Welcome to DZA’s latest newsletter, where we bring you the important updates affecting hospitals and other healthcare facilities for the upcoming calendar year (CY). This edition covers CMS’ proposed rules for the CY 2026 Outpatient Prospective Payment System (OPPS) and Medicare Physician Fee Schedule (MPFS).
To read about a specific topic in this article, use the following links, or keep scrolling:
- Site-Neutral Payment Policies for PPS Hospitals.
- Services Predominantly Done in Non-Hospital Settings.
- Rural Sole Community Hospitals.
- Price Transparency Rules.
- Graduate Medical Education (GME) Accreditation.
- Rural Health Clinics and Federally Qualified Health Centers.
Site-Neutral Payment Policies for PPS Hospitals
Aw… good ol’ site-neutrality: CMS’ favorite buzzword, PPS hospitals’ least favorite payment rule.
Site-neutrality means CMS aims to pay the same rate for a service regardless of where the service is provided. In other words, the location of the service shouldn’t drive payment differences—currently, much to CMS’ chagrin, it does. CMS has already made changes to address this issue, and now the saga continues with additional proposals.
Before diving into CMS’ concerns, it helps to understand the difference between excepted and non-excepted off-campus provider-based locations:
- Excepted locations: Off-campus provider-based locations that were billing Medicare before November 2, 2015. These locations are reimbursed at 100% of the APC rates (for most of their services) and bill using the PO modifier.
- Non-excepted locations: Off-campus provider-based locations that began billing Medicare after November 2, 2015. These locations are reimbursed at 40% of the APC and billed using the PN modifier.
This distinction between excepted and non-excepted locations mattered because it created significant payment differences for the same service depending solely on the location.
CMS’ Initial Concern
CMS noticed a shift in where services were provided: independent clinics were increasingly becoming departments of a hospital. Since a service billed in a hospital outpatient location (provider-based) can cost Medicare significantly more than the same service in a physician’s office (free-standing), CMS became concerned and concluded that the shift was just to get more money out of them, not that these clinics could not sustain themselves without the hospitals stepping in.
Prior Policy Changes
In 2015, CMS deemed all new off-campus provider-based locations were to be paid the same as if they were an independent (free-standing) location. CMS did not simply disallow provider-based status, however: instead, they decreased the APC to “mimic” the global physician fee schedule payment (the 40% APC discussed above).
In 2019, CMS extended the site-neutral policy to include a reduction in payments for all clinic visits (G4063) in excepted off-campus provider-based locations. Regardless of the clinic status (excepted vs non-excepted), clinic visits (G4063) are paid the same (or 40% of the APC) at hospital outpatient locations. This move is step one towards what CMS considers “fairness,” but is not the end of the story.
Ongoing Challenges
Even after those changes, CMS observed hospitals moving more outpatient services to excepted off-campus provider-based locations. Since these settings still receive higher OPPS rates, CMS believes the move is driving “unnecessary increases to hospital outpatient volumes” and raising costs for Medicare.
Proposed Policy Updates
Since earlier site-neutral changes aren’t enough, CMS is thinking bigger and proposing broader site-neutral payment rules that would also apply to drug administration services (APC family 569X). Just like with the reduction to clinic visits (G4063), certain treatments in excepted locations could see payments cut to match non-excepted locations. This is a big deal for infusion sites, which often provide high-cost drug administration in excepted off-campus provider-based locations; in short, this will reshape where and how infusion administration is delivered.
And CMS is not done—they are also examining other services, such as imaging and on-campus outpatient clinic visits. CMS is openly considering a much broader site-neutral policy and asking for public input regarding services “predominantly furnished” in non-hospital settings. (Hold up…the plot thickens. Don’t stop scrolling!)
Request for Information: Services Predominantly Done in Non-Hospital Settings
Continuing with site-neutrality, CMS is building a case for significantly expanding site-neutral payments via a request for information from hospitals (this means you). Specifically, CMS is looking to build a more “systematic process” to identify services at high risk of shifting from a lower- to a higher-cost setting.
