/ en Tue, 29 Jul 2025 17:33:23 -0500 Mon, 28 Jul 25 13:43:00 -0500 /advisory/2025-07-03-key-highlights-final-one-big-beautiful-bill-act <div class="container"><div class="row"><div class="col-md-8"><p>The Senate July 1, and the House July 3, passed a budget reconciliation bill, the <a href="https://sponsors.aha.org/rs/710-ZLL-651/images/07032025-Legis-language-h1_eas.pdf" target="_blank" title="Full text of the One Big Beautiful Bill Act (OBBBA) PDF.">One Big Beautiful Bill Act (OBBBA)</a>, H.R. 1, a sweeping package that enacts many of President Trump’s legislative priorities on taxes, border security, energy and deficit reduction. The bill includes significant policy changes to Medicaid and the Health Insurance Marketplaces.</p><p>The Medicaid program provides health insurance coverage for 72 million Americans, including children, pregnant women, the elderly, the disabled and millions of working Americans. According to the <a href="https://www.cbo.gov/publication/61534" target="_blank" title="Congressional Budget Office: Estimated Budgetary Effects of an Amendment in the Nature of a Substitute to H.R. 1, the One Big Beautiful Bill Act, Relative to CBO's January 2025 Baseline">Congressional Budget Office</a> (CBO) score of a draft version of the Senate bill, the OBBBA will lead to nearly $1 trillion in Medicaid cuts and result in more than 11.8 million people losing Medicaid and health insurance marketplace coverage.</p><p>Historically, provider taxes and state-directed payments (SDPs) allow hospitals to bridge the chronic and historic underpayment by Medicaid for the care they deliver. The legislation includes limitations on the use of provider taxes and SDPs. The CBO score for the policy changes related to SDPs and provider taxes is $340 billion and will result in direct decreases in hospital payments. The AHA estimates that the provider tax changes alone will result in a loss of federal payments to hospitals of $232 billion over 10 years.</p><h2>AHA Statement</h2><p>In a <a href="/press-releases/2025-07-03-aha-statement-house-passage-one-big-beautiful-bill-act" target="_blank" title="AHA Statement on House Passage of One Big Beautiful Bill Act">statement</a> shared with the media following passage in the House July 3, AHA President and CEO Rick Pollack said, “Today is an extremely disappointing and very difficult day for health care in America. Despite months of clearly demonstrating the implications that these Medicaid proposals will have on the patients and communities we serve, especially the most vulnerable populations, Congress has enacted cuts of nearly a trillion dollars to the Medicaid program. No matter how often repeated, the magnitude of these reductions — and the number of individuals who will lose health coverage — cannot be simply dismissed as waste, fraud, and abuse. The faces of Medicaid include our children, our disabled, our seniors, our veterans, our neighbors, and friends. The real-life consequences of these reductions will negatively impact access to care for all Americans.</p><p>“The AHA remains committed to working with all stakeholders to mitigate the impact of these cuts wherever possible. Our goal is to help ensure hospitals can remain open for their communities, and people can get the care they need when they need it. Our nation’s health and economic future depend on it.”</p><h2>AHA Summary of OBBBA Provisions Impacting Hospitals and Health Systems</h2><h3>SUBTITLE B — HEALTH</h3><h3>Chapter 1 — Medicaid</h3><h3><em>Subchapter A — Reducing Fraud and Improving Enrollment Processes</em></h3><h4>Section 71101: Moratorium on Implementation of Medicaid Savings Program Eligibility and Enrollment Rule (Effective from enactment through Sept. 30, 2034)</h4><p>Prohibits the Department of Health and Human Services (HHS) Secretary from implementing, administering or enforcing the amendments made by the Medicare Savings Program (MSP) rule for 10 years. This would rollback requirements that states 1) automatically enroll certain Supplemental Security Income recipients in the qualified Medicare beneficiary eligibility group of the MSP program, 2) use data from the low-income subsidy program as an application for MSPs and align the family size definitions between the MSP and Low Income Subsidy programs, and 3) accept self-attestation for certain types of income and resources. CBO estimates that this provision will result in a $85.3 billion reduction in federal spending over 10 years.</p><h4>Section 71102: Moratorium on Implementation of Medicaid, CHIP and Basic Health Program Eligibility and Enrollment Rule (Effective from enactment through Sept. 30, 2034)</h4><p>Prohibits the HHS secretary from implementing, administering or enforcing the amendments made by the provisions of the eligibility and enrollment rule for 10 years. This would limit states’ ability to use other data sources (such as payroll or state vital statistics data) to determine an individual’s eligibility for Medicaid and limit states’ use of prepopulated renewal forms. It also would allow states to impose annual and/or lifetime limits on Children’s Health Insurance Program (CHIP) benefits and to disenroll CHIP beneficiaries for failure to pay premiums or enrollment fees. CBO estimates that this provision will result in a $81.6 billion reduction in federal spending over 10 years.</p><h4>Section 71107: Eligibility Redeterminations (Effective Jan. 1, 2027)</h4><p>Requires states to redetermine eligibility once every six months for beneficiaries enrolled through the Medicaid expansion eligibility pathway, beginning in calendar year (CY) 2027. The HHS secretary must issue guidance related to implementing the rule no later than 180 days after enactment. The bill appropriates $75 million to the Centers for Medicare & Medicaid Services (CMS) administrator for fiscal year (FY) 2026 for implementation of the provisions. CBO estimates that this provision will result in a $62.6 billion reduction in federal spending over 10 years.</p><h4>Section 77109: Alien Medicaid Eligibility (Effective Oct. 1, 2026)</h4><p>Restricts eligibility for Medicaid to the following groups: legal permanent residents, certain Cuban immigrants and Compact of Free Association migrants lawfully residing in the United States. The bill appropriates $15 million to the CMS administrator for FY 2026 for implementation of the provisions. CBO estimates that this provision will result in a $6.2 billion reduction in federal spending over 10 years.</p><h4>Section 7110: Expansion FMAP for Emergency Medicaid (Effective Oct. 1, 2026)</h4><p>Beginning Oct. 1, 2026, the bill limits the Federal Medical Assistance Percentage (FMAP) to the state’s traditional FMAP for emergency Medicaid services provided to unlawfully present aliens who, except for their immigration status, would qualify for Medicaid expansion. The bill appropriates $1 million for FY 2026 to the CMS administrator for implementation of the provision. CBO estimates that this provision will result in a $28.2 billion reduction in federal spending over 10 years.</p><h3><em>Subchapter B — Preventing Wasteful Spending</em></h3><h4>Section 71111: Moratorium on Implementation of Rule Relating to Staffing Standards for Long-term Care Facilities Under the Medicare and Medicaid Programs (Effective from enactment through Sept. 30, 2024)</h4><p>Prohibits HHS from implementing the Minimum Staffing Standards for long-term care facilities and the Medicaid Institutional Payment Transparency Reporting regulation for 10 years. CBO estimates that this provision will result in a $23.1 billion reduction in federal spending over 10 years.</p><h4>Section 71112: Reducing State Medicaid Costs (Effective Jan. 1, 2027)</h4><p>Limits the timeframe for retroactive Medicaid and CHIP eligibility to 30 days prior to the application date for expansion enrollees, and 60 days prior to the application date for traditional enrollees, as opposed to the current 90-day period. CBO estimates that this provision will result in a $4.2 billion reduction in federal spending over 10 years.</p><h4>Section 71113: Federal Payments to Prohibited Entities (Effective on enactment into 2026)</h4><p>Prohibits states from receiving federal matching funds for services rendered by providers who provide abortions (other than Hyde Amendment exceptions) and receive more than $800,000 in Medicaid payments in 2023. This applies to not-for-profit, essential community providers primarily engaged in family planning services, reproductive health and related medical care. This provision applies for one year, beginning on the date of enactment. The bill appropriates $1 million for FY 2026 to the CMS administrator for implementation of the provisions. CBO estimates that this provision will result in a $52 million increase in federal spending over 10 years.</p><h3><em>Subchapter C — Stopping Abusive Financing Practices</em></h3><h4>Section 71114: Sunsetting Increased FMAP Incentive. (Effective Jan. 1, 2026)</h4><p>Repeals the ability for states that have not yet expanded Medicaid to receive 5% enhanced FMAP funds should they later choose to expand. CBO estimates that this provision will result in a $13.6 billion reduction in federal spending over 10 years.</p><h4>Section 71115: Provider Taxes (Freeze effective upon enactment; reduction begins Oct. 1, 2027)</h4><p>Freezes existing provider taxes imposed by a state or local unit of government as of the date of enactment. Removes the ability of a state or local unit of government to impose a new provider tax after enactment by setting the “hold harmless threshold” at 0%. Beginning in FY 2028, the hold harmless threshold for <strong>expansion states</strong> with an existing tax will be reduced by 0.5% annually until the threshold reaches 3.5% in 2032. Provider taxes in non-expansion states and provider taxes imposed on nursing homes and intermediate care facilities will remain frozen at their rates as of enactment. The bill appropriates $20 million for FY 2026 to the CMS administrator for implementation of the provisions. CBO estimates that this provision will result in a $191.1 billion reduction in federal spending over 10 years.