The reconciliation bill was signed with nearly $1 trillion in Medicaid reductions, and CMS followed with outpatient and physician proposals and a final inpatient rule.
July turned months of debate into law and then layered on the annual Medicare payment cycle. Leaders now have the statutory Medicaid changes in hand and a first look at 2026 Medicare rates across inpatient, outpatient and physician services.
The Senate passed the bill 51-50 on July 1 with the vice president breaking the tie, the House followed 218-214 on July 3, and the president signed it on July 4. The Congressional Budget Office projects 11.8 million more uninsured people by 2034, and Medicaid spending falls by close to $1 trillion over the decade. The law caps provider taxes at 3.5%, restricts state-directed payments, and phases in Medicaid work requirements beginning as early as January 2027.
The law also creates a $50 billion rural health fund, $10 billion a year for fiscal 2026 through 2030, administered by CMS. Rural systems should expect competition for those dollars to be shaped by state applications.
CMS’s proposed 2026 outpatient rule, released July 15, would raise rates a net 2.4%. It would pay for drug administration at grandfathered off-campus outpatient departments at 40% of the OPPS rate, which CMS estimates would cut $280 million in 2026. CMS also proposed eliminating the inpatient-only list over three years, starting with 285 mostly musculoskeletal procedures, and speeding recovery of the 340B remedy offset from 0.5% to 2% a year. The AHA called the update inadequate and opposed the site-neutral expansion.
The July 14 physician fee schedule proposal would raise the conversion factor by about 3.3% to 3.8%, helped by a one-year statutory bump of 2.5%. It also proposes a -2.5% efficiency adjustment to work values for many procedural services and would recognize higher indirect costs for office-based practices than for facility-based ones, a change that matters for employed physician groups.
The FY 2026 IPPS final rule, issued July 31, sets a net 2.6% update, about $5 billion more in payments, including a $2 billion increase in disproportionate share payments. The mandatory TEAM bundled payment model for select surgical episodes starts January 1, 2026. The AHA said the update still falls short.
Executive takeaway: Rebuild multiyear forecasts around the enacted Medicaid provisions, file comments on the outpatient and physician proposals before the deadlines, and confirm TEAM readiness if your hospitals are in a selected market.
The proposed CY2027 outpatient rule extends site-neutral payment to imaging, deepens 340B cuts and removes 638 services from the inpatient-only list. Here's how to prepare before the final rule.
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The FY2027 IPPS rule took effect Oct. 1 with a 2.3% update, new quality measures and a mandatory joint-replacement model coming in 2028. Here's what hospital leaders should do now.
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September 2026: hospital margins slip in July, Essentia and HealthPartners plan a 22-hospital merger, and Elevance targets off-campus outpatient billing.
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