Hospitals oppose CMS outpatient payment rates, and the plan to ‘claw back billions’

The Centers for Medicare & Medicaid Services has released its 2026 payment plans for outpatient services, and hospitals would likely prefer key elements of those plans to be thrown out.

Hospitals aren't happy about Medicare's proposed 2026 outpatient payment rates, and other planned reforms have rankled health systems.

Health systems hoped for better payments for outpatient services, but their real outrage lies in other elements of the CMS proposal released this week.

The government is pushing “site neutral” payments from Medicare for outpatient services, a proposal that some lawmakers in Congress have championed and hospitals have opposed. Hospitals are fuming over a CMS proposal to take back billions in Medicare funds, with the American Hospital Association saying such plans are illegal.

Here’s an overview of the CMS proposals and why hospitals and health systems aren’t happy with them.

2026 payments

The CMS is proposing a 2.4% increase in outpatient payment rates for hospitals in the 2026 Hospital Outpatient Prospective Payment System (OPPS) rule.

The agency is also planning a 2.4% increase in payment rates for ambulatory surgery centers.

Ashley Thompson, senior vice president of public policy analysis and development for the American Hospital Association, said the payment proposals are insufficient.

“The AHA is disappointed that CMS proposes an inadequate Medicare outpatient hospital payment update as many hospitals — especially those in rural and underserved communities — operate under challenging financial pressures,” Thompson said in a statement.

CMS will finalize the rule later in the year. It’s possible that the agency will revise the payment plans and boost them from their current proposal.

Clawing back

Hospitals are slamming the CMS plans to ramp up collecting billions of dollars from health systems.

The plans stem from hospitals winning a Supreme Court victory to overturn Medicare payments cuts to providers in the 340B drug pricing program. Hospitals successfully argued that the federal government improperly cut the payments, and the government paid hospitals to make up for insufficient payments from 2018 through 2022.

However, CMS is aiming to collect $7.8 billion in payments in the coming years at a faster rate than anticipated. The agency had planned a 0.5% reduction in aid annually through 2041. Now, CMS is proposing a 2% reduction annually through 2031.

Thompson says the association opposes the CMS’ plans “to claw back billions of dollars from hospitals at a far faster rate than originally promised.”

“It is important to remember that this clawback punishes 340B hospitals for the agency’s own mistake in implementing a policy that a unanimous Supreme Court held to be unlawful,” Thompson said in a statement. “Doubling down on that unlawfulness, the proposed recoupment is both illegal and unwise, and it should not be finalized.”

Site neutral payments

The CMS is proposing other changes that it says will offer consumers more choices in outpatient services, but hospitals are opposing those plans.

The government is aiming to move to “site neutral” Medicare payments for outpatient services. Some lawmakers have been pushing CMS to change Medicare payment policy so that Medicare would pay the same rate for outpatient services, whether they are delivered in a hospital or an outpatient clinic or surgery center.

CMS is proposing to get rid of the “Inpatient Only List” over a 3-year period. The agency wants to start with a group of 285 musculoskeletal procedures in 2026.

Hospitals have long pushed back against “site neutral” policies, saying they aren’t fair to health systems. Hospitals argue that they are required to meet greater licensing and regulatory requirements.

Thompson says hospitals oppose the site-neutral policies and the elimination of the inpatient only list.

“Both policies fail to account for the real and crucial differences between hospital outpatient departments and other sites of care,” Thompson said in the statement. “Studies show hospital outpatient departments are more likely to serve Medicare patients who are sicker, more clinically complex, and more likely to be disabled or living in poorer, rural communities than patients treated in independent physician offices.”

Soumi Saha, senior vice president of government affairs at Premier Inc., said the outpatient payment proposals and other elements of the plan need to be revised.

“Not only is reimbursement failing to keep up with the cost of providing care, the proposed policies contained in this rule will further degrade the critical healthcare infrastructure patients rely on,” Saha said.