Medicare Outpatient Services Proposed Changes
Under a new proposed rule, hospitals may receive an additional $8 billion in Medicare rebates for outpatient services next year, with a projected rate increase of 2.4%.
However, the American Hospital Association expresses dissatisfaction, calling the proposed pay raise insufficient. They have criticized the measures aimed at creating more equitable reimbursement rates, which would lessen the benefits that hospitals currently enjoy from federal insurance programs when compared to non-hospital facilities.
Additionally, regulators are moving towards stricter price transparency regulations, a priority that began during the Trump administration. The Centers for Medicare & Medicaid Services (CMS) also plans to expedite the timeline related to the 340B drug discount program and address past overpayments.
Chris Cromp, Associate Administrator and Director of Medicare, stated, “These changes will help make hospital care more predictable, accountable, and affordable.” Overall, the increase reflects a 3.2% rise in the market basket, adjusted for a productivity decline of 0.8 percentage points.
If approved, outpatient surgery centers would see a wage rate increase of 2.4% compared to 2025, adding up to an increase of approximately $480 million.
Inpatient Services and Payment Neutrality
The proposed rule includes an expansion of the neutral payment policy to outpatient services. Under the current framework, Medicare reimburses hospital outpatient departments at a higher rate than independent physician offices and outpatient surgery centers for the same types of care.
This inconsistency has frustrated stakeholders, with lawmakers arguing that adjusting payment structures could lower patient costs and save Medicare money.
On Tuesday, CMS introduced a phased approach to transitioning the way certain hospital procedures are categorized, aiming to address outpatient care more efficiently.
The agency noted that many procedures could now be performed on an outpatient basis due to shorter recovery times, allowing doctors more flexibility in determining the most suitable care settings.
While some hospitals, particularly acute care facilities, may be concerned about these changes, surgical partners and operators like Tenet Healthcare’s United Surgical Partners International are expected to adapt effectively.
The proposed regulations extend previous policies aimed at managing the volume of clinic visits in off-campus provider-based departments (PBDs), which are considered part of hospitals.
Should the policies go into effect, off-campus PBDs would receive reimbursements at the rate of individual physician services instead of the higher rates for hospital outpatient facilities, potentially saving $280 million.
The AHA has raised concerns about both of these policies, expressing that it’s difficult to comprehend the significant disparities in reimbursement between hospital outpatient departments and other care sites.
Price Transparency Measures
The proposed regulations aim to enhance price transparency as well. If finalized, starting in January, hospitals would be required to publicly disclose various negotiated payment amounts, thus helping to illuminate the price variations for services rendered.
Hospitals would also need to provide transparency regarding the methodologies used to set these fees, ensuring compliance with payer-specific negotiations.
The Trump administration had long emphasized price transparency, having mandated during his presidency that hospitals disclose their service prices. However, compliance has been slow, with only 21.1% of hospitals meeting transparency standards as of November.
Changes to the 340B Drug Discount Program
The proposal also includes adjustments to the 340B drug discount program, intended to ensure that drug manufacturers provide lower outpatient medication costs for many low-income patients.
To address historical underpayments related to the program, CMS has proposed allocating $9 billion to over 1,600 hospitals that received limited reimbursements from 2018 to 2022.
However, this comes with the caveat that $7.8 billion will also be retracted from hospitals due to overpayments in other services, leading to a potential reduction in the conversion coefficients for all hospitals until regulators reach budget neutrality.
AHA has criticized the proposed adjustments, arguing that the changes unfairly penalize 340B hospitals for previous regulatory mistakes deemed illegal by the Supreme Court.
Other Proposed Regulations
Furthermore, CMS suggests eliminating specific health equity and Covid-19 vaccination metrics from Medicare’s Quality Reporting Program. If these changes are finalized, certain metrics related to vaccination rates and patient discharge times would be removed.
Hospitals will aim to achieve star ratings reflecting their quality of care in 2026, with lower-rated hospitals facing potential penalties.
