Proposed Medicare Payment Updates for Outpatient and ASC Services
On July 2, 2026, the Centers for Medicare & Medicaid Services (CMS) issued a proposal to update Medicare payment rules for hospital outpatient and Ambulatory Surgical Center (ASC) services, effective in 2027. This proposal is set to amend payment rates and policies under the Hospital Outpatient Prospective Payment System (OPPS) and the ASC Payment System. CMS's update impacts approximately 3,500 hospitals and 6,400 ASCs, in alignment with annual regulatory compliance requirements.
The proposal not only addresses payment rates but also suggests revisions to the Overall Hospital Quality Star Rating, with a particular focus on the Safety of Care measure group. CMS is actively seeking feedback on enhancements to the Hospital Outpatient Quality Reporting (OQR) and ASC Quality Reporting (ASCQR) programs, which aim to improve outpatient quality reporting and measurement.
An important aspect of the proposal includes a Request for Information (RFI) aimed at improving hospital price transparency. By gathering public input, CMS seeks to achieve greater standardization and comparability of pricing information to benefit consumers.
Notably, the proposed adjustments suggest a 2.4% payment rate increase for hospitals meeting quality reporting standards, factoring in a 3.2% projected hospital market basket increase offset by a 0.8 percentage point productivity deduction. Similarly, ASCs following quality criteria would see a corresponding 2.4% rate adjustment, promoting regulatory compliance.
Moreover, CMS plans to extend limitations on outpatient service volume increases, focusing on imaging services in off-campus provider-based departments. This initiative is expected to save Medicare Part B approximately $260 million in the first year, impacting beneficiary premiums favorably.
In response to a hospital drug acquisition cost survey, CMS proposes a payment revision for 340B-acquired drugs, with a rate set at Average Sales Price minus 33.4%. This adjustment anticipates a substantial reduction in Medicare's drug payments by $4.55 billion, alongside a decrease in beneficiary payments by $1.15 billion during the initial year.
CMS is gradually phasing out the Inpatient Only list to provide more outpatient care options for Medicare beneficiaries, removing 638 services in the second year of the initiative. Additionally, the proposal includes a 3% annual payment reduction for non-drug services to reconcile past overpayments from CY 2018 to CY 2022, excluding hospitals joining Medicare post-January 2018. This strategy is projected to attain a $7.8 billion reduction goal by CY 2029.
Further adjustments are proposed for hospitals in Alaska and Hawaii to account for geographic factors, raising payments by $55 million for CY 2027. The RFI also addresses improving hospital price transparency, emphasizing data comparability and consumer usability.
Updates to the Intensive Outpatient and Partial Hospitalization Programs will base payment rates on CY 2025 claims data, maintaining the current rate structures for better cost alignment. Lastly, CMS proposes a stronger focus on compliance with the Emergency Medical Treatment and Labor Act (EMTALA), suggesting an integration of compliance oversight into routine hospital surveys to enhance regulatory standards and enable efficient operations. This includes extending prior authorization requirements to additional botulinum toxin injection codes to control service volume without compromising patient care.