee schedules and formula components).

• Ensure that the machine-readable file (MRF) encodes the name of the hospital CEO, president or another senior official responsible for ensuring the data are true, accurate and complete, and includes the hospital’s Type 2 NPI(s).

These revisions take effect January 1, 2026. However, CMS will use enforcement discretion through April 1, 2026. While CMS adopted modifications to its proposed policies that add flexibility for all hospitals, it declined to create special carve outs for small, rural and safety-net hospitals, despite repeated concerns that these facilities are disproportionately burdened by new requirements. CMS emphasized the consumer benefits of standardization and comparability across hospitals.

CMS also finalized its proposal to reduce the amount of civil monetary penalty (CMP) by 35 percent in certain circumstances, when a hospital submits a written waiver of its right to an Administrative Law Judge hearing within 30 days of the CMP notice. According to CMS, the changes aim to improve price transparency, strengthen data integrity and streamline enforcement while providing consumers with more actionable pricing information.

Accelerated repayment for non-drug services overpayments under 340B

In response to public comments, CMS has decided not to accelerate the annual offset percentage for non-drug items and services from 0.5 percent to 2 percent as proposed. However, CMS anticipates implementing a larger adjustment, between 0.5 percent and 2 percent in CY 2027.

Historically, drugs under the 340B Drug Pricing Program were reimbursed at the Average Sales Price (ASP) plus 6 percent. Beginning with the 2018 OPPS final rule, CMS adopted a reduced 340B drug payment policy for ASP minus 22.5 percent. To maintain budget-neutrality during that period, CMS increased payments for non-drug items and services. In 2022, the reduced 340B drug payment policy was challenged in the US Supreme Court decision. The Court held that absent a survey of hospital acquisition costs for outpatient prescription drugs, CMS may not vary reimbursement by hospital group.

In early 2024, CMS repaid affected 340B hospitals in a one-time lump sum payment. At the same time, and consistent with the OPPS budget-neutrality requirements, CMS began seeking offsetting reductions for non-drug items and services that had been paid at higher rates between 2018 – 2022. The offset is intended to restore hospitals to the financial position they would have held had the 2018 340B reduction in reimbursement never taken effect, while avoiding the burden of a single-year recovery. Hospitals that began billing Medicare under the OPPS after January 1, 2018, are exempt from this reduction.

Further, pursuant to Executive Order 14273, the US Department of Health and Human Services (HHS) will conduct a CY 2026 survey of the acquisition costs for each separately payable drug acquired by hospitals under the OPPS. The survey results are expected to inform CMS policy decisions for the CY 2027 payment rules. CMS will launch a portal for hospitals to provide their drug acquisition cost data. This survey sets the stage for CMS to reduce payments for 340B drugs in future years and likely signals headwinds for 340B reimbursement.

Inpatient only list

CMS has finalized its proposal to phase out the hospital inpatient-only (IPO) list over three years, beginning in CY 2026. The IPO list was originally established to identify procedures payable only when furnished in an inpatient setting due to their invasive nature or the need for extended postoperative recovery. CMS now believes that advances in surgical techniques and patient safety protocols justify phasing out the IPO list. For the first phase, 285 musculoskeletal services will be removed from the IPO list (Final Rule, Table 119), making them eligible for payment under the OPPS.

CMS is also extending the “two-midnight rule” exemption. Under this exemption, procedures recently removed from the IPO list may be performed and billed in either an inpatient (Medicare Part A, IPPS) or outpatient (Medicare Part B, OPPS) setting. These procedures will be exempted from site-of-service claim denials and Medicare audits on the grounds that they should have been performed outpatient instead of inpatient. The exemption will remain in effect until Medicare billing data show the procedures are being more commonly performed in outpatient settings, at which point standard medical review processes will resume.

ASC covered procedures and supervision

CMS finalized its proposal to expand the ASC covered procedure list (CPL). The ASC CPL is the official list of surgical procedures permitted in an ASC. In the Final Rule, CMS shifted several exclusion criteria into nonbinding physician considerations for patient safety. These considerations include procedures that (1) generally result in extensive blood loss, (2) require major or prolonged invasion of body cavities, (3) directly involve major blood vessels, (4) are generally emergent or life-threatening in nature and (5) commonly require systemic thrombolytic therapy. The Final Rule adds 547 procedures as proposed, plus an additional 13 procedures recommended by commenters to the ASC CPL for CY 2026 (see Tables 131-133, Final Rule).

CMS also finalized its proposal to permanently allow real-time audio-video technology for the direct supervision of cardiac rehabilitation, intensive cardiac rehabilitation, pulmonary rehabilitation and diagnostic services, except for certain diagnostic services with global surgery indicators of 010 or 090.