</p><h4>Section 71116: State-directed Payments (SDP cap effective on enactment; reduction effective by the rating period on or after Jan. 1, 2028)</h4><p>Caps SDPs at 100% of the total published Medicare rate in expansion states and 110% of the total published Medicare rate in non-expansion states. SDPs approved (or where there was a good faith effort to be approved) by May 1, 2025, and SDP payments for rural hospitals approved (or where there was a good faith effort to be approved) by enactment will be grandfathered in at a higher rate. Completed preprints for SDPs can be submitted until enactment and may be grandfathered in at a higher rate. Beginning with the rating period on or after Jan. 1, 2028, all grandfathered SDPs would be reduced by 10 percentage points annually until the specified Medicare payment rate limit is achieved. The total published Medicare rate is defined as provided in 438.6(a) of title 42 of the Code of Federal Regulations or any future regulation that replaces it. Rural hospitals are defined as those located in a rural area, treated as being in a rural area, or located in a rural census tract, as well as critical access hospitals, sole community hospitals, Medicare-dependent hospitals, low-volume hospitals and rural emergency hospitals. The bill appropriates $7 million for each FY between 2026 and 2033 for the implementation of the provision. CBO estimates that this provision will result in a $149.4 billion reduction in federal spending over 10 years.</p><h4>Section 71117: Requirements Regarding Waiver of Uniform Tax Requirement for Medicaid Provider Tax (Effective upon enactment)</h4><p>Modifies the requirements regarding the uniformity of provider taxes and, specifically, whether a state’s tax is considered “generally redistributive.” A tax will not be considered generally redistributive if:</p><ol type="a"><li>Lower-volume Medicaid health care entities are taxed at a lower rate than higher-volume Medicaid health care entities.</li><li>High Medicaid volume health care entities are taxed more heavily than non-Medicaid health care entities.</li><li>The tax establishes any target or exclusion related to a health care entity’s Medicaid participation status.</li></ol><p>The HHS secretary will determine an applicable transition period (up to three years) for taxes considered not generally redistributive. CBO estimates that this provision will result in a $34.6 billion reduction in federal spending over 10 years.</p><h3><em>Subchapter D — Increasing Personal Accountability</em></h3><h4>Section 71119: Requirement for States to Establish Medicaid Community Engagement Requirements for Certain Individuals (Effective Dec. 31, 2026)</h4><p>Requires certain nonpregnant, nondisabled adult Medicaid beneficiaries to meet certain community engagement requirements (work requirements) beginning Dec. 31, 2026. Individuals must work or engage in qualifying activities (e.g., community service, educational programs, job training) for no less than 80 hours per month. The legislation exempts, among other groups, parents, guardians and caretaker relatives of children aged 14 or under, or disabled individuals. States are permitted to receive temporary exemptions with HHS approval. The legislation limits the types of entities that can contract with states to help implement this provision, effectively barring Medicaid managed care plans from assisting. The bill provides $200 million in FY 2026 for state implementation and $50 million for federal administration. CBO estimates that this provision will result in a $325.8 billion reduction in federal spending over 10 years.</p><h4>Section 71120: Modifying Cost-sharing Requirements for Certain Expansion Individuals Under the Medicaid Program (Effective Oct. 1, 2028)</h4><p>Requires Medicaid expansion enrollees with incomes above 100% of the federal poverty level to pay up to $35 in cost sharing per service. Cost sharing for non-emergency services provided in a hospital emergency department may exceed $35. The provision will exclude certain services, including primary care, pregnancy-related services, mental health or substance use disorder services. Total cost sharing may not exceed 5% of family income. CBO estimates that this provision will result in a $7.5 billion reduction in federal spending over 10 years.</p><h3><em>Subchapter E — Expanding Access to Care</em></h3><h4>Section 71121: Making Certain Adjustments to Coverage of Home or Community-based Services Under Medicaid (Effective July 1, 2028)</h4><p>Provides states with the option to pursue a standalone waiver under section 1915(c) and expand access to home and community-based services. The bill appropriates $50 million for FY 2026 to the HHS secretary for implementation of the provisions. Further, the bill appropriates $100 million for FY 2027 for making payments to states delivering home or community-based services. CBO estimates that this provision will result in a $6.6 billion increase in federal spending over 10 years.</p><h3>Chapter 2 — Medicare</h3><h3><em>Subchapter A — Strengthening Eligibility Requirements</em></h3><h4>Section 71201: Limiting Medicare Coverage of Certain Individuals (Effective 18 months from enactment)</h4><p>Restricts eligibility for Medicare for non-citizens to the following groups: legal permanent residents, certain Cuban immigrants and Compact of Free Association migrants lawfully residing in the United States. CBO estimates that this provision will result in a $5.1 billion reduction in federal spending over 10 years.</p><h3><em>Subchapter B — Improving Services for Seniors</em></h3><h4>Section 71202: Temporary Payment Increase Under the Medicare Physician Fee Schedule to Account for Exceptional Circumstances (Effective Jan. 1, 2026)</h4><p>Provides a rate update to the Physician Fee Schedule of 2.5% for calendar year (CY) 2026 only. There is no adjustment for CY 2025. CBO estimates that this provision will result in a $1.9 billion increase in federal spending over 10 years.</p><h4>Section 71203: Expanding and Clarifying the Exclusion for Orphan Drugs Under the Drug Price Negotiation Program (Effective Jan. 1, 2028)</h4><p>Modifies the Inflation Reduction Act to exclude orphan drugs under the Drug Price Negotiation Program. CBO estimates that this provision will result in a $4.9 billion increase in federal spending over 10 years.</p><h3>Chapter 3 — Health Tax</h3><h3><em>Subchapter A — Improving Eligibility Criteria</em></h3><h4>Section 71301: Permitting Premium Tax Credit Only for Certain Individuals (Effective Jan. 1, 2027)</h4><p>Restricts eligibility premium tax credits for marketplace coverage for non-citizens to the following groups: legal permanent residents, certain Cuban immigrants and Compact of Free Association migrants lawfully residing in the United States. CBO estimates that this provision will result in a $69.8 billion reduction in federal spending over 10 years.</p><h4>Section 71302: Disallowing Premium Tax Credits During Periods of Medicaid Ineligibility Due to Alien Status (Effective Jan. 1, 2026)</h4><p>Disallows undocumented immigrants who report income below 100% of the federal poverty level and are in their five-year Medicaid waiting period (due to immigration status) from receiving premium tax credits to purchase health insurance on the marketplaces. CBO estimates that this provision will result in a $49.5 billion reduction in federal spending over 10 years.</p><h3><em>Subchapter B — Preventing Waste, Fraud and Abuse</em></h3><h4>Section 71303: Requiring Verification of Eligibility for the Premium Tax Credit (Effective Jan. 1, 2028)</h4><p>Prohibits an individual from claiming the premium tax credit if the individual’s eligibility related to income, enrollment and other requirements is not actively verified annually. This will prohibit automatic reenrollment for enrollees receiving premium tax credits by requiring them to actively prove tax credit eligibility each year. CBO estimates that this provision will result in a $36.9 billion reduction in federal spending over 10 years.</p><h4>Section 71304: Disallowing Premium Tax Credit in Case of Certain Coverage Enrolled in During the Special Enrollment Period (Effective Jan. 1, 2026)</h4><p>Prohibits individuals from receiving premium tax credits if they enroll in health coverage on the marketplace through a special enrollment period associated with their income. CBO estimates that this provision will result in a $39.5 billion reduction in federal spending over 10 years.</p><h4>Section 71305: Eliminating Limitation on Recapture of Advance Payment of Premium Tax Credit (Effective Jan. 1, 2026)</h4><p>Removes the repayment limits and requires affected individuals to reimburse the Internal Revenue Service for the full amount of excess tax credit received. CBO estimates that this provision will result in a $17.3 billion reduction in federal spending over 10 years.</p><h3><em>Subchapter C — Enhancing Choice For Patients</em></h3><h4>Section 71306: Permanent Extension of Safe Harbor for Absence of Deductible for Telehealth Services (Effective Jan. 1, 2025)</h4><p>Provides a safe harbor to allow telehealth services to be provided pre-deductible for patients with high-deductible health plans. CBO estimates that this provision will result in a $4.3 billion reduction in federal revenue over 10 years.</p><h4>Section 71307: Allowance of Bronze and Catastrophic Plans in Connection with Health Savings Accounts (Effective Jan. 1, 2026)</h4><p>Allows bronze and catastrophic plans to contribute to health savings accounts. CBO estimates that this provision will result in a $3.6 billion reduction in federal revenue over 10 years.</p><h4>Section 71308: Treatment of Direct Primary Care Service Arrangements (Effective Jan. 1, 2026)</h4><p>Allows individuals in high-deductible health plans to enroll in direct primary care service arrangements and to use their health savings accounts for payment. CBO estimates that this provision will result in a $2.8 billion reduction in federal revenue over 10 years.</p><h3>Chapter 4 — Protecting Rural Hospitals and Providers</h3><h4>Section 71401: Rural Health Transformation Program (Effective upon enactment)</h4><p>Creates a rural stabilization fund with $50 billion, to be paid out as $10 billion annually across FYs 2026 through 2030. States will need to submit a one-time application to CMS to be eligible for an allotment of these funds during a submission period specified by CMS (with an application and decision date no later than Dec. 31, 2025). Of the $50 billion in funding, 50% of the funds for each fiscal year will be equally distributed among all the states with an approved application. Forty percent of the funds for each fiscal year will be distributed in a method determined by CMS. CMS will consider the following as its distribution method: the percentage of the state population located in rural geographies, the proportion of rural health facilities in the state relative to the nation, and any other factors deemed appropriate by CMS. Not more than 10% of the amount allocated to the states can be used for administrative expenses. Separately, the legislation appropriates $200 million to the CMS administrator for FY 2025 to implement the provision.