CY 2026 Medicare Physician Fee Schedule Proposed Rule Summary, Including the Quality Payment Program and the Medicare Shared Savings Program

The Centers for Medicare & Medicaid Servies (CMS) released the Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System proposed rule for CY 2026. The proposed regulation makes payment and policy changes to the services provided under the OPPS and ASC payment system, including updating payment rates, making updates to quality measures, proposing changes to the inpatient only procedure list, and other policies.

The proposed rule is accompanied by a fact sheet, an addenda used by CMS in rate setting, and a press release. Comments are due September 15. Page numbers in this summary reflect the page number of the display copy of the proposed rule linked above.

The proposed payment regulations promulgated by CMS this year, including the OPPS proposed rule, contain various repeated themes and requests for information and include topics like recognition of software as a service (SaaS) in payment policy, the removal of social drivers of health (SDOH) quality measures, and a request for information on the development of new measures related to nutrition and overall wellbeing. Listed below are the topics that are included in the OPPS rule that have also been discussed and summarized by CRD, in other rules.

• Comment Solicitation on Payment Policy for Software as a Service – p. 213
• Measure Concepts under Consideration for Future Years in the Hospital: Request for Information (RFI): Well-Being and Nutrition – p. 623
• Proposed Removal of Social Drivers of Health Measures for the CY 2025 Reporting Period – p. 629

Payment Rate Update Updates for OPPS and ASC Payment System – p. 845

Payment rates for services performed in the hospital outpatient department will increase by 2.4% in 2026. The payment increase is derived from the inpatient hospital market basket increase of 3.2% for inpatient services paid under the inpatient prospective payment system, and then reduced by a productivity adjustment of 0.8%. The agency estimates that total Medicare payments to OPPS providers, including Medicare beneficiary cost sharing will be $100 billion in 2026. Payment rates in the ASC setting will also increase by 2.4% and total payments will equal approximately $9.2 billion.

CY 2026 Physician Fee Schedule Proposal Regarding Cell and Gene Therapies – p. 405

CMS proposes two changes regarding preparatory procedures for tissue procurement used in manufacturing autologous cell-based immunotherapies and gene therapies. First, CMS proposes that payment for preparatory procedures including cell and tissue collection, preparation for transport, cryostorage etc. be bundled into the payment for the administration of the therapy. Second, starting January 1, 2026, any procedures paid for by the manufacturer must be included in the calculation of the manufacturer’s Average Sales Price (ASP). These proposed changes may affect therapies reimbursed under the Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) payment systems.

CMS would like stakeholders to submit comments on payment policy for cell and gene therapies through the Medicare Physician Fee Schedule (PFS) 2026 proposed rule.

Proposed Changes to the Inpatient Only List – p. 449

CMS proposes to discontinue the Inpatient Only (IPO) list beginning in 2026 by using a phased-in approach, with the list being eliminated by January 1, 2029. The agency believes that that phasing in the elimination of the IPO list will allow time for providers, payers, patients, and other interested parties to adjust and prepare for implementation. The first set of services proposed for removal are 269 musculoskeletal procedures as well as 16 cardiovascular, lymphatic, digestive, gynecological, and endovascular procedures. The list of services proposed for removal can be found in Table 69 on page 465.

The agency states that changes in medical technology, the development of advanced surgical techniques, and quality and safety advances have made the use of the IPO list unnecessary. Additionally, CMS supports that the physician, using clinical knowledge and judgment, coupled with a Medicare beneficiary’s specific needs, has the capability of determining the safest site of service for a particular procedure.

The IPO list was established in 2000 as part of the implementation of the Outpatient Prospective Payment System (OPPS). It identifies procedures that Medicare will only reimburse when performed in an inpatient hospital setting due to their invasive nature, the health status of Medicare patients, or the need for extended postoperative recovery. While services on the IPO list can technically be performed in an outpatient setting, Medicare will not pay for them unless the service(s) is provided in the inpatient setting, as the outpatient setting for a service on the IPO list may be considered unsafe or not medically appropriate for the Medicare population.

