Key Policy Proposals in the OPPS/ASC Proposed Rule: Payment, Quality, and Equity in Focus

The Centers for Medicare & Medicaid Services (CMS) released the Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule for 2026.

This comprehensive proposal introduces significant policy shifts that reflect the CMS focus on care site neutrality, access expansion, equity-centered quality reporting, and data transparency. These updates will affect more than 3,500 hospitals and approximately 6,100 ASCs nationwide, bearing implications for payment, performance measurement, and long-term strategic planning for healthcare organizations.

CMS proposes a 2.4-percent increase in OPPS and ASC payment rates, derived from a 3.2-percent projected hospital market basket increase, reduced by a 0.8-percent productivity adjustment. Facilities that meet quality reporting standards will benefit from this adjustment. CMS estimates that these updates will result in an overall increase of $1.61 billion in OPPS payments and approximately $480 million for ASCs in 2026.

However, this increase comes with an important offset.

CMS also proposes a 2-percent reduction in payments for certain non-drug outpatient services, which would lead to an estimated savings of $1.1 billion. The agency’s goal is to redirect Medicare spending toward services that offer higher value while curbing potentially excessive costs in the outpatient setting.

Continuing a strategy that began in earlier rulemaking cycles, CMS is proposing a three-year plan to phase out the Inpatient-Only (IPO) List. Beginning in 2026, the agency would remove a selection of musculoskeletal procedures from the IPO List and reassign them to appropriate Ambulatory Payment Classification (APC) groups.

This transition marks a critical shift in the CMS approach to classifying procedures based on clinical appropriateness, rather than historical site-of-service defaults.

The proposed removal includes procedures that CMS believes can be safely and effectively performed in outpatient settings, under proper clinical circumstances. Hospitals will be able to furnish these services either as inpatient or outpatient based on patient need, which enhances operational flexibility, but also demands refined utilization review and documentation practices.

A related proposal includes the addition of 547 codes to the ASC Covered Procedures List, of which 271 are linked to procedures transitioning from the IPO List. This expansion represents one of the largest in recent years and reflects the CMS objective to advance surgical care access in lower-cost environments while ensuring safety and efficacy. These changes may require ASCs to reevaluate resource availability, staffing models, and procedural readiness to accommodate the expanded scope of eligible services.

Site-neutral payment continues to be a central theme in Medicare reform efforts. In 2026, CMS proposes aligning payment for certain drug administration services furnished in excepted, off-campus, provider-based departments with the rates paid in physician offices. While the change excludes sole community hospitals, it underscores CMS’s pursuit of consistent payment across care settings for comparable services.

This proposal builds upon previous efforts to reduce discrepancies in reimbursement between hospital-affiliated outpatient departments and independent physicians, promoting fair market competition and improving cost transparency for beneficiaries.

CMS is also introducing a new ASC payment indicator, “S2,” to allow for separate payment of specific skin substitute products. This reflects stakeholder feedback that bundling such products with surgical procedures has hindered proper reimbursement and limited patient access to biologically advanced wound care therapies.

Under this change, select skin substitutes used in ASCs will be paid under separately established rates, consistent with how they are reimbursed in the hospital outpatient setting. This policy also supports more consistent access to these products, regardless of the care setting.

CMS is proposing the removal of three measures from the Hospital Outpatient Quality Reporting (OQR) Program, beginning with the 2025 reporting period. These include the following:

• Health Equity Summary Score; 
• Screening for Social Determinants of Health (SDOH); and 
• Screen Positive Rate for SDOH.

These measures were initially designed to support the CMS equity objectives, but the agency now believes that refinements are necessary to ensure meaningful data use and provider alignment. The proposed removals signal a shift toward streamlining data collection efforts and reducing reporting burden, particularly in areas where voluntary programs or alternative data sources may be more effective.

Additionally, CMS will continue to support the Excessive Radiation Dose or Inadequate Image Quality for Diagnostic CT eCQM as a voluntary reporting measure in 2027, with mandatory reporting beginning in 2028 for 2030 payment impact.

Revisions to the Extraordinary Circumstances Exception (ECE) policy are also proposed. CMS would explicitly permit extensions during significant disruptions, including pandemics and natural disasters, offering greater flexibility and regulatory clarity.

In a forward-thinking move, CMS included a Request for Information (RFI) seeking input on the development of future quality measures related to nutrition, food insecurity, and overall well-being. This initiative reflects a growing recognition that the SDoH directly impact clinical outcomes and health system performance.

Stakeholders are invited to comment on potential measure development, implementation timelines, and data sources, paving the way for future integration of holistic patient care elements into Medicare’s quality framework.

CMS has also signaled its intent to transition toward a market-based methodology for calculating inpatient relative weights. Specifically, the agency is exploring the use of median payor-specific negotiated charge data reported on Medicare cost reports. If finalized, this policy would take effect in the 2029 fiscal year, introducing a significant shift in the foundation of inpatient hospital payment calculations.

This approach would promote pricing transparency and align with broader efforts to modernize the Medicare payment systems using commercial market data.

The 2026 OPPS and ASC proposed rule presents a robust package of reforms that extend beyond routine payment updates. From eliminating the IPO List and expanding site-neutral payments to reimagining quality reporting priorities, CMS is actively reshaping the outpatient care landscape.

These proposed changes will require hospitals and ASCs to adapt operationally and strategically, particularly in documentation, compliance, and revenue cycle planning.

Stakeholders should closely examine the proposed rule and participate in the comment period to ensure that the final rule supports safe, accessible, and equitable care delivery across all outpatient settings.

Programming note:

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