</p><h3>SUBTITLE A — TAX</h3><h3>Chapter 4 — Investing In American Families, Communities and Small Businesses</h3><h3><em>Subchapter B — Permanent Investments in Students and Reforms to Tax-Exempt Institutions</em></h3><h4>Section 70415: Endowment Tax for Universities (Effective Jan. 1, 2026)</h4><p>Amends the excise tax rate for universities based on student endowments. The rates are as follows: 1.4% for student endowments ranging from $500,000-$750,000 , 4% for student endowments ranging from $750,000-$2 million, and 8% for all student endowments above $2 million. CBO estimates that this provision will result in a $761 million increase in federal revenue over 10 years.</p><h4>Section 70416: Executive Compensation (Effective Jan. 1, 2026)</h4><p>Limits tax-exempt organizations’ ability to deduct compensation over $1 million, including for former employees, dating back to tax year 2017. CBO estimates that this provision will result in a $3.8 billion increase in federal revenue over 10 years.</p><h3><em>Subchapter C — Permanent Investments in Community Development</em></h3><h4>Section 70426: One Percent Floor on Deduction of Charitable Contributions Made by Corporations (Effective Jan. 1, 2026)</h4><p>Allows a deduction for corporate charitable contributions only to the extent that the aggregate of corporate charitable contributions exceeds 1% of a taxpayer’s taxable income and does not exceed 10% of the taxpayer’s taxable income. CBO estimates that this provision will result in a $16.6 billion increase in federal revenue over 10 years.</p><h3>Chapter 5 — Ending Green New Deal Spending, Promoting America-First Energy and Other Reforms</h3><h3><em>Subchapter A — Termination of Green New Deal Subsidies</em></h3><h4>Section 70503: Termination of Qualified Commercial Clean Vehicles Credit (Credit terminates Sept. 30, 2025)</h4><p>Eliminates the tax credit that allowed for tax-exempt entities to receive a direct payment for the lesser of 1) 15% of the vehicle’s cost (30% for vehicles not powered by gas or diesel) or 2) the incremental cost of the vehicle relative to a comparable vehicle. CBO estimates that this provision will result in a $104.5 billion increase in federal revenue over 10 years.</p><h4>Section 70504: Termination of Alternative Fuel Vehicle Refueling Property Credit (Credit terminates June 30, 2026)</h4><p>Eliminates the tax credit that allowed for a tax-exempt owner of property to receive direct payment for the cost of installing a qualified alternative fuel vehicle refueling station on property, such as electric charging stations CBO estimates that this provision will result in a $1.96 billion increase in federal revenue over 10 years.</p><h4>Section 70507: Termination of Energy Efficient Commercial Buildings Deduction (Deduction terminates June 30, 2026)</h4><p>Eliminates a tax deduction for tax-exempt organizations for energy-saving commercial building property. The deduction will terminate for any property with construction beginning after June 30, 2026. CBO estimates that this provision will result in a $134 million increase in federal revenue over 10 years.</p><h4>Section 70513: Termination and Restrictions on Clean Electricity Investment Credit (Credit terminates Dec. 31, 2027)</h4><p>Eliminates a tax credit for investing in qualifying zero-emission electricity generation facilities or energy storage technology. Under the previous law, the credit was phased out in 2032. Specifically, this provision:</p><ul><li>Terminates eligibility for covered wind and solar facilities placed into service after Dec. 31, 2027.</li><li>Increases the domestic content requirement for projects to be eligible for the domestic content bonus. The current law requires that 40% of the manufactured products in a facility be from a domestic source. The act will increase the required threshold to 45% (or 27.5% for offshore wind) from June 16, 2025, until Dec. 31, 2025; 50% (or 35% for offshore wind) for CY 2026; and 55% after Dec. 31, 2026.</li><li>Prevents access to credits for wind and solar if the taxpayer rents or leases the property to a third party.</li><li>Prohibits credits that include any material assistance from a prohibited foreign entity.</li></ul><p>Additionally, the bill eliminates the investment tax credit for certain energy properties for qualified projects. Specifically, the provision eliminates the 2% base credit for projects not meeting prevailing wage and apprenticeship requirements, applies to construction beginning on or after June 16, 2025.CBO estimates that this provision will result in a $177.9 billion increase in federal revenue over 10 years.</p><h2>Further Questions</h2><p>If you have further questions, please contact AHA at <a href="tel:1-800-424-4301">800-424-4301</a>.</p></div><div class="col-md-4"><div class="sticky"><a href="/system/files/media/file/2025/07/Legislative-Advisory-Key-Highlights-of-the-Final-One-Big-Beautiful-Bill-Act.pdf" target="_blank" title="Click here to download the Legislative Advisory: Key Highlights of the Final One Big Beautiful Bill Act PDF."><img src="/sites/default/files/inline-images/Page-1-Legislative-Advisory-Key-Highlights-of-the-Final-One-Big-Beautiful-Bill-Act.png" data-entity-uuid="6a061d3b-a8fa-410e-baa3-17eaad87d657" data-entity-type="file" alt="Legislative Advisory: Key Highlights of the Final One Big Beautiful Bill Act page 1." width="696" height="900"></a></div></div></div></div> div.sticky { position: sticky; top: 0; } Thu, 03 Jul 2025 00:00:01 -0500 Advisory /advisory/2025-07-28-hospital-outpatient-ambulatory-surgical-center-proposed-rule-cy-2026 <div class="container"><div class="row"><div class="col-md-8"><p>The Centers for Medicare & Medicaid Services (CMS) July 17 published its calendar year (CY) 2026 outpatient prospective payment system (OPPS) and ambulatory surgical center (ASC) <a href="https://www.federalregister.gov/documents/2025/07/17/2025-13360/medicare-and-medicaid-programs-hospital-outpatient-prospective-payment-and-ambulatory-surgical" target="_blank" title="CY 2026 outpatient prospective payment system (OPPS) and ambulatory surgical center (ASC) proposed rule.">proposed rule</a>. The rule would increase OPPS rates by a net 2.4% in CY 2026 compared to CY 2025. It also includes proposals to pay at the site-neutral rate for drug administration services in grandfathered off-campus hospital outpatient departments (HOPDs), phase out the inpatient-only (IPO) list, expedite the 340B remedy timeline for repayment for non-drug services and conduct a new drug acquisition cost survey, and modify the price transparency requirements for hospitals.</p><div><h2 id="keyhighlights">Key Highlights</h2><p>CMS’ proposed policies would:</p><ul><li>Increase Medicare hospital OPPS rates by a net 2.4% in CY 2026.</li><li>Pay for drug administration services in grandfathered off-campus HOPDs at the site-neutral rate of 40% of the OPPS rate and request comment on expanding site-neutral payment to on-campus clinic visits and other grandfathered off-campus services.</li><li>Phase out the IPO list over three years, starting with removing 285 musculoskeletal services in 2026.</li><li>Expedite the 340B remedy timeline for repayment of $7.8 billion for non-drug services through a 2% annual cut to the OPPS conversion factor (CF), concluding by CY 2031.</li><li>Permanently revise the definition of direct supervision for cardiac rehabilitation (CR), intensive cardiac rehabilitation (ICR) and pulmonary rehabilitation (PR) services and diagnostic services in HOPDs to include virtual direct supervision.</li><li>Remove three measures on health equity and one on COVID-19 vaccination among health care personnel from the Outpatient, ASC and Rural Emergency Hospital (REH) quality reporting programs.</li><li>Adopt a new ED timeliness measure for the Outpatient and REH quality reporting programs and a new patient-reported outcome measure for the ASC program.</li><li>Change the methodology for the Overall Hospital Star Rating to emphasize Safety of Care measures.</li><li>Make several changes to the hospital price transparency requirements, including to data elements of the machine-readable file, the attestation requirements and the enforcement process.</li><li>Collect market-based payment rate data on the Medicare cost report for purposes of setting the inpatient PPS relative weights beginning in FY 2029.</li></ul></div><p>The final rule will be published on or around Nov. 1 and provisions generally take effect Jan. 1, 2026. CMS will accept comments on the proposed rule through Sept. 15, 2025.</p><h2 id="ahatake">AHA Take</h2><p>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.</p><p>We oppose the proposal to expand “site-neutral” cuts and eliminate the inpatient-only list, as both policies fail to account for the real and crucial differences between hospital outpatient departments and other sites of care. 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.</p><p>We are also concerned with CMS’ proposal 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. Doubling down on that unlawfulness, the proposed recoupment is both illegal and unwise, and it should not be finalized.</p><p>Finally, we are concerned about the proposal to pursue a burdensome acquisition cost survey, especially if the agency’s goal is to drastically reduce Medicare payments to hospitals that serve the nation’s most vulnerable communities.</p><p>We look forward to reviewing these proposals in more detail and participating in the comment process with the agency.</p><h2 id="whatyoucando">What You Can Do</h2><ul><li><strong>Participate in an AHA members-only webinar on Thursday, Aug. 7, at 3 p.m. ET</strong> to share your questions and feedback on this regulation for AHA’s comment letter to CMS. <a href="https://aha-org.zoom.us/webinar/register/WN_59Aqo3t6QQm_hIfNApweCg" target="_blank">Register for this 60-minute webinar.</a></li><li><strong>Share this advisory with your senior management team</strong> and ask your chief financial officer to examine the impact of the proposed payment changes on your Medicare revenue for CY 2026. Spreadsheets comparing the proposed changes in the ambulatory payment classification (APC) payment rates and weights from 2025 to 2026 are available on the <a href="/topics/outpatient-pps">AHA’s OPPS webpage</a>. To access these, you must be logged on to the website.</li><li><strong>Share this advisory with your billing, medical records, quality improvement and compliance departments and your clinical leadership team</strong> to apprise them of the proposals around the APCs, CoPs and quality measurement requirements.