In this episode, Bob McDowell, BESLER’s Senior Reimbursement Consultant. In this episode, Bob will provide us with a glimpse into BESLER’s next free Webinar, CY 2026 OPPS Final Rule Summary, hosted live on Wednesday, January 14th, at 1 PM ET.
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Learn how to listen to The Hospital Finance Podcast® on your mobile device.Highlights of this episode include:
- Acumens on the outpatient updates for calendar year 2026
- Changes CMS has made to outpatient payment in the 2026 OPPS final rule
- 340B program updates
- The inpatient-only list
Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome back Bob McDowell, BESLER’s Senior Reimbursement Consultant. In this episode, Bob will provide us with a glimpse into BESLER’s next free Webinar, CY 2026 OPPS Final Rule Summary, that we’re hosting live on Wednesday, January 14th, at 1 PM eastern time. Welcome back and thanks for joining us, Bob.
Bob McDowell: Well, thank you, Kelly. It’s a pleasure to be with you today.
Kelly: It’s a pleasure to have you on. Well, let’s go ahead and jump in. So, in the final rules, CMS updates the payment rates for covered services. Can you give us some acumens on the outpatient updates for calendar year 2026?
Bob: Absolutely. For calendar year 2026, outpatient payment rates for hospitals that meet the quality reporting requirements will increase 2.6%. This increase is based on the market basket increase of 3.3% and reduced by a 0.7% or 7/10 of a percent productivity adjustment. Once the budget neutrality factors are applied, we see the conversion factor increase from $89.17 for calendar year 2025 to $91.42 for calendar year 2026 for facilities that are not affected by the 340B remedy offset. For hospitals affected by the 340B remedy offset, they will see an increase to $90. 97. These conversion factor updates result in a net increases of 2.519% and 2.017% respectively. CMS estimates that the calendar year 2026 OPPS total payments to providers to be $101 billion, an increase of approximately $8 billion compared to estimated calendar year 2025 OPPS payments. CMS is continuing the policy for hospitals that do not meet the outpatient quality reporting requirements to experience a 2% reduction in payments using a reporting factor of 0.9805 applied to OPPS payments and copayments. CMS has extended the 7.1% adjustment for rural sole community hospitals and essential access community hospitals for calendar year 2026.
Kelly: Thank you for those updates, Bob. So, the wage index has received a lot of attention in recent years. Can you elaborate on any changes CMS has made to outpatient payment in the 2026 OPPS final rule?
Bob: Sure. If you remember back in the federal fiscal year 2025 inpatient final rule presentation that we did, CMS had finalized the inclusion of the 25th percentile rule, otherwise known as a low wage index hospital policy. A couple of days after that presentation, CMS came out with an interim final rule with comment period, removing the low wage index hospital policy from the federal fiscal year 2025 inpatient prospective payment system regulations in response to ongoing litigation. Now, in the calendar year 2025 OPPS final rule, CMS had once again finalized the inclusion of the low wage index policy to be applied to OPPS payments. CMS recognized that that would mean that some hospital facilities would have a different wage index for calculating their outpatient claims than they had for calculating their inpatient claims. So, in the calendar year 2026 OPPS final rule, CMS has implemented the realignment by eliminating the low wage index policy from the OPPS payments. CMS is using the same methodology they did in the federal fiscal year 2026 IPPS final rule, utilizing the 5% cap and wage index reduction from the prior year for those hospitals affected by this policy change.
Kelly: Thank you, Bob. That’s very interesting. Another major program for hospitals is the 340B program. Can you tell us about the changes in the coming year triggered by the program?
Bob: Sure. There are two major changes to reimbursement relating to the 340B program starting in calendar year 2026. The first is the 340B remedy recruitment fix, which is related to the conversion factor that we just mentioned. It’s for the conversion factor increase for calendar years 2018 through 2022. CMS had previously, in the proposed rule, stated a 2% decrease in the calendar year 2026 conversion factor in order to accelerate the recoupment of the $7.8 billion in additional payments to hospital facilities. In the calendar year 2026 final rule, CMS did not finalize the 2% reduction, but decided to stay with the original 0.5% or half percent decrease in the calendar year 2026 conversion factor as originally stated in the remedy document published on November 8th, 2023. CMS also reserved the right to increase this reduction in future years. Now, the second change to the 340B program for calendar year 2026 was published on August 7th, 2025, by HHS and HRSA and involves a shift in funds for providers by moving to a backend rebate-style pilot program instead of an upfront discount program for 10 drugs that are listed on the CMS Medicare drug price negotiation selected drug list.
