On July 15, 2025, the Centers for Medicare & Medicaid Services (CMS) released the proposed rule for the Calendar Year (CY) 2026 Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) payment systems. The public comment period ends Sept. 15, 2025. These proposed changes would impact roughly 3,500 hospitals and 6,100 ASCs nationwide.
Key highlights of the CY 2026 OPPS proposal include a 2.4 percent increase in payment rates, driven by a 3.2 percent market basket update and offset by a 0.8 percentage point productivity adjustment. CMS projects total OPPS payments—including beneficiary cost sharing and adjustments for enrollment, utilization and case mix—to reach approximately $100 billion in 2026.
For the CY 2026 Physician Fee Schedule (PFS), CMS proposes two separate conversion factors:
- Qualifying alternative payment model (APM) participants (QPs):Updated by +0.75 percent, resulting in a proposed conversion factor of $33.59, a 3.83 percent increase from the current $32.35.
- Non-Qualifying alternative payment model (APM) participants (QPs):Updated by +0.25 percent, with a proposed conversion factor of $33.42, a 3.62 percent increase from the current $32.35.
Seven Key Provisions of the Proposed Rules
- Phasing Out the Inpatient-Only (IPO) List – CMS 2026 OPPS proposes to eliminate the inpatient-only procedures list over three years starting in 2026 by removing 285 mainly musculoskeletal interventions. This proposal allows providers to expand surgical capacity and services in outpatient hospital and ambulatory surgical center settings when clinically appropriate. It may require investment in infrastructure, implementing cross-train staff and adjusting administrative and clinical protocols, including transition of care and discharge planning for patients previously admitted as inpatient. Acute care hospitals may see lower payments per case since outpatient payments yield less revenue than IPPS DRG payment; however, overtime hospitals may gain volume if outpatient surgical capacity is increased.
- Applying Efficiency Adjustments to Payment – CMS CY 2026 PFS proposes a – 2.5 percent efficiency adjustment on non-time-based physician service. This adjustment would reduce work RVUs and Medicare FFS reimbursements for most procedural codes, except time-based services, by looking back five years of productive changes. Physicians and hospitals may face pressure to increase productivity as CMS assumes efficiency improvements in the delivery of care, and to define new performance benchmarks.
- Expanding Telehealth, Behavioral Health and Digital Health Policies – CMS CY 2026 PFS proposals broaden remote and integrated care to increase access for more patients (e.g., population in rural areas and patients with chronic diseases) and enable new billable services which can offset any payments reductions in other services.
Telehealth: CMS plans to expand virtual care options and streamline the telehealth services by removing provisional and permanent distinctions, eliminating certain frequency limits (e.g., follow-up visits and critical care consultations) and allowing the physician to provide direct supervision through real-time audio-video interactive telecommunications. Telehealth would require infrastructure upgrades and training staff in virtual direct supervision rules, while still affecting staffing patterns.
Behavioral Health: CMS proposes to create optional add-on codes for Advanced Primary Care Management (APCM) that would facilitate providing complementary Behavioral Health Integration (BHI) or Psychiatric Collaborative Care Model (CoCM) services. The implementation of new codes would modestly increase revenue in primary care practices.
Digital Mental Health: CMS considers expanding payment policies for covering digital mental health treatment (DMHT) devices, for example, used in the treatment of ADHD in conjunction with an on-going behavioral health plan of care. This would allow providers to prescribe FDA-authorized digital therapies.
- Restructuring Practice Expense (PE) Methodology – CMS 2026 PFS plans changes to how indirect costs of practice expense (PE) are calculated, allocating more indirect costs to office settings and using auditable hospital data from the OPPS cost reports. The proposal shifts more PE RVUs to non-facility settings, recognizing that office-based practitioners incur higher indirect costs than hospital-employed practitioners, and well as reflecting a decline of private practice as more physicians now work in hospital systems.
- 340B Program Offsets – CMS 2026 OPPS proposes to increase the 340B offset on outpatient non-drug services from a 0.5 percent to two percent annual payment reduction for eligible hospitals (excluding hospitals post 2018) to shorter timeframe to recoup $7.8 billion in prior overpayments by CY 2031 instead of CY 2041.
- Skin Substitute Payments – CMS has proposed a change in how skin substitute products are reimbursed when used during covered application procedures in the hospital outpatient setting under the OPPS or in the non-facility setting under the PFS. Under the new approach, these products would be paid as incident-to-supplies. Currently, skin substitutes are bundled into procedure payments, but CMS now proposes to unpackage them and establish new Ambulatory Payment Classifications (APCs) based on product categories aligned with Food and Drug Administration (FDA) regulations, rather than based on price alone. The shift aims to better reflect the differences in product types, foster innovation through increased competition and generate savings for the Medicare Trust Fund.
- Hospital Price Transparency – CMS outlines several updates to the Hospital Price Transparency (HPT) regulations, aligning with Executive Order 14221: Making America Healthy Again by Empowering Patients with Clear, Accurate, and Actionable Healthcare Pricing Information. Beginning Jan. 1, 2026, hospitals would be required to include in their machine-readable files (MRFs) the 10th, median and 90th percentile allowed amounts when payer-specific negotiated charges are based on percentages or algorithms. They must also report the number of allowed amounts used to calculate these percentiles, offering a more accurate view of actual pricing distributions for items and services. Additionally, CMS proposes that hospitals attest to having included all applicable payer-specific negotiated charges in dollar amounts. For rates that cannot be expressed in advance or as a dollar figure, hospitals must provide sufficient information in the MRF to allow the public to calculate the amount. This includes naming a senior official, such as the CEO or president, responsible for ensuring data accuracy and completeness. To encourage compliance, CMS also proposes a 35 percent reduction in civil monetary penalties for hospitals that accept the CMS’s non-compliance determination and waive their right to an Administrative Law Judge hearing.
What Providers Can Do
- Conduct financial and budgeting analysis of proposed payments adjustment and communicate with clinicians proposed policy changes to discuss collaborative efforts to streamline care delivery to meet CMS’s productivity assumptions.
- Evaluate operational readiness to support an influx in outpatient surgical cases, the expansion of telehealth services and the integration of behavioral health services into primary care management services.
- Assess revenue cycle workflows from hospital price transparency to scheduling to charge capture, coding and billing reflecting changes of procedures and supplies codes, unpacked services, physician fee schedule adjustments and hospital Chargemaster updates.
- Submit comments to CMS before Sept. 15, 2025.
The CY 2026 OPPS and PFS proposed rules present new challenges for both clinical and administrative leaders and their teams in maintaining operational efficiency, quality of care, timely delivery of care and regulatory compliance to achieve appropriate reimbursement and financial sustainability.
Windham Brannon’s Healthcare Consulting Practice can assist you to optimize revenue cycle processes and prepare for forthcoming changes to keep your organization on track to sustain patient engagement, mitigate regulatory risk and maintain payment integrity. For questions or more information, contact your Windham Brannon advisor today, or reach out to Denise Gaulin.
Interested in more information on CMS updates? Read the following articles:
CMS Price Transparency Guidance | Executive Order 1422
CMS Shift Medicare Inpatient Hospital Reviews | Atlanta CPA Firm
60 Day Overpayment Rule | 2025 Medicare Physician Fee Schedule
Sources:
Calendar Year (CY) 2026 Medicare Physician Fee Schedule (PFS) Proposed Rule (CMS-1832-P) | CMS