Method to Control Unnecessary Increases in the Volume of Outpatient Services Furnished in Excepted Off-Campus Provider-Based Departments (PBDs) – p. 478

CMS finds that there is continued growth in the volume of outpatient department (OPD) services driven by site of service payment differentials, and that these volume increases are based on financial incentives tied to payment policy and not to clinical necessity. The agency proposes to remove the site-of-service differential for drug administration services delivered in excepted provider-based departments (PBDs). Specifically, CMS proposes to reduce payments for certain drug administration services furnished in excepted off-campus outpatient departments to 40 percent of the OPPS rate, with an exemption for Sole Community Hospitals.

CMS is concerned with the correlation between the volume of OPD clinic visits, the vertical integration of hospitals and physician practices, and the higher OPPS payment rate for clinical visits. The agency previously noted in the CY 2019 OPPS/ASC final rule that beneficiaries receiving chemotherapy administration receive more sessions on average when treated in the OPD. For some drug administration services for cancer care, provider consolidation increases the cost of outpatient chemotherapy treatment. The agency believes that the proposal to address drug administration services across the APC family will help address this issue.

Request for Information: Adjusting Payment under the OPPS for Services Predominately Performed in the Ambulatory Surgical Center or Physician Office Settings – p. 503

As discussed above, Medicare payments to hospital outpatient departments under the OPPS have been higher than payments bade to ASCs or to physician offices. CMS has taken steps to address payment disparities between hospital outpatient departments and the physician office setting, but there is still evidence of continued growth in the volume of outpatient department services driven by site-of-service payment differentials.

The agency seeks feedback for future rulemaking on the development of a more systematic process for identifying ambulatory services at high risk of shifting to the hospital setting based on financial incentives rather than medical necessity and adjusting payments accordingly. Specific questions to elicit feedback from stakeholders are outlined on page 504 of the display copy of the proposed rule.

Proposed Additions to ASC Covered Surgical Procedures and Covered Ancillary Services Lists – p. 562

CMS is required to identify, in consultation with medical organizations, surgical procedures that can be safely performed not only in hospitals but also in ASCs, critical access hospitals (CAHs), or hospital outpatient departments (HOPDs). By law, CMS must review and update the ASC Covered Procedures List (ASC CPL) at least every two years, and it evaluates the list annually to consider adding or removing procedures.

Proposed Changes to the List of ASC Covered Surgical Procedures for CY 2026

CMS proposes to revise its regulatory criteria and add certain surgical procedures to the ASC CPL, beginning in CY 2026, to expand access, while maintaining the safety for Medicare beneficiaries through the nonbinding physician considerations for patient safety.

Currently, covered surgical procedures must be separately paid under the OPPS, pose minimal safety risk when performed in an ASC, and typically not require the patient to need active medical care past midnight. While retaining the requirement that procedures must be separately paid under the OPPS, CMS proposes moving the criteria related to patient safety and post-procedure monitoring to a new section that outlines factors physicians should consider when determining the appropriate site of service.

Additionally, CMS proposes to eliminate five of the current general exclusion criteria, allowing physicians to determine, based on clinical judgement, whether a procedure can be safely performed in an ASC. The five criteria proposed for removal include:

1. Generally result in extensive blood loss;
2. Require major or prolonged invasion of body cavities;
3. Directly involve major blood vessels;
4. Are generally emergent or life-threatening in nature; and
5. Commonly require systemic thrombolytic therapy.

CMS believes these five exclusionary criteria may no longer be necessary, given the current capabilities of many ASCs.

CMS proposes to maintain three general exclusion criteria, excluding procedures from the ASC CPL that:

1. Are designated as requiring inpatient care;
2. Can only be reported using a CPT unlisted surgical procedure code; or
3. Are otherwise excluded.

