CMS 2026 Medicare Outpatient Payments Rise 2.6%, Site-Neutral Cuts Take Effect

The Centers for Medicare and Medicaid Services (CMS) has announced a 2.6% increase in Medicare hospital outpatient payments for 2026, slightly lower than the 2.9% increase scheduled for 2025. This adjustment incorporates a 3.3% market basket update, offset by a 0.7% productivity reduction. Ambulatory surgical centers (ASCs) will also see a 2.6% payment increase. The final rule includes payment reductions through site-neutral payment policies and the elimination of the inpatient-only list over a three-year period, which has drawn objections from the American Hospital Association (AHA). CMS finalizes paying for drug administration services at grandfathered off-campus hospital outpatient departments at a site-neutral rate of 40% of the standard outpatient prospective payment system (OPPS) rate, exempting rural sole community hospitals from this cut. This policy is expected to reduce OPPS spending by $290 million in 2026. The elimination of the inpatient-only list aims to provide beneficiaries with more care options and potential out-of-pocket savings by phasing out mostly musculoskeletal procedures starting in 2026. The revision also broadens the criteria for excluding services from ambulatory surgical center coverage, adding 547 procedures to ASC payment eligibility. The AHA criticizes these site-neutral payment cuts and inpatient-only list removal, citing that hospital outpatient departments primarily treat sicker, more complex, and often underserved Medicare patients compared to independent physician offices. This rule impacts roughly 4,000 hospitals and 6,000 ASCs nationwide. It introduces changes to the hospital quality star rating system to place greater emphasis on safety of care metrics. These adjustments reflect CMS's ongoing effort to control spending while shifting care to lower-cost sites, raising compliance and operational challenges for providers. Overall, the 2026 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Final Rule highlights the evolving landscape of Medicare payments, balancing budget constraints and access considerations. Healthcare providers, payers, and policy analysts should monitor the implications for reimbursement structures, service delivery models, and quality reporting requirements.