</li><li><strong>Submit comments to CMS with your specific concerns by Sept. 15 at </strong><a href="http://www.regulations.gov/" target="_blank"><strong>www.regulations.gov</strong></a><strong>.</strong></li></ul><hr><h2>Table of Contents</h2><p><a href="#keyhighlights">KEY HIGHLIGHTS</a></p><p><a href="#ahatake">AHA TAKE</a></p><p><a href="#whatyoucando">WHAT YOU CAN DO</a></p><p><a href="#rulechanges">CY 2026 OPPS PROPOSED RULE CHANGES</a></p><p class="toc-indent"><a href="#oppspaymentupdate">OPPS Payment Update and Linkage to Hospital Quality Data Reporting</a></p><p class="toc-indent"><a href="#oppspaymentupdate"></a><a href="#dataproposed">Data Proposed for Use in CY 2026 OPPS/ASC Rate Setting</a></p><p class="toc-indent"><a href="#proposedrecalibration">Proposed Recalibration and Scaling of APC Relative Weights</a></p><p class="toc-indent"><a href="#proposedsiteneutral">Proposed Site-neutral Payment Policies for Off-campus Provider-based Departments</a></p><p class="toc-indent"><a href="#paymentsfordrugs">Payments for Drugs, Biologicals and Radiopharmaceuticals</a></p><p class="toc-indent"><a href="#proposaltoexpedit">Proposal to Expedite Recoupment Timeline Under 340B Remedy Rule</a></p><p class="toc-indent"><a href="#hospitaldrugacquisition">Hospital Drug Acquisition Cost Survey</a></p><p class="toc-indent"><a href="#addonpayment">Add-on Payment for Radiopharmaceutical Technetium-99m</a></p><p class="toc-indent"><a href="#paymentforintensive">Payment for Intensive Outpatient and Partial Hospitalization Programs</a></p><p class="toc-indent"><a href="#areawageindex">Area Wage Index</a></p><p class="toc-indent"><a href="#ruralschadjustment">Rural SCH Adjustment</a></p><p class="toc-indent"><a href="#cancerhospital">Cancer Hospital Payment Adjustment</a></p><p class="toc-indent"><a href="#comprensiveapcs">Comprehensive APCs</a></p><p class="toc-indent"><a href="#rfi">RFI: Payment Policy for Software as a Service</a></p><p class="toc-indent"><a href="#virtualdirect">Virtual Direct Supervision of Certain Rehabilitation and Diagnostic Services Furnished to Hospital Outpatients</a></p><p class="toc-indent"><a href="#proposedelimination">Proposed Elimination of the IPO List</a></p><p class="toc-indent"><a href="#proposednonopioid">Proposed Non-opioid Policy for Pain Relief Under the OPPS and ASC Payment System</a></p><p class="toc-indent"><a href="#paymentforskin">Payment for Skin Substitute Products Under the OPPS</a></p><p class="toc-indent"><a href="#hospitaloutpatientoutlier">Hospital Outpatient Outlier Payments</a></p><p class="toc-indent"><a href="#transitionalpassthrough">Transitional Pass-through Payments</a></p><p class="toc-indent"><a href="#beneficiarycoinsurance">Beneficiary Coinsurance</a></p><p class="toc-indent"><a href="#outpatientquality">Outpatient Quality Reporting Program</a></p><p><a href="#cy2026asc">CY 2026 ASC PROPOSED RULE CHANGES</a></p><p class="toc-indent"><a href="#ascpaymentupdate">ASC Payment Update</a></p><p class="toc-indent"><a href="#proposedchangestothelist">Proposed Changes to the List of ASC-covered Surgical Procedures</a></p><p class="toc-indent"><a href="#ascqualityreporting">ASC Quality Reporting Program</a></p><p><a href="#otherqualityrelated">OTHER QUALITY-RELATED PROPOSALS</a></p><p class="toc-indent"><a href="#proposedmodifications">Proposed Modifications to the Overall Star Rating Methodology to Emphasize Safety of Care</a></p><p class="toc-indent"><a href="#rehquality">REH Quality Reporting Program</a></p><p><a href="#otherproposals">OTHER PROPOSALS</a></p><p class="toc-indent"><a href="#marketbasedweights">Market-based Weights for the Inpatient PPS</a></p><p class="toc-indent"><a href="#changestothehospitalprice">Changes to the Hospital Price Transparency Requirements</a></p><p class="toc-indent"><a href="#medicarepartbdrugs">Medicare Part B Drugs Without a Medicaid National Drug Rebate Agreement</a></p><p class="toc-indent"><a href="#graduatemedicaleducation">Graduate Medical Education Accreditation</a></p><p class="toc-indent"><a href="#allinclusive">All-inclusive Rate Add-on Payment for High-Cost Drugs Provided by Indian Health Services and Tribal Facilities</a></p><p><a href="#furtherquestions">FURTHER QUESTIONS</a></p><hr><h2 id="rulechanges">CY 2026 OPPS Proposed Rule Changes</h2><h3 id="oppspaymentupdate">OPPS Payment Update and Linkage to Hospital Quality Data Reporting</h3><p>The CY 2025 OPPS conversion factor is $89.169. To calculate the proposed conversion factor for CY 2026, CMS adjusted the 2025 conversion factor by the fee schedule increase factor and made further adjustments for various budget neutrality factors. The fee schedule increase factor equals the proposed hospital market-basket increase factor of 3.2%, reduced by a statutorily required productivity adjustment that CMS proposes at 0.8 percentage points, for a net 2.4% increase. Hospitals that do not meet outpatient quality reporting (OQR) program requirements are subject to a reduction of 2.0 percentage points, resulting in a proposed fee schedule increase factor of 0.4%. In addition, the agency notes that under its 340B remedy offset proposal (described further below), payments for services at hospitals subject to the 340B remedy offset will be reduced by 2.0 percentage points, resulting in a CY 2026 estimated reduction in OPPS spending $1.1 billion. Thus, the proposed CY 2026 OPPS conversion factor is $91.747 for hospitals meeting OQR requirements and $89.958 for hospitals not meeting OQR requirements.</p><p>The increase in federal spending due only to changes in the 2026 OPPS proposed rule is estimated to be approximately $1.61 billion or 2.0%. CMS also estimates spending increases taking into account estimated changes in enrollment, utilization and case mix; under this, for 2026, it estimates that such OPPS expenditures, including beneficiary-cost sharing, would be approximately $100 billion, which is approximately $8.1 billion higher than estimated expenditures in 2025. The table below details the full impact of the proposed policies.</p><table><thead><tr><th>All Hospitals</th><th>2.0%</th></tr></thead><tbody><tr><td>Urban Hospitals</td><td>2.0%</td></tr><tr><td>Large Urban</td><td>1.9%</td></tr><tr><td>Other Urban</td><td>2.2%</td></tr><tr><td>Rural</td><td>2.0%</td></tr><tr><td>Sole Community</td><td>2.2%</td></tr><tr><td>Other Rural</td><td>1.5%</td></tr></tbody></table><hr><h3 id="dataproposed">Data Proposed for Use in CY 2026 OPPS/ASC Rate Setting</h3><p>To set proposed OPPS and ASC payment rates, CMS would use the most updated cost reports and claims data available. Therefore, the agency proposes using the CY 2024 claims data and the most updated cost report extract available from the Healthcare Cost Report Information System.</p><h3 id="proposedrecalibration">Proposed Recalibration and Scaling of APC Relative Weights</h3><p>For 2026, CMS proposes recalibrating the APC relative weights using hospital claims for services furnished during CY 2024. As in previous years, the agency standardizes all relative payment weights to the APC 5012 (Level 2 Examinations and Related Services) because that is the APC to which Healthcare Common Procedure Coding System (HCPCS) code G0463 (hospital outpatient clinic visit) is assigned. G0463 is the most frequently billed OPPS service. That is, CMS calculates an “unscaled” — i.e., not adjusted for budget neutrality — relative payment weight by comparing the geometric mean cost of each APC to the geometric mean cost of the APC 5012.</p><p>To comply with budget neutrality requirements, CMS compares the estimated unscaled relative payment weights in CY 2026 to the estimated total relative payment weights in CY 2025 using the service volume in the CY 2023 claims data. Based on this comparison, the CY 2026 unscaled APC payment weights are proposed to be adjusted by a weight scalar of 1.4624. The effect of the adjustment is to increase the unscaled relative weights by about 46.24% to ensure that the CY 2026 relative payment weights are budget neutral.</p><h3 id="proposedsiteneutral">Proposed Site-neutral Payment Policies for Off-campus Provider-based Departments</h3><h4>Background</h4><p>Section 603 of the Bipartisan Budget Act of 2015 requires that services, except for dedicated emergency department (ED) services, furnished in off-campus provider-based departments (PBDs) that began billing under the OPPS on or after Nov. 2, 2015, or that cannot meet the 21st Century Cures Act "mid-build" exception, will no longer be paid under the OPPS, but under another applicable Part B payment system. For 2026, the agency continues to identify the Physician Fee Schedule (PFS) as the applicable payment system for most of these non-grandfathered (non-excepted) services and sets this site-neutral payment rate at 40% of the OPPS rate.</p><p>In the CY 2019 OPPS/ASC final rule, CMS applied a previously unused statutory authority to develop a “method to control for unnecessary increases in the volume of outpatient services.” Under this method, CMS pays the site-neutral rate for clinic visit services furnished in off-campus PBDs that had previously been protected from site-neutral provisions under the Bipartisan Budget Act of 2015. For CY 2026, CMS will continue to pay for hospital outpatient clinic visit services furnished in grandfathered (excepted) off-campus PBDs at 40% of the OPPS payment amount. It also will continue to exempt excepted off-campus PBDs of rural sole community hospitals (SCHs) from this clinic visit payment policy.</p><h4>Proposed Use of the “Method to Control Unnecessary Increases in the Volume of Outpatient Services” to Establish Site-neutral Payment for Drug Administration Services in Grandfathered (Excepted) Off-campus PBDs</h4><p>CMS claims that financial incentives continue to drive service volume increases in HOPDs, particularly for drug administration services, leading to “unnecessary” Medicare spending and higher out-of-pocket costs for beneficiaries. The agency attributes this trend to site-of-service payment disparities and hospital acquisitions of physician practices, which enable billing at higher hospital-based rates.</p><p><strong>Therefore, starting in CY 2026, CMS proposes to again use the statutory authority described above to impose a site-neutral payment reduction. Under its proposal, it would pay the site-neutral rate of 40% of the OPPS rate for drug administration procedures furnished in grandfathered (excepted) off-campus PBDs. In addition, it discusses its interest in assessing additional service families for site-neutral payment, such as imaging without contrast, in future rulemaking.