Physician practices tend to skip the hospital outpatient rule. It is long, it is about facilities, and the fee schedule rule came out the day before. This year that would be a mistake. The calendar year 2026 OPPS and ASC proposed rule, released by CMS on July 15, 2025 and published in the Federal Register on July 17, changes where a large set of surgical procedures can be performed and how hospital-owned clinics are paid for infusions. Both affect independent practices, surgeons and ASC owners directly. Comments are due September 15.
We have read the payment sections with two kinds of clients in mind: surgical groups that own or use an ASC, and practices that were acquired or that compete with hospital outpatient departments. What follows is the part of the rule that matters to them.
Key takeaways
- A 2.4 percent payment update for hospital outpatient departments and ASCs, and a proposal to keep the ASC update tied to the hospital market basket.
- The inpatient-only list would be eliminated over three years, starting in 2026 with 285 mostly musculoskeletal procedures. That opens the ASC covered procedures list to cases that could only be done inpatient before.
- Drug administration at excepted off-campus provider-based departments would be paid at the physician fee schedule equivalent rate, narrowing the gap between hospital-owned and independent infusion practices.
- Skin substitutes get the same flat per-square-centimeter treatment as in the physician fee schedule proposal, so hospital wound care programs face the same reset.
- Comments are due September 15. If a proposal changes your practice's economics, the comment letter is where the numbers belong.
The headline number
CMS proposes a 2.4 percent payment update for both hospital outpatient departments and ambulatory surgical centers, built from a 3.2 percent market basket increase reduced by a 0.8 percentage point productivity adjustment. The ASC update continues to track the hospital market basket, a policy CMS has extended year by year and proposes to continue. For an ASC owner, 2.4 percent is modestly better than the physician side, where the fee schedule update is 3.3 percent but is offset by the efficiency adjustment for most procedures.
| Proposal | What CMS proposes | When | Who feels it outside the hospital |
|---|---|---|---|
| Payment update | 2.4 percent for OPPS and ASC (3.2 percent market basket less 0.8 points productivity) | January 1, 2026 | ASC owners |
| Inpatient-only list | Eliminate over three years; remove 285 mostly musculoskeletal procedures in year one and add newly eligible procedures to the ASC list | 2026 to 2028 | Surgeons, ASC owners, anyone who documents inpatient status |
| Site-neutral drug administration | Pay drug administration at excepted off-campus provider-based departments at the physician fee schedule equivalent rate | January 1, 2026 | Independent infusion practices (competitively) and acquired practices billed through a PBD |
| Skin substitutes | Incident-to supply with a flat payment per square centimeter, mirroring the fee schedule | January 1, 2026 | Wound care programs in every setting |
| 340B remedy offset | Raise the annual offset to non-drug payments from 0.5 percent to 2 percent to recoup the remedy faster | 2026 onward | Hospitals only |
| Price transparency | Require actual dollar amounts instead of estimates and strengthen attestation and enforcement | 2026 | Practices, as a data source for contract negotiation |
The inpatient-only list starts to go away
This is the structural change. The inpatient-only list is the set of procedures Medicare will pay for only when the patient is admitted. CMS proposes to eliminate it over three years, beginning in 2026 with 285 procedures, mostly musculoskeletal. CMS tried a similar elimination for 2021 and reversed it for 2022 after pushback about patient safety. This time the phase-in is slower and the agency is asking for comment on the sequence.
The reason it matters outside the hospital is the ASC covered procedures list. When a procedure leaves the inpatient-only list, it becomes eligible to be added to the ASC list, and CMS proposes to add a significant number of procedures to the ASC list for 2026 as a result, including spine and joint procedures that surgeons have wanted in the ASC for years. For an orthopedic or spine group with an ASC interest, the modeling question is straightforward: which of the 285 procedures do our surgeons perform, how many were done as inpatient in the last year because there was no alternative, and what does the ASC facility fee look like against the hospital payment.