This expansion significantly broadens the scope of procedures eligible for ASC reimbursement, increasing flexibility for providers and improving patient access to outpatient surgical care.

Payment for skin substitute products

Scrutiny relating to fraud and abuse in Medicare payment for skin substitutes has been rising, as evidenced by a report published by the HHS Office of Inspector General in September. CMS has finalized separate payment for certain groups of skin substitutes as incident to supplies when used during a covered application procedure in hospital outpatient department settings. This aligns HOPD payment policy for skin substitutes with that of physician office settings.

The Final Rule establishes three new Ambulatory Payment Classifications (APCs): PMA, 510(k) and 361 HCT/Ps, to which skin substitute products will be assigned. The final payment rate for all three APCs is US$127.14/cm², a slight increase from the proposed rate of US$125.38. The new policy is effective January 1, 2026.

CMS emphasized its objective of promoting a site-neutral payment system for skin substitutes, as support for its decision to unbundle payments in HOPDs. Notably, CMS signaled its willingness to move in the opposite direction in future rulemaking and bundle payment for skin substitute products with the related application procedure in both hospital outpatient and non-facility settings. The new payment policy does not apply to skin substitutes classified as biologicals under Section 1847A of the Social Security Act. These products will continue to be paid under the ASP methodology.

Hospital Quality Star Ratings modification

CMS has finalized its proposal to make two-stage methodological updates to the Overall Hospital Quality Star Rating without modification. Stage 1 will implement a 4-star cap for hospitals in the lowest quartile of the Safety of Care measure group beginning in 2026, and Stage 2 will implement a blanket 1-star reduction for hospitals in the lowest quartile of Safety of Care measure group performance for 2027 and later years. 

Other policy changes and proposals

Outpatient Quality Reporting Program changes

CMS has finalized its proposal to remove certain measures from the HOPD, Rural Emergency Hospital (REH) and ASC quality reporting programs. These removals include measures for health equity, screening for social determinants of health and COVID-19 vaccination rates among healthcare personnel. In their place, for the outpatient and REH quality reporting programs, CMS is adopting a new Emergency Care Access and Timeliness measure based on patient wait times. Reporting on this measure will be voluntary in CY 2027 and mandatory in CY 2028. For the ASC quality reporting program, CMS is adopting a new patient reported measure based on clear understanding of discharge and recovery instructions. Reporting on this measure will be voluntary in CY 2027 – CY 2028 and mandatory in CY 2029.

Partial hospitalization and intensive outpatient

CMS finalized its proposal to maintain the current payment rate methodology used to calculate Partial Hospitalization Program (PHP) and Intensive Outpatient Program (IOP) services furnished by hospital-based providers, while revising the methodology used for Community Mental Health Centers (CMHCs). Going forward, CMS will apply a 40 percent MPFS (Medicare physician fee schedule) Relativity Adjuster to hospital-based PHP and IOP geometric mean per diem costs to calculate CMHC rates. CY 2026 rates reflect this new methodology.

The final calculated geometric mean per diem costs are as follows:

• Hospital‑based PHP/IOP APCs: US$421.67 (4+ services/day) and US$321.83 (3+ services/day)
• CMHC: US$168.67 (4+ services/day) and US$128.73 (3+ services/day)

Graduate medical education accreditation

CMS has finalized its proposal that accreditors may not require or encourage institutions to adopt diversity, equity, and inclusion programs. Citing Executive Order 14279, CMS stated that “in practice, many such diversity, equity, and inclusion programs unlawfully discriminate against Americans on the basis of race.” The Final Rule further provides that the HHS Secretary may recognize other organizations besides the Accreditation Council for Graduate Medical Education, as accreditors “in order to increase the potential for competition in the accreditation space and improve the quality of the accreditation process.”

Looking ahead

The CY 2026 OPPS and ASC Final Rule reflects CMS’s continued effort to modernize outpatient reimbursement, advance site‑neutral payment policies and strengthen transparency and accountability across care settings. While CMS has built in some flexibility, such as phased implementation and delayed enforcement, providers should begin preparing now for compliance, particularly in areas involving reporting, supervision and reimbursement methodology. Taken together, these reforms underscore CMS’s broader policy trajectory: aligning payment across sites of service, promoting consumer access to clear pricing information and ensuring budget neutrality in Medicare’s outpatient payment systems.

The Norton Rose Fulbright team continues to monitor CMS’s long‑term direction toward standardized, transparent and site‑neutral outpatient care delivery. If you have any questions, please contact us.