</strong></p><p>Consistent with its previous decision to exempt rural SCHs from site-neutral clinic visit payment policies, CMS also proposes to exempt rural SCHs from its proposed drug administration site-neutral policy. It bases this exemption on the unique challenges faced by rural SCHs, such as limited access to care, higher costs and the fact that they are often the sole outpatient provider in their communities. CMS notes that rural SCHs have not shown evidence of unnecessary volume increases for drug administration services and that applying lower PFS-equivalent rates could harm access. The exemption would maintain current full OPPS payment levels for drug administration services in grandfathered (excepted) rural SCHs, avoiding an estimated $16 million in savings that would result from implementing the policy without the exemption. CMS requests comments on this proposed exemption for rural SCHs, its potential impact and whether other hospital types should also be considered for similar exemptions.</p><p>The drug administration APCs to which this policy would apply are:</p><ul><li>APC 5691 (Level 1 Drug Administration).</li><li>APC 5692 (Level 2 Drug Administration).</li><li>APC 5693 (Level 3 Drug Administration).</li><li>APC 5694 (Level 4 Drug Administration).</li></ul><p>There are currently 61 HCPCS codes describing various drug administration procedures that map to the four APCs above. Once again, the site-neutral payment rate proposed by CMS would be 40% of the OPPS payment rate.</p><p><strong>As in CY 2019, CMS again proposes to implement this payment reduction in a non-budget-neutral manner. As such, the agency estimates that the proposal will reduce hospital payments by $280 million in CY 2026 and $10.88 billion over 10 years (CY 2026 to CY 2035).</strong></p><p>A summary of CMS’ rationale for this proposal follows.</p><h5>Utilization of Drug Administration Services</h5><p>CMS reports it has observed a significant increase in the volume of drug administration services provided in HOPDs, particularly at grandfathered (excepted) off-campus PBDs, which the agency claims is driven in part by the large payment differentials between HOPDs and physician offices. It claims that drug administration services can be safely performed in both settings, but notes that services have increasingly migrated to the HOPD setting. CMS therefore believes that applying its volume control methodology to drug administration services will curb unnecessary growth, improve efficiency and reduce beneficiary financial burden.</p><h5>Payment for Drug Administration Services at PBDs</h5><p>CMS analyzed claims data for the top 20 most frequently billed drug administration codes and found that the most commonly used codes are nearly identical, with only slight variations in the order based on volume between grandfathered (excepted) and non-grandfathered (non-excepted) off-campus PBDs. CMS argues that this suggests the lower site-neutral payment rate is sufficient and can support the provision of these services in an off-campus PBD.</p><p>The agency also compared PFS and OPPS payment rates for drug administration by creating a “PFS proxy” APC payment rate for each of the four drug administration APCs and found that the volume-weighted PFS payment for the drug administration APCs ranged from 24% to 33% of the OPPS payment. CMS concludes that this difference in payments creates financial incentives that unnecessarily shift services from lower-cost physician offices to higher-cost hospital outpatient settings. CMS asserts that such migration is unjustified when services can be safely delivered in less expensive settings and views the continued growth in OPPS drug administration volume as unnecessary and driven by payment incentives.</p><p>Finally, it notes that if the PFS payment rate for drug administration services ranges from 24% to 33% of the OPPS rate, then a site-neutral rate set at 40% of the OPPS amount should sufficiently cover the cost of these services. CMS concludes that the shift of services from the physician office to the HOPD is unnecessary if the beneficiary can safely receive the same services in a lower-cost setting but is instead receiving services in the higher-cost setting due to payment incentives.</p><h5>Patient Severity and Cost of Care</h5><p>In response to its previous rulemaking, CMS reports that some commenters argued that higher payments for services in HOPDs are justified due to the greater complexity of patients, higher operational costs, and the need to maintain emergency and standby capabilities. While CMS acknowledges that HOPDs serve more medically complex patients, it nevertheless does not support higher payments for services that it believes can also be safely and effectively provided in lower-cost settings, like physician offices and ASCs. CMS cites studies that it asserts demonstrate no quality differences in services delivered across these settings. Finally, while CMS acknowledges that HOPD patients have higher risk scores than in other settings, it argues that patient severity does not meaningfully affect the cost of care for low-complexity services such as drug administration.</p><h4>Request for Information (RFI): Expanding the Method to Control for Unnecessary Increases in the Volume of Covered HOPD Services to On-campus Clinic Visits</h4><p>CMS requests comments on whether its current site-neutral payment policy should be expanded to include on-campus clinic visits. The agency notes that over 60% of clinic visits still occur on campus and remain unaffected by its site-neutral payment policy. It believes clinic visits, which are the most commonly billed OPPS service, can often be safely performed in lower-cost settings such as physician offices, and seeks input on whether paying on-campus clinic visits at 40% of the OPPS rate would be appropriate. The agency also invites feedback on how to distinguish necessary from unnecessary clinic visits, the potential impact of this policy on hospitals (including rural and other specific hospital types), the implications for patient access and out-of-pocket costs, and whether additional costs justify higher payments for on-campus clinic visits. CMS indicates that these comments will inform future rulemaking efforts on this topic.</p><h4>RFI: Adjusting Payment Under the OPPS for Services Predominately Performed in the ASC or Physician Office Settings</h4><p>CMS is requesting feedback on potential payment reforms for OPPS services that are predominantly performed in lower-cost settings such as ASCs or physician offices. The agency notes that despite its efforts, it continues to observe growth in HOPD service volumes that it believes are influenced by financial differentials. Therefore, it is exploring a more systematic approach to adjusting payments based on where services are most frequently performed. The agency seeks input on a range of issues, including identifying services with unnecessary volume growth, using setting-specific volume to inform payment levels, determining appropriate data timeframes and sources, accounting for the geographic availability of care and addressing packaging differences across payment systems. CMS also asks whether exceptions should be made for services tied to emergency or trauma care, whether certain hospital types (e.g., rural hospitals) should be excluded, and whether other utilization controls, such as prior authorization, should be considered.</p><h3 id="paymentsfordrugs">Payments for Drugs, Biologicals and Radiopharmaceuticals</h3><h4>Proposed Packaging Policy for “Threshold-packaged” and “Policy-packaged” Drugs, Biologicals and Radiopharmaceuticals</h4><p>CMS pays for drugs, biologicals and radiopharmaceuticals that do not have pass-through status in one of two ways: packaged payment or separate payment (individual APCs). For CY 2026, CMS proposes to maintain the packaging threshold for “threshold-packaged” drugs, including non-implantable biologicals and therapeutic radiopharmaceuticals, of $140 per day. This means that such products with a per-day cost of $140 or less would have their cost packaged in the procedure with which they are billed.</p><p>There are exceptions to this threshold-based packaging policy for certain “policy-packaged” drugs, biologicals and contrast agents. CMS proposes to continue to package the costs of all anesthesia drugs; intraoperative items and services; drugs, biologicals and contrast agents and other drugs that function as supplies when used in a diagnostic test or procedure; and drugs and biologicals that function as supplies when used in a surgical procedure (e.g., skin substitutes), regardless of whether they meet the $140 per day threshold.</p><h4>Diagnostic Radiopharmaceuticals Separate Payment</h4><p>In the CY 2025 final rule, CMS established a policy to pay separately for diagnostic radiopharmaceuticals with per-day costs above a threshold of $630 — which was approximately two times the volume-weighted average cost amount then associated with diagnostic radiopharmaceuticals. It also finalized a policy to update the $630 threshold in subsequent years by the Producer Price Index for Pharmaceutical Preparations.</p><p>Using this methodology, CMS proposes setting the packaging threshold for diagnostic radiopharmaceuticals at $655 per day for CY 2026 and proposes to pay for diagnostic radiopharmaceuticals with a per-day cost above this threshold based on their Mean Unit Cost derived from OPPS claims data. In the proposed rule, the agency again encourages manufacturers to begin or continue reporting average sales price (ASP) data for potential future use.</p><h4>Separately Payable Drugs and Biologicals</h4><p>For CY 2026, CMS proposes to continue its current policy and pay for most separately payable non-pass-through Part B drugs and biologicals at the “statutory default rate” of ASP plus 6%.</p><h4>Payment for New Drugs Before ASP Data Is Available</h4><p>Consistent with policy in the PFS, CMS proposes to continue to pay for new non-pass-through Part B drugs and biologicals during an initial sales period (two quarters) for which ASP pricing data are not yet available at a rate of wholesale acquisition cost (WAC) plus 3%. Other drugs and biologicals where ASP data are not available will continue to be paid at WAC plus 6%, as required by statute. If ASP and WAC are unavailable, Medicare will pay 95% of the average wholesale price.