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Hospitals could get $8 billion more in Medicare reimbursement for outpatient services next year under a new proposed rule that would raise rates by 2.4%.

Hospital groups aren’t pleased, with the American Hospital Association calling the pay bump inadequate. The hospital lobby also criticized steps towards site neutrality in the regulation, which would cut into the more generous reimbursement hospitals currently receive from the federal insurance program for offering care in outpatient settings compared to non-hospital facilities.

Regulators also proposed stricter price transparency disclosures, a priority for the Trump administration. The CMS also wants to shorten the timeline for clawing back past overpayments to hospitals related to the 340B drug discount program.

“We are building on our efforts to modernize Medicare payments by advancing site neutrality, simplifying hospital billing, and ensuring real prices — not estimates — are available to patients,” Chris Klomp, CMS deputy administrator and director of Medicare, said in a statement Tuesday. “These changes help make hospital care more predictable, accountable, and affordable.”

Overall, the pay increase to hospital outpatient departments reflects a market basket increase of 3.2%, minus a 0.8 percentage point productivity adjustment.

If finalized, ambulatory surgery centers will also have their pay rates increase by 2.4%, a $480 million increase compared to 2025.

Inpatient only list, site-neutral payments

The Trump administration is proposing to expand some site-neutral payment policies. Currently, under Medicare, hospital outpatient departments receive higher reimbursement than independent physician offices and ambulatory surgery centers for providing the same care.

The discrepancy is a source of frustration for spending watchdogs and some lawmakers who argue aligning payment rates across settings would drive down patient costs while saving Medicare money.

On Tuesday, the CMS proposed phasing out the inpatient only list, a list of which surgical procedures have to be furnished in hospitals.

The government wants to phase out the list over a three-year period, beginning with removing 285 procedures, mostly musculoskeletal, for 2026.

“CMS believes that the evolving nature of the practice of medicine allows more procedures to be performed on an outpatient basis with a shorter recovery time,” the agency said in a fact sheet on the rule. “This proposal would allow for these services to be paid by Medicare in the hospital outpatient setting when determined to be clinically appropriate, giving physicians greater flexibility in determining the most appropriate site of service.”

The proposal is a concern for hospitals, especially acute care facilities that have benefited from Medicare designing them the appropriate site of care for surgeries, according to analysts.

However, it would benefit surgery facility operators like Surgery Partners and Tenet Healthcare’s United Surgical Partners International though potentially higher volumes.

The proposed rule also expands a 2019 policy from the CMS that attempted to control increases in the volume of clinic visits to off-campus provider-based departments. PBDs are outpatient departments and considered part of hospitals, even if they’re not physically located onsite.

If finalized, off-campus PBDs would be reimbursed at physician rates for drug administration services, not hospital outpatient rates. The CMS estimates this would save $280 million.

The AHA pushed back on both policies, saying they “fail to account for the real and crucial differences between hospital outpatient departments and other sites of care.”

Price transparency

The proposed rule also includes several possible changes to price transparency. If finalized, hospitals starting in January would be required to post the 10th percentile allowed amount, the median allowed amount and the 90th percentile allowed amount of charges negotiated with payers.

The goal is to more accurately account for the variance in actual prices that hospitals receive for providing services, the CMS said.

Hospitals would also have to disclose the data used to determine those charges, and attest that they’ve included all payer-specific negotiated charges to the best of their ability.

The Trump administration has long focused on hospital price transparency. In President Donald Trump’s first term, he ordered hospitals to publicly disclose prices for services. In February, Trump released an executive order tapping three federal agencies to “rapidly implement and enforce” regulations he first proposed in his first term.

Although the government has attempted to hold hospitals accountable for price transparency, compliance has lagged. Only 21.1% of hospitals were fully in compliance with price transparency regulations in November, according to a report by Patient Rights Advocate.

An updated 340B fix

The proposal also includes a change to an earlier regulation linked to the 340B drug discount program, which requires drugmakers to give providers that serve a large number of low-income patients a discount on outpatient drugs.

In 2023, Medicare released a plan to repay hospitals for years of underpayments in 340B, after the Supreme Court ruled a policy change from the first Trump administration, which lowered the reimbursement for medications in the program by about 30%, was illegal.

To remedy the underpayments, the CMS finalized $9 billion in lump sum payments to more than 1,600 340B hospitals that received lower reimbursement from 2018 to 2022. 

However, the CMS also said it planned to claw back $7.8 billion from hospitals for overpayments on other services during that time.

To ensure the 340B fix also stayed budget neutral, the CMS finalized a 0.5% reduction in the conversion factor for non-drug items and services for all hospitals until the regulator reached the $7.8 billion threshold. The CMS estimated that would happen in 2041.

The fix aimed to balance restoring hospitals’ finances and avoiding burdening them with an immediate, single-year recovery, the CMS said. But in the latest proposed rule, the regulator argued a shorter timeframe would be “more appropriate.”

To that end, the CMS is proposing to bump the offset percentage from 0.5% to 2%, effective next year. The reduction would remain in effect until the full $7.8 billion is recovered, which the CMS estimates will happen in 2031.

The AHA lambasted the proposed change, noting the regulation would claw back money 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,” Ashley Thompson, senior vice president for public policy analysis and development at the AHA, said in a statement. “Doubling down on that unlawfulness, the proposed recoupment is both illegal and unwise, and it should not be finalized.”

Other provisions

The CMS is also proposing to remove some health equity and COVID-19 vaccination metrics from Medicare’s quality reporting program.

If the rule is finalized, public-facing metrics showing COVID vaccination coverage among healthcare employees and various other health equity metrics would be nixed. The rule would would also remove metrics measuring the median time for discharged patients in the emergency room and those measuring patients who “left without being seen.”

Hospitals would also get a cap on their overall hospital quality star ratings in 2026 if they rank low on care safety measures. Star ratings are publicly reported and are organized into five groups measuring care, mortality, readmission and other standards.

Hospitals that score in the lowest quartile for safety of care will have their stars capped at 4 stars. Hospitals scoring in that quartile will also face a one-star reduction.

Rebecca Pifer contributed reporting.