Article
What took effect
The calendar year 2026 outpatient prospective payment system rule, finalized Nov. 21, gives hospitals a net 2.6% rate increase: a 3.3% market basket update less a 0.7 percentage point productivity adjustment. Several provisions in the same rule pull in the other direction.
The most direct is the expansion of site-neutral payment to drug administration, such as chemotherapy infusions, at off-campus departments that had been grandfathered at full hospital rates. Those services are now paid at 40% of the OPPS amount, roughly matching what Medicare pays a physician office. CMS projects the change will lower outpatient spending by $290 million this year. Rural sole community hospitals are exempt, and critical access hospitals are not paid under the OPPS at all.
KFF noted that the administration expects the effect to fall more on urban than rural hospitals, and disproportionately on hospitals that serve many Medicaid and low-income patients.
Other changes moving at the same time
- Inpatient-only list. CMS began a three-year phaseout of the list, starting with musculoskeletal procedures. More surgical cases can now be performed and billed as outpatient, which shifts payment and patient cost sharing.
- Ambulatory surgery centers. Looser exclusion criteria add hundreds of procedures to the ASC covered list, widening competition for surgical volume.
- 340B recoupment. The conversion factor reduction stays at 0.5% for 2026, but CMS signaled cuts of up to 2% a year beginning in 2027.
- Price transparency. Revised requirements took effect Jan. 1, with enforcement delayed to April 1.
What finance leaders should do now
Start by pulling drug administration volume from each off-campus department billed under the grandfathered modifier and recalculating Medicare revenue at the new rate. Oncology and infusion centers will carry most of the exposure. Then decide whether each site still makes sense as a hospital department, or whether moving infusion volume on campus, into a physician practice or into a partnership changes the math.
Leaders should also watch two longer-term risks. The policy applies only off campus for now, but a broader version covering on-campus services has been scored by the Congressional Budget Office at far larger savings. And a drug acquisition cost survey now under way will inform separately payable drug rates in the 2027 rule.
Archive entry for Jan 2, 2026, added Nov. 11, 2026.