</p><h4>Invoice Drug Pricing Proposal for CY 2026</h4><p>In the CY 2025 OPPS final rule, CMS finalized a policy, effective Jan. 1, 2026, for determining payment rates for separately payable drugs and biologicals when standard pricing data (such as ASP, WAC, average wholesale price or mean unit cost) is unavailable.</p><p>Under this policy, if a drug does not appear in Addendum B (meaning there is no CMS-provided rate), Medicare Administrative Contractors (MACs) will calculate payment based on provider invoice costs, defined as the net acquisition cost after subtracting rebates, chargebacks and post-sale concessions. Before setting a payment rate using invoices, MACs must verify that the drug is not policy-packaged and the per-day cost exceeds the applicable packaging threshold. However, CMS clarified that it, not the MACs, will determine whether the drug is policy-packaged, while MACs will still assess whether the per-day cost exceeds the threshold.</p><p>For drugs subject to ASP reporting, invoice pricing is expected to be temporary (lasting 2-3 quarters). For drugs not subject to ASP reporting (e.g., diagnostic pharmaceuticals), invoice pricing may be used for a longer duration. CMS also noted that the National Uniform Billing Committee has created Value Code 92 to facilitate reporting of drug invoice costs on hospital claims, aligning with this new invoice-based pricing policy.</p><h3 id="proposaltoexpedit">Proposal to Expedite Recoupment Timeline Under 340B Remedy Rule</h3><p>Beginning in CY 2018 through CY 2022, CMS instituted a policy to reduce payments for certain providers for separately payable Part B drugs purchased under the 340B Drug Pricing Program from ASP plus 6% to ASP minus 22.5%. Due to budget neutrality requirements, this nearly 30% payment cut was offset by increasing payments for non-drug services to all hospitals paid under the OPPS by 3.19%. Upon successful litigation led by the AHA, the Supreme Court unanimously ruled that the agency’s policy was unlawful. The agency subsequently finalized a remedy that would repay 340B hospitals in one-time lump sum payments totaling $10.6 billion, as well as seek recoupment of $7.8 billion in funds from all hospitals for the increased payments received for non-drug services. The intended goal was to undo the unlawful policy and restore all providers to the same position as if the policy had never been in place. The agency had finalized a recoupment strategy that would reduce the OPPS conversion factor by 0.5% annually beginning in CY 2026 until the full $7.8 billion was recouped, which was estimated to occur in CY 2041.</p><p>CMS is now proposing to expedite the timeline for this recoupment by adjusting the reduction in the OPPS conversion factor from 0.5% to 2%. As a result, the agency estimates that it will recoup the entire $7.8 billion by CY 2031, or about six years. <strong>Under this approach, the agency estimates an impact of $1.1 billion in reduced payments to all OPPS hospitals in CY 2026.</strong> The agency’s stated rationale for a shorter recoupment timeline is to minimize the impact of potential changes in non-drug services over time and ensure a more equitable impact on all hospitals. Specifically, CMS states “…the longer it takes for us to fully recover the $7.8 billion, the less likely that the relative burden on hospitals from the adjustments will match the relevant benefits those hospitals previously received.” Further, the agency notes that it will not seek any interest or account for any inflation on the $7.8 billion to be recouped.</p><p>CMS also noted that it is considering an alternative proposal that would expedite the timeline even further by adjusting the reduction in the OPPS conversion factor to 5% which would result in the full $7.8 billion being recouped in approximately three years. <strong>Under this approach, the agency estimates an impact of $2.7 billion in reduced payments to all OPPS hospitals in CY 2026.</strong></p><p>The agency also notes that the ASC standard rate setting methodology adopts OPPS payment rates for the device offset amount. Therefore, any changes to the OPPS conversion factor can have an indirect impact on ASC payment rates. To mitigate this impact, the agency proposes not applying any changes to the OPPS conversion factor to the ASC payment system for the device offset amount, as it would not accurately reflect the device costs of covered surgical procedures performed in the ASC setting.</p><h3 id="hospitaldrugacquisition">Hospital Drug Acquisition Cost Survey</h3><p>CMS announced a notice of intent to conduct an acquisition cost survey of all hospitals for covered outpatient drugs. This follows an April 18 Executive Order by President Trump (E.O. 14273), “Lowering Drug Prices by Once Again Putting Americans First,” that directed the HHS secretary to publish in the Federal Register a plan to conduct a hospital acquisition cost survey for covered outpatient drugs. The survey is anticipated to go live starting the end of CY 2025, and responses will be collected into early CY 2026. Results of the survey will be used to set payment rates for covered outpatient drugs in the CY 2027 rulemaking.</p><p>The survey will ask hospitals to report, by individual National Drug Code (NDC), the total number of units purchased and the total acquisition costs net of all rebates (including prompt pay discounts, wholesaler discounts, etc.). For 340B hospitals, the agency wants a separate accounting of the total number of units and total acquisition costs purchased under the 340B program and outside of the 340B program. CMS also stated that it will release the list of NDCs that will be included in the survey in advance of the survey going live. The agency estimates it will take 73.5 hours for a hospital to complete the survey at a cost of approximately $4,000 per hospital.</p><p>The agency is also considering various approaches to account for hospital non-responses to the survey to meet the statutory requirement of a large enough sample size and statistically significant results for its usability in setting and varying payment rates among hospitals. The agency outlines two primary reasons why hospitals may not respond to the survey: 1) because the hospital has minimal acquisition costs, or 2) because the hospital has lower acquisition costs than other hospitals, so it is “withholding its response strategically.” As a result, the agency lays out various options it could use to estimate acquisition costs for a non-responding hospital:</p><ol><li>Assume the lowest average acquisition cost reported by a similar responding hospital.</li><li>Use supplemental data sources such as pricing from the Federal Supply Schedule (FSS) or, for 340B drugs, use 340B ceiling price data from HRSA.</li><li>Apply a percentage of the drug’s ASP (e.g., ASP plus 0%) as the average acquisition cost for each NDC for a non-responding hospital.</li><li>Determine that for certain hospitals, drugs should be packaged as part of an Ambulatory Payment Classification (APC) rather than paid separately. This assumes that a hospital's non-response means it has minimal acquisition costs for certain drugs and could support viewing those drug costs as ancillary or supportive.</li></ol><p>The agency is specifically seeking comments on these and other possible methodologies to interpret hospital non-responses to the survey for the purpose of setting payment rates in future rulemaking.</p><h3 id="addonpayment">Add-on Payment for Radiopharmaceutical Technetium-99m</h3><p>Radioisotopes are widely used in modern medical imaging, particularly for cardiac imaging and predominantly for the Medicare population. Technetium-99m (Tc-99m), the radioisotope used in most of such diagnostic imaging services, is produced through the radioactive decay of molybdenum-99 (Mo-99). The United States makes-up roughly half of the global demand for Mo-99. However, 100% of this radioisotope is produced outside of the United States.</p><p>In the CY 2025 OPPS final rule, CMS noted that the Department of Energy had raised concerns about an issue affecting the domestic supply chain for Mo-99 and Tc-99 that, left unaddressed, could cause payment inequity among outpatient hospital providers. That is, foreign Mo-99 production has historically been subsidized by foreign governments, resulting in prices below the true cost of production. These artificially low, foreign government-subsidized prices have created a disincentive for domestic investments in Mo-99 production infrastructure and a barrier to entry for new producers, including U.S. companies, which in turn has resulted in unreliable production and periodic shortages. Unlike many foreign producers, U.S. companies must price their products high enough to cover the full cost of operating their production facilities. Based in part on these differences in pricing models, U.S. companies have experienced challenges in competing with foreign producers for customers in the past.</p><p>As a result, in the CY 2025 final rule, CMS addressed this payment inequity by establishing a new add-on payment, starting Jan. 1, 2026, of $10 per dose for radiopharmaceuticals that use Tc-99m derived from domestically produced Mo-99. While CMS recognizes that there may not be domestic production of Mo-99 and Tc-99m in CY 2026, it believes it is better to have a regulatory framework for this policy in place for when domestic production of Tc-99m radiopharmaceuticals begins. This is because providers will be knowledgeable about the availability of additional payments for domestically sourced Tc-99m radiopharmaceuticals, and producers of domestic Mo-99 will have certainty that the Medicare OPPS payment policy takes into account the additional costs of domestic production of Mo-99.</p><p>To qualify for this add-on payment, at least 50% of the Mo-99 used in the Tc-99m generator that produces a dose of Tc-99m must be domestically produced. CMS proposes to adopt criteria for “domestically produced Mo-99” developed by the Department of Energy’s National Nuclear Security Administration.</p><p>The agency further proposes establishing a new HCPCS C-code C917X to identify Tc-99m from domestically produced non-Highly Enriched Uranium Mo-99. CMS notes that it expects that hospitals requesting this additional payment will perform standard due diligence to ensure that their claims are supported by internal records, such as payment certification and tracking.