On July 15, 2025, the Centers for Medicare & Medicaid Services (CMS) released the proposed rule for the Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System for calendar year (CY) 2026. Among other items, the agency proposes increasing payments to all outpatient providers, eliminating the Inpatient Only (IPO) List, and changing quality reporting programs. This Health Capital Topics article reviews the proposed updates and changes to outpatient reimbursement.

For most procedures, the payment rates under the OPPS and ASC Payment System are the product of: (1) a relative weight (which indicates a procedure’s resource intensity relative to other procedures) and (2) a conversion factor.¹ The conversion factor converts the relative weight into a payment amount. Prior to 2019, the ASC conversion factor was updated annually based on the consumer price index for all urban consumers (CPI-U). But in 2019, CMS changed the basis for the annual ASC conversion factor update, instead basing it on the hospital market basket index.² With this change, subsequent updates to the ASC conversion factor have been aligned with updates to the OPPS conversion factor, equalizing updates among both types of outpatient facilities.³

For CY 2026, CMS proposes to increase OPPS payment rates to hospital outpatient departments (HOPDs) that meet specific quality reporting criteria by 2.4% – calculated from the proposed hospital inpatient market basket percentage increase of 3.2% minus the proposed productivity adjustment of 0.8%.⁴ This calculation results in a proposed OPPS conversion factor of $91.747.⁵ ASCs that meet the required quality criteria will also receive proposed payment rate increases of 2.4%, by way of the same calculation described above for OPPS payment rates.⁶ Consequently, the proposed ASC conversion factor for 2026 is $55.109.⁷

As discussed above, CMS began applying productivity-adjusted hospital market basket updates (i.e., the updates used for HOPD payment rate updates) to ASC payment rates in 2019, for a test period of five years,⁸ in order to assess changes in the migration of services and determine if the data trends were consistent.⁹ Because of abnormal healthcare utilization in 2020 due to the COVID-19 public health emergency (PHE), CMS then extended the test period until 2025.¹⁰ CMS proposes to extend the test period for an additional year (i.e., through 2026) to continue studying “the impact of the higher update factor on the migration of services from the hospital outpatient setting to the ASC setting.”¹¹

The Inpatient Only (IPO) List, established as part of the initial implementation of the OPPS, contains approximately 1,730 services for which Medicare makes payment only when they are furnished in the inpatient hospital setting.¹² In the 2021 OPPS/ASC final rule, CMS eliminated the IPO List over a three-year transitional period.¹³ In response to stakeholder concerns, the 2022 final rule reversed course and halted the elimination, reinstating most of the services removed in 2021.¹⁴ CMS once again proposes to eliminate the IPO List over the next three years, starting with the removal of 285 procedures, most of which are musculoskeletal, for 2026.¹⁵ The agency states that “the evolving nature of the practice of medicine allows more procedures to be performed on an outpatient basis with a shorter recovery time. This proposal would…[give] physicians greater flexibility in determining the most appropriate site of service.”¹⁶

The 340B Drug Pricing Program allows hospitals and clinics that treat low-income, medically underserved patients to purchase certain “specified covered outpatient drugs” at discounted prices and then receive reimbursement under the OPPS at the same rate as all other providers.¹⁷ This results in a margin for these participants between the amount paid for the drug and the amount received, which enables covered entities to stretch scarce federal resources as far as possible, reaching more patients and providing more comprehensive services.¹⁸ CMS must follow a statutory formula in setting the annual reimbursement rate for 340B drugs. From 2006 to 2018, the reimbursement rate for these outpatient drugs was the drug’s average sales price (ASP) plus 6%.¹⁹ In the 2018 OPPS, however, CMS finalized a reduction to this reimbursement rate, specific to 340B participants only, of ASP minus 22.5%.²⁰ Hospitals and hospital associations subsequently sued CMS to challenge the cuts, and the U.S. Supreme Court unanimously found in 2022 that CMS exceeded its authority in changing drug reimbursement rates for a subset of hospitals.²¹

In accordance with the Supreme Court ruling, CMS issued its 340B Final Remedy rule in November 2023, which set forth the agency’s plan to claw back reimbursements unlawfully paid to some hospitals and reimbursements unlawfully kept from other hospitals. Under the Final Remedy rule, the agency stated that it would repay the amounts owed to approximately 1,600 hospitals in a single lump-sum payment. It also stated that it would recoup funds from those overpaid hospitals by adjusting their OPPS conversion factor by -0.5% starting in 2026, and continuing that adjustment until the full amount is recouped, approximately 16 years.²² In the 2026 OPPS/ASC proposed rule, CMS instead proposes revising that offset percentage to -2% starting in 2026, which will accelerate the payback period by 10 years.²³

Other proposals CMS suggests for 2026 include:

1. Revising the ASC Covered Procedures List (CPL) to make it easier to add procedures to the list;
2. Adding 547 procedures to the ASC CPL (271 of which are also proposed for removal from the IPO List);
3. Expanding site-neutral payment policies to drug administration services, which CMS predicts will reduce OPPS spending by $280 million;
4. Numerous changes to the hospital price transparency regulations, e.g., requiring the disclosure of the 10th, median, and 90th percentile allowed amounts of payor-specific negotiated charges when they are based on percentages or algorithms; and
5. Revising the quality measures that must be reported under the Hospital Outpatient Quality Reporting (OQR) Program, the Rural Emergency Hospital Quality Reporting (REHQR) Program, and the Ambulatory Surgical Center Quality Reporting (ASCQR) Program.²⁴

CMS will receive comments and information on the OPPS/ASC proposed rule until September 15, 2025, and the final rule is expected to be released in November 2025.²⁵