It is a good time to talk to CMS as to why these payment structures make sense (e.g., “If we are paid at lower rates, would we continue to be able to offer this service?”). Remember that CMS prefers actual data, so share specifics in your response and how these changes will affect the Medicare beneficiaries in your service area.
CMS is asking the following questions (not an all-inclusive list):
- Which hospital outpatient services are being done more than necessary in the hospital versus a lower cost setting? Are there certain procedures CMS should focus on because they’ve shifted from ambulatory surgical centers (ASCs) or physician offices to the hospital?
- Should CMS cap payments for some services? For procedures usually done in an ASC or physician’s office, should hospitals only get paid the same as those sites?
- Should payment match where most care happens? If a service is mostly done in an ASC, should hospitals get the ASC rate? If mostly done in a physician office, should we calculate the office-equivalent rate?
- Which data should we use to decide this? Do we look at recent trends, or the past five-to-ten years? Should Medicare Advantage data be included?
- How should CMS account for local access to services? If an area has no ASC or physician office nearby, should payment still assume that lower-cost setting?
- How should CMS handle different rules for bundling items? OPPS, ASC, and office payments treat things like supplies or ancillary items differently. How should CMS make payments fair across systems?
- Should some services always get hospital rates? Emergencies, trauma, or medically complex cases might always belong in hospitals—how should CMS decide which ones?
- Which hospital locations should follow site-neutral rules? All hospital outpatient departments, or just some (like off-campus clinics)?
- Should certain rural hospitals be exempt? Rural hospitals, like sole-community hospitals (SCHs), might need full hospital rates to preserve patient access.
- Should exceptions be permanent, temporary, or conditional?
- Are there other ways to prevent unnecessary increases? Besides payment limits, should CMS use prior authorization or other checks to control overuse?
Read that last question again, and remember that both sides of the political aisle prefer Medicare Advantage to direct Medicare as they believe these insurance companies provide services for less cost. But as many hospitals are aware, it is not because Medicare Advantage is better at managing care, but rather better at delaying or denying care. This comment, if no other, is the one to send to CMS, with actual stories of how prior authorization policies effect your Medicare patient population. Give details and offer support. (Psst: refer to the Seeking Comment section below on how to give your input.)
Wait, what did you mention about rural sole community hospitals (SCH)? How do rural SCHs factor into site-neutrality? Great question—keep reading.
Rural Sole Community Hospitals (SCH)
Currently, rural SCH’s excepted off-campus provider-based locations are exempt from site-neutral cuts for clinic visits. CMS is proposing that rural SCH’s excepted provider-based locations should also be exempt from the site-neutral cuts for drug administration.
Huh? When CMS made cuts to excepted locations billing clinic visits (G4063), the site-neutral policy applied to rural SCHs excepted provider-based locations as well. However, in 2023, CMS exempted rural SCHs. This same methodology is being proposed by CMS for site-neutral cuts for drug administration at excepted provider-based locations for rural SCHs.
Price Transparency
All hospitals are already required to make a public list of standard charges for all items and services. Charges are to be posted in two ways: (1) machine-readable file which is meant for technology tool developers, employers, and researchers, and (2) a consumer-friendly format for patient use. This second tool is meant to help patients shop for non-emergency care by comparing prices and is intended to help hospitals “improve” transparency and competitiveness.
The following proposals to price transparency are set to begin on January 1, 2026:
- If a hospital’s payer-specific negotiated charge is not a simple dollar amount, hospitals must replace “estimated allowed amounts” with the 10th percentile, median, and 90th percentile, as well as the count of allowed amounts. In other words, instead of just finding one estimated price, users now need to channel their inner statistician and brush up on standard deviations 101. What if grocery prices were listed like this…? But I digress.
- Strengthening the machine-readable file attestation by attesting to and including a lot of really exciting legalese. Laymen’s version (not to be used): “We’re promising CMS that we’ve included all required prices—whether fixed or formula-based—and that the file is accurate. If a payer doesn’t give us a set price, we’ve spelled out the formula and fee schedule they use so the public could calculate the price if they wanted to.”
- Additional proposals consist of including the name of the hospital’s CEO, president, or senior officer (increasing the hospital-level ownership of transparency) and having hospitals report their NPI to improve the comparability of the data and for easier enforcement.