</p><h3 id="paymentforintensive">Payment for Intensive Outpatient and Partial Hospitalization Programs</h3><p>Intensive Outpatient Programs (IOP) and Partial Hospitalization Programs (PHP) are distinct outpatient behavioral health treatment programs that involve several hours of hospital-based psychiatric and substance use treatment services without inpatient admission. In the CY 2024 OPPS final rule, CMS established regulatory requirements to implement a new Medicare benefit category for IOP services as directed by the Consolidated Appropriations Act of 2023. Beginning Jan. 1, 2024, CMS established distinct PHP and IOP APC per diem rates, differentiating hospital-based programs and programs delivered by Community Mental Health Centers (CMHCs). Payment rates are based on the geometric mean per diem costs of a service day consisting of either four or more services or three services or fewer. For further details on this methodology, see AHA’s CY 2024 OPPS Final Rule <a href="/advisory/2023-11-17-hospital-outpatient-ambulatory-surgical-center-final-rule-cy-2024">Regulatory Advisory</a>.</p><p>In this rule, CMS proposes payment updates for both hospital-based IOP and PHP based on methodologies established in previous rulemaking. For CY 2026, CMS proposes to continue to use the latest available cost information and CY 2024 OPPS claims to update the payment rates for the APCs finalized in last year’s rule.</p><p>The agency also proposes revising the methodology for calculating IOP and PHP rates for CMHCs, specifically by applying the 40% Medicare PFS Relativity Adjuster. Under this methodology, CMS would establish CMHC IOP and PHP APC payment rates at 40% of the rates for hospital-based IOP and PHP APCs. The agency believes this process would align with that used for other grandfathered (nonexcepted) OPPS services furnished by nonexcepted off-campus HOPDs (i.e., the application of the Medicare PFS Relativity Adjuster) and reflect the differences between PHP and IOP costs in the hospital and CMHC settings. CMS would use the same calculations for CMHC outlier policies as previously finalized.</p><p>The table below shows the proposed APCs and calculated geometric mean per diem costs for CY 2026; this data will be used to inform payment rates and copayments in the final rule.</p><h3>Proposed CY 2026 IOP Geometric Mean Per Diem Costs</h3><table><thead><tr><th>CY 2025 APCs</th><th>Group Title</th><th>Geometric Mean Per Diem Costs</th></tr></thead><tbody><tr><td>5851</td><td>Intensive Outpatient (3 services) for CMHCs</td><td>$136.36</td></tr><tr><td>5852</td><td>Intensive Outpatient (4 or more services) for CMHCs</td><td>$169.84</td></tr><tr><td>5861</td><td>Intensive Outpatient (3 services) for Hospital-based IOPs</td><td>$340.90</td></tr><tr><td>5862</td><td>Intensive Outpatient (4 or more services) for Hospital-based IOPs</td><td>$424.60</td></tr><tr><td>5853</td><td>Partial Hospitalization (3 services) for CMHCs</td><td>$136.36</td></tr><tr><td>5854</td><td>Partial Hospitalization (4 or more services) for CMHCs</td><td>$169.84</td></tr><tr><td>5863</td><td>Partial Hospitalization (3 services) for Hospital-based PHPs</td><td>$340.90</td></tr><tr><td>5864</td><td>Partial Hospitalization (4 or more services) for Hospital-based PHPs</td><td>$424.60</td></tr></tbody></table><hr><h3 id="areawageindex">Area Wage Index</h3><p>The area wage index adjusts payments to reflect differences in labor costs across geographic areas. For CY 2026, CMS proposes to continue its policy of applying a 60% labor-related share to determine hospital outpatient payments.</p><p>In addition, as it has done in previous years, CMS proposes to adopt the final fiscal year (FY) inpatient PPS post-reclassified wage index as the calendar year wage index for the OPPS. Thus, any policies or adjustments finalized in the FY 2026 inpatient PPS final rule would be reflected in the final CY 2026 OPPS wage index. For example, consistent with the FY 2026 inpatient PPS proposed rule, CMS is proposing to discontinue the low-wage index hospital policy under the OPPS for CY 2026 and subsequent years.</p><p>For hospitals paid under the OPPS but not the inpatient PPS, CMS proposes to continue its longstanding policy to assign the wage index that would be applicable if the hospital were paid under the inpatient PPS, based on its geographic location and any applicable wage index adjustments.</p><p>For more information on proposed wage index policies for 2025, see the AHA FY 2026 inpatient PPS proposed rule <a href="/advisory/2025-05-07-inpatient-pps-proposed-rule-fy-2026">Regulatory Advisory</a>.</p><h3 id="ruralschadjustment">Rural SCH Adjustment</h3><p>CMS proposes to continue increasing payments to rural SCHs, including essential access community hospitals, by 7.1% for all services paid under the OPPS, except for separately payable drugs and biologicals, brachytherapy sources, items paid at charges reduced to costs, and devices paid under the pass-through payment policy. The adjustment is budget neutral to the OPPS and applied before calculating outliers and coinsurance.</p><h3 id="cancerhospital">Cancer Hospital Payment Adjustment</h3><p>For CY 2026, CMS proposes to continue to provide additional payments to cancer hospitals so that a cancer hospital’s payment-to-cost ratio (PCR) after the additional payments is equal to the weighted average PCR for the other OPPS hospitals — the target PCR. The change in these additional payments from year to year is budget-neutral.</p><p>For CY 2026, CMS proposes a target PCR of 0.87, the same PCR as non-cancer hospitals using the most recently submitted or settled cost report data, to determine the CY 2026 cancer hospital payment adjustment to be paid at cost report settlement. That is, the payment adjustments would be the additional payments needed to result in a PCR equal to 0.87 for each cancer hospital. Table 7 in the proposed rule shows the estimated hospital-specific payment adjustment for each of the 11 dedicated cancer centers, with increases in OPPS payments for 2026 ranging from 11.9% to 51.6%.</p><h3 id="comprensiveapcs">Comprehensive APCs</h3><p>There are currently 72 comprehensive APCs (C-APCs) that package an expanded number of related items and services on the same claim into a single payment for a comprehensive primary service under the OPPS. Each year, CMS reviews and revises the services within each APC group and the APC assignments under the OPPS.</p><p>After its annual review, CMS does not propose to convert any additional standard APCs to C-APCs in CY 2026. Thus, it proposes that the number of C-APCs for CY 2026 would remain at 72. These 72 C-APCs are listed in Table 2 in the proposed rule and displayed in Addendum J to the proposed rule (available on the CMS website).</p><p>For CY 2026, CMS requests comments regarding making refinements to the current C-APC complexity adjustment criteria. Specifically, CMS seeks feedback on the expansion of code combinations for complexity adjustments and the identification of clinically appropriate service pairings or clusters that are not currently included in complexity adjustment determinations. If there is an expansion of the complexity adjustment criteria, CMS also seeks comments specific to the cost and frequency thresholds in identifying code clusters that accurately reflect complexity and resource consumption code combinations routinely performed in hospital outpatient departments.</p><h4>Exclusion of Cell and Gene Therapies from C-APC Packaging</h4><p>CMS considers all items and services reported on a C-APC claim as integral, ancillary, supportive, dependent, and adjunctive to the primary service, and representative of the comprehensive service components.</p><p>CMS finalized a proposal for CY 2025 and subsequent years to exclude specific cell and gene therapies from C-APC packaging when those therapies are not functioning as integral, ancillary, supportive, dependent, or adjunctive to the primary C-APC service. As such, CMS continues to propose adding product-specific HCPCS codes as they are developed to the C-APC exclusion list. The current list of qualifying cell and gene therapy products is reflected in Table 1 in the proposed rule. The complete list of proposed exclusion categories is available as part of Addendum J with this proposed rule.</p><h3 id="rfi">RFI: Payment Policy for Software as a Service</h3><p>In the proposed rule, CMS issues an RFI on payment policies related to Software as a Service (Saas). The agency acknowledges that technology continues to evolve with the integration of new software-based technologies, like artificial intelligence in outpatient and physician settings. Historically, SaaS services were considered ancillary services, and payment was included in the underlying clinical service. Recently, CMS paid separately for SaaS outpatient services through New Technology APCs, although the payment methodology has not been standardized.</p><p>Based on stakeholder interest in more consistent payment options, the agency seeks feedback on payment policies for SaaS. Specifically, CMS requests comments on the factors for consideration when setting SaaS payment rates, how the agency should assess SaaS costs, data sources, and how CMS can best assess the quality and efficacy of SaaS technologies. CMS issued a similar request for information in the CY 2026 Physician Fee Schedule proposed rule.</p><h3 id="virtualdirect">Virtual Direct Supervision of Certain Rehabilitation and Diagnostic Services Furnished to Hospital Outpatients</h3><p>In CY 2025, CMS extended virtual supervision flexibilities for cardiac rehabilitation, intensive cardiac rehabilitation services and pulmonary rehabilitation services and diagnostic services. Specifically, it allowed direct supervision to be furnished via two-way, audio/visual communication technology (excluding audio only) for these services. In this rule, CMS proposes to extend these virtual supervision flexibilities for OPPS <em>permanently.</em></p><h3 id="proposedelimination">Proposed Elimination of the IPO List</h3><p>The IPO list was created to identify services for which Medicare will make payment only when furnished in the inpatient hospital setting because of the invasive nature of the procedures, the underlying physical condition of the Medicare patient, or the need for at least 24 hours of postoperative recovery time or monitoring before the patient can be safely discharged.</p><p><strong>For CY 2026 and subsequent years, CMS proposes to eliminate the IPO list in a 3-year transition, completing the elimination by Jan. 1, 2029.