CMS believes these retained criteria, coupled with physician judgment and appropriate patient selection, will continue to safeguard patient safety on an ambulatory basis.

Proposed Procedure Additions for CY 2026

Based on the proposed revised ASC CPL criteria, CMS proposes adding 276 surgery or surgery-like codes not on the CY 2025 IPO list, and an additional 271 codes currently on the IPO list. A list of the proposed additions to the ASC CPL for CY 2026 and the IPO list removals proposed for addition to the ASC CPL for CY 2026 can be found in Table 80 on p. 569 and Table 81 on p. 579 of the proposed rule.

Covered Ancillary Services

Covered ancillary services are eligible for separate payment under the ASC payment system when provided as part of a covered surgical procedure. These include:

1. Brachytherapy sources
2. Certain implantable items with OPPS pass-through status
3. Contractor-priced items (e.g., corneal tissue procurement)
4. Certain separately paid drugs and biologicals under OPPS
5. Certain radiology services paid separately under OPPS
6. Non-opioid pain management drugs used during surgery

Ancillary items not eligible for separate payment are bundled into the ASC payment for the surgical procedure.

All ASC covered ancillary services and their proposed payment indicators for CY 2026 are included in Addendum BB to this proposed rule

Proposed Changes to the List of ASC Covered Items and Services for CY 2026

As discussed earlier in the proposed rule, CMS proposes to remove skin substitutes from the list of packaged items under both the OPPS and ASC payment systems.

Like the payment methodology for brachytherapy sources integral to ASC covered surgical procedures, CMS proposes to pay for groups of skin substitute products at annual prospective rates adopted under the OPPS, effective January 1, 2026. These prospective rates would not be subject to the ASC wage index adjustment and beneficiaries would be responsible for 20 percent coinsurance.

To enable separate payment for certain groups of skin substitute products used during a covered surgical procedure, CMS proposes to include groups of skin substitute products as covered ancillary items and services that are integral to a covered surgical procedure. CMS would revise regulations to classify these products as covered ancillary services in ASCs and assign them a new payment indicator “S2,” replacing the current “N1” indicator for those that qualify.

Graduate Medical Education Accreditation – p. 780

The Trump Administration’s Executive Order 14279, "Reforming Accreditation to Strengthen Higher Education," directs the United States Attorney General, in consultation with the Secretary of Health and Human Services, to investigate and take action to terminate unlawful discrimination in graduate medical education (GME) advanced by the Liaison Committee on Medical Education or the Accreditation Council for Graduate Medical Education (ACGME) or other accreditors of GME, including diversity, equity, and inclusion (DEI) requirements deemed discriminatory.

ACGME is the primary organization in the United States that conducts accreditation for GME programs. ACGME accreditation is a voluntary process; however, GME programs that are not accredited by the ACGME do not receive Medicare funding from CMS for direct GME (DGME) and indirect GME (IME). CMS recognizes that ACGME identifies DEI as a primary value of the organization and believes that such DEI initiatives “unlawfully discriminate against Americans on the basis of race.”

Current regulations define an “approved GME program” as a residency program approved by one of the following national organizations: ACGME, the American Osteopathic Association (AOA), the Commission on Dental Accreditation (CODA) of the American Dental Association, and the Council on Podiatric Medical Education (CPME) of the American Podiatric Medical Association. CMS interprets the statute to say that an “approved” program can be a program that is accredited by one of these national organizations, or one that leads toward board certification by the American Board of Medical Specialties (ABMS).”

CMS believes that the statute gives the agency the authority to specify additional criteria for approved GME programs. Therefore, the agency proposes to prohibit accreditors from requiring, or encouraging institutions to put in place, DEI programs that encourage “unlawful discrimination on the basis of race.” Additionally, CMS proposes to allow the Secretary to recognize other organizations that meet or exceed Medicare’s requirements as accreditors to increase competition in the accreditation space and improve the quality of the accreditation process. If finalized, the effective date of this proposal would be January 1, 2026.