The second effect is on medical necessity for inpatient status. When a procedure is no longer inpatient-only, the two-midnight rule and the payer's own inpatient criteria decide status, and a surgeon's documentation about comorbidities and expected recovery becomes the deciding factor. Expect Medicare Advantage plans to move quickly to outpatient status for anything removed from the list.
Site-neutral payment for drug administration
Since 2019 CMS has paid clinic visits at excepted off-campus provider-based departments at a rate equivalent to the physician fee schedule rather than the full OPPS rate. The 2026 rule proposes to extend that treatment to drug administration services at those departments. In plain terms, the hospital-owned infusion suite across town that was grandfathered at full hospital rates would be paid closer to what an independent oncology or rheumatology practice receives for the same infusion.
The mechanism is the same one used for clinic visits: the payment is set at 40 percent of the OPPS rate, which CMS calculates as the physician fee schedule equivalent. Applied to the drug administration codes (the 96360 to 96379 infusion and injection family and the 96401 to 96549 chemotherapy administration codes), the hospital department loses roughly 60 percent of its facility payment for the administration service. Drug payment itself is unchanged. The excepted departments' share of Medicare drug administration volume is large enough that CMS expects a measurable shift, and the rule asks for comment on extending the approach to other service lines in future years.
For independent infusion practices this is a competitive change, not a payment change: the gap that made hospital acquisition of infusion practices so attractive narrows. For practices that have been acquired and are billed under the hospital's provider-based departments, the revenue model for the infusion line should be re-run at the lower rate.
Skin substitutes, again
The OPPS rule carries the same skin substitute reform as the fee schedule: products treated as incident-to supplies with a flat payment per square centimeter rather than product-specific payment at average sales price. Hospital-based wound care programs face the same revenue reset that office-based programs face, and the WISeR prior authorization model adds review on top of it in six states from January.
Price transparency
CMS proposes to tighten the hospital price transparency rules by requiring hospitals to post actual dollar amounts rather than estimates where an estimate is currently allowed, and to strengthen the attestation and enforcement provisions. For practices, this matters mainly as a data source: hospital machine-readable files are one of the few ways to see what a competing facility is paid by a commercial payer for the same procedure, and better data makes that comparison usable in contract negotiations.
Other items
- CMS proposes to speed up the recoupment of the 340B remedy through a larger annual offset to non-drug payments, which affects hospitals but not physician groups.
- The rule requests comment on future quality measures on patient well-being and nutrition, and continues the Overall Hospital Quality Star Ratings methodology changes.
- ASC quality reporting continues with modest measure changes.
Questions we hear
Will the inpatient-only phase-out survive?
It did not last time. The three-year phase-in and the request for comment on sequencing suggest CMS learned from 2021, and the current administration is more committed to site neutrality than the previous one was. Our guess is that some version is finalized in November, possibly with fewer procedures in year one.
We are a hospital-employed group. Does any of this change our pay?
Not directly, but the site-neutral drug administration proposal and the inpatient-only change alter the economics your employer used to justify the acquisition and your compensation model. It is worth understanding before your next contract renewal. Our RCM audit team is often asked to model exactly this for groups considering whether to stay employed or return to independence.
We own an ASC. Is the market basket link permanent?
Not yet. CMS adopted the hospital market basket for ASC updates as a five-year interim policy beginning in 2019 and has been extending it. The proposed rule extends it again for two more years, through 2027, while CMS studies whether ASC cost data supports a permanent change. If the link were to lapse, ASC updates would revert to the consumer price index for urban consumers, which has generally run lower than the hospital market basket. If your ASC has an opinion on that, September 15 is the date.
What to do this month
- Surgeons and ASC owners: pull the proposed list of 285 procedures from the rule's addenda and match it to your case log. Estimate ASC-eligible volume for 2026.
- Infusion practices: re-run the revenue model for the infusion line at the proposed site-neutral rate if you are billed through a provider-based department, or note the competitive change if you are independent.
- Wound care: model 2026 on the flat rate, in both settings.
- Everyone: if a proposal costs your practice money in a way CMS may not have considered, write it down with numbers and submit it before September 15.