For these 10 pharmaceuticals, providers will have to pay full WAC or wholesale acquisition costs pricing when purchasing these drugs. Once the product is sold and the provider applies for the rebate, the drug costs will be reduced to the lower cost of the 340B ceiling price or the Medicare maximum fare price. If the model is fully implemented at a 340B program, it could mean millions of dollars being postponed to 340B providers. The rationale for this program is the adage from the manufacturers about duplicate discounts and diversion that is happening in the program.
Kelly: Well, thank you for sharing that with us. I know the 340B program, there’s always something going on with that. There’s some discussion on changes to the way hospital outpatient departments are being paid in calendar year 2026. Do you have any details on those changes?
Bob: Well, I believe you’re referring to what is called the method to control unnecessary increases in volume of outpatient services furnished and accepted off-campus provider-based departments, which we have shortened to simply site-neutral payments. CMS has stated in the final rule that there was evidence that increased volume and intensity of certain covered outpatient department services, which was likely driven by financial incentives to furnish services in hospitals in order to receive higher reimbursement than making site of service decisions based on medical necessity. For calendar year 2026, CMS decided to pay accepted hospital outpatient departments as if they were non-accepted or freestanding clinics at the Medicare physician fee schedule reimbursement rates instead of the OPPS rates for anti-HCPCS codes assigned to drug administration services, AAPCs. CMS published the specific APCs affected in table 121 of the final rule. And something else to watch here is that there is discussion in the final rule of applying this provision to on-campus hospital outpatient department.
Kelly: Okay. But isn’t CMS doing away with the inpatient-only list? How is that going to affect the outpatient volumes and inpatient services?
Bob: Well, that’s a good point. In the calendar year 2026 OPPS final rule, CMS finalized the elimination of the inpatient-only list over the next three years. This means that more procedures will be done in an outpatient setting, increasing volumes. It will be interesting to watch and see how payments made to hospitals, outpatient departments, and ambulatory surgical centers evolve over time, and whether site neutrality will eventually be implemented in some form to ASCs. And I want to shift gears there for a second, but there’s another aspect with the elimination of the inpatient-only list. And that is the indefinite exemption of site of service claim denials due to the two-midnight rule. As procedures migrate to the outpatient setting, CMS is relying on the physician’s determination as to whether a procedure removed from the inpatient-only list should be done in an inpatient or outpatient setting. If done in an inpatient setting, auditors are not to use the two-midnight rule as a determination for denial of payment at this time. Once CMS determines the procedure to be an outpatient procedure, they will communicate the reinstatement of the rule towards that procedure.
Kelly: So, kind of switching gears a bit here. So, in some of your previous webinars, you discussed up-and-coming activities that could be changing and items we need to keep an eye on. So can you share any areas our audience may need or want to watch?
Bob: First, I would say we should keep an eye on the 340B remedy reduction amount. CMS has given us warning they could increase the reduction of the conversion factor in later years. Next, I would watch for additional site-neutral payment policies. As they have progressed to the excluded provider-based sites for drug administrative services, CMS may choose to apply that policy to other services or to on-campus clinic sites. And lastly, we visit this every year, and that’s pay-go sequestration. The additional Medicare 4% statutory pay-as-you-go sequestration was scheduled to go into effect in January of 2026. Congress has, over the years, continued to keep this program from going into effect, either by wiping the scorecard clean or by using other devices to avoid triggering the sequester. In the continuing resolution that passed in November of 2025, the current administration followed the same practice as the prior administration and wiped the scorecard clean of the $3.4 trillion of deficit spending over the next 10 years. And so it will not go into effect in January of 2026. The reason we need to continue to watch this is twofold. First, it is potentially a drastic cut to Medicare spending as long as the provision remains in the regulations. And second, that Congress could at some point implement it to control over spending.
Kelly: That makes sense. Well, thanks so much for sharing that with us. And thanks for joining us, Bob, today, and for giving us this sneak peek into BESLER’s upcoming webinar, 2026 OPPS Final Rule Summary, that you’re presenting live on Wednesday, January 14th, at 1 PM eastern time. And as a bonus, you can earn CPE. Thanks again, Bob.
Bob: Thank you, Kelly. Have a great day.
Kelly: Thank you. And thank you all for joining us for this episode of The Hospital Finance Podcast. Until next time…
[music] This concludes today’s episode of The Hospital Finance Podcast. For show notes and additional resources to help you protect and enhance revenue at your hospital, visit besler.com/podcasts. The Hospital Finance Podcast is a production of BESLER | SMART ABOUT REVENUE, TENACIOUS ABOUT RESULTS.
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