- Last but certainly not least—a 35% reduction in penalty fees for a hospital out of compliance, if the hospital acknowledges the violation and waives its appeal right. Read that again: if a hospital thinks it made an error, the hospital can waive its right to appeal and pay less.
Graduate Medical Education (GME) Accreditation
Earlier this year, President Trump issued an executive order which, among other things, directed federal agencies to ensure federal contractors do not operate DEI programs “that violate Federal anti-discrimination laws.”
Under this executive order, CMS is proposing that accreditors of GME programs may NOT require or encourage DEI programs that could be seen as unlawful discrimination based on race. GME programs must focus on quality of care and excellence, not diversity goals. In other words, accreditors of a program could lose their GME accreditation if there is any requirement or encouragement related to DEI in their GME program. Hospitals using that program could lose their Medicare GME or IME payments.
Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs)
CMS has proposed several big changes for how RHCs and FQHCs bill for care coordination and telehealth services beginning January 1, 2026.
Care Coordination Services
Currently, CMS treats “care management” under the Medicare Physician Fee Schedule and “care coordination” under the RHC/FQHC rules as two separate categories. This means every time a new care management code comes out under the MPFS, CMS has to go through another rulemaking step to decide if it also counts as a care coordination service for RHCs/FQHCs.
CMS proposes to streamline this process and automatically align RHC/FQHC billing with the MPFS list of “care management” services. This would give clinics more clarity and let them bill new codes as soon as they’re available—without waiting for CMS to add them separately. In other words, “Let’s just define them the same way—if it’s a care management service under the MPFS, it’s automatically a care coordination service for RHCs and FQHCs.” The intent is to reduce lag time and confusion, and ensures clinics are reimbursed for the same care management services as physician offices.
Advanced Primary Care Management (APCM)
In 2025, RHCs/FQHCs began using new codes (G0556–G0558) for “Advanced Primary Care Management.” This bundled chronic care, complex chronic care management, principal care management, and transitional care management into a simpler monthly payment.
CMS is proposing that clinics billing these advanced primary care management codes can also add on behavioral health integration (BHI) codes for patients with both chronic and behavioral health needs. Because, as CMS notes, patients with multiple chronic illnesses often face mental health challenges, too. This change supports a more “whole-person” approach to care and streamlines billing.
Behavioral Health: Collaborative Care Model (CoCM)
Right now, RHCs and FQHCs bill behavioral health collaborative care through a single bundled code (G0512). CMS proposes requiring clinics to use the more detailed individual CPT codes (99492, 99493, 99494, and G2214). Again, they are proposing aligning care coordination services in the RHC or FQHC setting with care management in physician offices.
Virtual Communication
Also happening right now, RHCs and FQHCs use a single bundled code (G0071) for brief virtual check-ins and remote evaluations. Under CMS’ proposal, that bundled code would go away, and clinics would instead bill the individual component codes (G2010, G2250, and 98016).
Are you sensing a common theme with the proposals to RHC and FQHCs?
Essentially, these proposals move RHC and FQHC payments closer to how physician offices are paid. The intent of the proposals is to simplify billing and reduce delays by tying RHC and FQHC services directly to the MPFS list, expanding behavioral health integration into chronic care management and standardize coding for collaborative care and telehealth services. But wait, there is more…
Direct Supervision via Telehealth
CMS is proposing to make virtual direct supervision via real-time two-way audio video permanent for nearly all incident-to services, excluding services with global surgery indicators 010 or 090. Even if telehealth billing expires, virtual supervision could still allow many services to be delivered safely and compliantly.
Seeking Comments
Let your voice be heard! CMS wants your input on all these proposals—don’t forget about the “predominantly furnished” request for information. You have until September 15 to submit comments at regulations.gov using the file codes CMS 1834-P for the proposals affecting hospitals, or CMS 1832-P for the proposals affecting RHCs and FQHCs.
Closing
If you have any questions regarding the CY 2026 OPPS or MPFS Proposed Rules, contact us or reach out to a DZA reimbursement consultant today.
Tristi Cohelan
Principal