</strong> While in previous rulemakings, it agreed with commenters that the IPO list was necessary, it has now reconsidered comments from interested parties requesting that the IPO list be eliminated. CMS states that it no longer believes there is a need for the IPO list to identify services that require inpatient care. The agency agrees with past commenters’ views that a physician should use his or her clinical knowledge and judgment, together with consideration of the beneficiary’s specific needs, to determine whether a procedure can be performed appropriately in a HOPD or whether inpatient care is required, subject to the general coverage rules requiring that any procedure be reasonable and necessary. CMS also notes that this change would ensure maximum availability of services to beneficiaries in the outpatient setting.</p><p>Currently, there are 1,731 procedures/services included on the IPO list. <strong>The phase-out of the IPO list over three years would begin in CY 2026 with the removal of 285 services, mostly musculoskeletal, but also including 16 non-musculoskeletal services spanning cardiovascular, lymphatic, digestive, gynecological and endovascular procedures.</strong> Table 69 in the proposed rule presents the complete list of 285 services, including the CPT/HCPCS code, descriptors, proposed payment indicators, and APC. With this proposal, CMS further proposes establishing a 7-level Musculoskeletal Procedures APC series, allowing for the assignment of musculoskeletal procedures removed from the IPO list to an APC with a relevant range of estimated costs.</p><p>Additional related proposals upon which CMS solicits comments include:</p><ul><li>The elimination of the criteria used to determine whether procedures should be removed from the IPO list.</li><li>Whether three years is an appropriate timeframe for the transition.</li><li>Whether there are other services that CMS should consider for removal from the IPO list in the near term.</li><li>Whether to restructure or create any new APCs or C-APCs to allow for OPPS payment for services removed from the IPO list.</li></ul><h4>Effects on Beneficiary Cost Sharing</h4><p>CMS acknowledges stakeholder concerns that removing procedures from the IPO list and allowing them to be performed in outpatient settings under the OPPS could increase financial burdens for Medicare beneficiaries, particularly for complex services. Under current law, cost-sharing for each individual OPPS service (defined as a single APC) is capped at the Part A inpatient deductible for that year. However, some stakeholders have expressed concerns that if a beneficiary receives multiple separately payable outpatient services, the combined cost-sharing could exceed what would have been incurred had the care been provided in an inpatient setting.</p><p>In response, CMS notes that procedures removed from the IPO list are typically surgical and, when paid under OPPS, are usually assigned to a C-APC. This means they are treated as a single episode of care with one payment and one copayment, rather than generating multiple copayments for individual services. As a result, in most cases, beneficiaries should not face multiple copayments, and the inpatient deductible cap would apply to the overall claim.</p><h4>Two-midnight Rule Medical Review Activities Exemptions</h4><p>CMS proposes to continue its existing policy, which indefinitely exempts procedures removed from the IPO list from certain medical review activities related to the two-midnight policy. Per this policy, procedures removed from the IPO list are exempted from site-of-service claim denials and Beneficiary and Family-Centered Care Quality Improvement Organization referrals to Recovery Audit Contractors for noncompliance with the two-midnight rule, and RAC reviews of “patient status” (i.e., site-of-service). This exemption, which began in 2021, would remain in place for each procedure until the secretary determines it is more commonly performed in the outpatient setting than the inpatient setting. CMS is also seeking feedback on whether alternative exemption periods would be more appropriate.</p><p>CMS clarifies that while initial medical review contractors may still review these claims to educate providers, they would not deny claims based on noncompliance with site-of-service requirements under Medicare Part A. In addition, despite pausing some review activities, contractors will continue to respond to beneficiary quality-of-care complaints and assess the medical necessity of services, with the authority to deny claims if the service is found to be unreasonable or not medically necessary.</p><p>CMS believes that its enhanced ability to monitor outpatient safety and care quality supports the continuation of this exemption and is unlikely to negatively impact patient outcomes, but it invites public comments on any potential effects of eliminating the IPO list.</p><h3 id="proposednonopioid">Proposed Non-opioid Policy for Pain Relief Under the OPPS and ASC Payment System</h3><p>The Consolidated Appropriations Act of 2023 requires CMS to unpackage and provide separate payments for three years, beginning Jan. 1, 2025, for non-opioid treatments for pain relief. A non-opioid treatment for pain relief is defined as having “demonstrated the ability to replace, reduce, or avoid intraoperative or postoperative opioid use or the quantity of opioids prescribed in a clinical trial or through data published in a peer-reviewed journal.”</p><p>The agency proposes continuing the policies it finalized in the CY 2025 OPPS to provide temporary additional payments for certain non-opioid treatments for pain relief in the HOPD and ASC settings, without modification, through Dec. 31, 2027, consistent with statute.</p><p>CMS proposes that five drugs and six devices, listed in Table 82 in the proposed rule, would qualify as non-opioid treatments for pain relief. These products would be paid separately in both the HOPD and ASC settings. CMS requests comments and supporting documentation from interested parties on additional products that may qualify for separate payment under this provision.</p><h3 id="paymentforskin">Payment for Skin Substitute Products Under the OPPS</h3><p>Starting in CY 2026, CMS proposes to pay separately for certain groups of skin substitute products as supplies when they are used during a covered application procedure paid under the PFS in the non-facility setting or under the OPPS.</p><p>This proposal includes grouping skin substitutes that are not drugs or biologicals using three Food and Drug Administration (FDA) regulatory categories (PMAs, 510(k)s, and 361 HCT/Ps) to set payment rates. To accomplish this categorization and incorporation into OPPS payment policy, CMS proposes to create three new APCs for HCPCS codes describing skin substitute products organized by clinical and resource similarity and by their FDA regulatory pathway. CMS proposes an initial payment rate of $125.38 for each of the new proposed APCs.</p><p>The proposed APCs are:</p><ul><li>APC 6000 (PMA Skin Substitute Products).</li><li>APC 6001 (510(k) Skin Substitute Products).</li><li>APC 6002 (361 HCT/P Skin Substitute Products).</li></ul><h3 id="hospitaloutpatientoutlier">Hospital Outpatient Outlier Payments</h3><p>Outlier payments are added to the APC amount to mitigate hospital losses when treating high-cost cases. CMS again proposes establishing separate thresholds for hospitals and CMHCs. For CY 2026, CMS proposes setting the projected target for outlier payments at 1% of total OPPS payments. The agency proposes to allocate 0.01% of outlier payments to CMHCs for PHP and IOP outlier payments.</p><p>CMS continues to include both a fixed-dollar and a percentage outlier threshold. In CY 2026, it proposes to decrease the fixed-dollar threshold for outliers to $6,450 from $7,175 for CY 2025 to ensure that outlier spending does not exceed the outlier target.</p><p>Thus, to be eligible for an outlier payment in CY 2026, the cost of a hospital outpatient service would have to exceed 1.75 times the APC payment amount (the percentage threshold) and be at least $6,450 more than the APC payment amount. When the cost of a hospital outpatient service exceeds these applicable thresholds, Medicare would make an outlier payment that is 50% of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment rate.</p><h3 id="transitionalpassthrough">Transitional Pass-through Payments</h3><p>Congress created temporary additional, or “transitional pass-through payments,” for certain innovative medical devices, drugs and biologicals to ensure that Medicare beneficiaries have access to new technologies in outpatient care. For CY 2026, CMS projects that pass-through payments will be 0.59% of total OPPS payments (approximately $100 billion), or $587 million. This includes $571.8 million in pass-through payments for devices and $15.2 million for drugs and biologicals. These payments are implemented in a budget-neutral manner.</p><h3 id="beneficiarycoinsurance">Beneficiary Coinsurance</h3><p>Medicare law provides that the minimum coinsurance is 20% of the OPPS payment amount. The statute also limits a beneficiary’s actual cost-sharing amount for a service to the inpatient hospital deductible for the applicable year, which is yet to be determined for FY 2026. CMS estimates that the aggregate beneficiary coinsurance percentage will be 18.0% for all services paid under the OPPS in CY 2026.</p><h3 id="outpatientquality">Outpatient Quality Reporting Program</h3><p>CMS proposes several updates to the measure set used in the OQR, including the removal of four measures, the replacement of two measures with one new measure, and the modification of one measure to extend voluntary reporting. The table below summarizes finalized and proposed measures for the OQR Measure Set for the CYs 2026-2028 reporting periods, including each measure’s Consensus Based Entity (CBE) identifier (if the measure has been endorsed by a CBE).</p><h3>OQR Measures by Reporting Period</h3><table><thead><tr><th>Measure Name</th><th>CBE #</th><th>CY 2026</th><th>CY 2027</th><th>CY 2028</th></tr></thead><tbody><tr><td>OP-8: MRI Lumbar Spine for Low Back Pain</td><td>Endorsement Removed</td><td>X</td><td>Z</td><td> </td></tr><tr><td>OP-10: Abdomen CT – Use of Contrast Material</td><td>None</td><td>X</td><td>X</td><td>X</td></tr><tr><td>OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non-Cardiac, Low-Risk Surgery</td><td>Endorsement Removed</td><td>X</td><td>Z</td><td> </td></tr><tr><td>OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients</td><td>Endorsement Removed</td><td>X</td><td>X</td><td>Z</td></tr><tr><td>OP-22: Left Without Being Seen</td><td>Endorsement Removed</td><td>X</td><td>X</td><td>Z</td></tr><tr><td>OP-23: Head CT or MRI Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Heat CT or MRI Scan Interpretation within 45 Minutes of ED Arrival</td><td>0661</td><td>X</td><td>X</td><td>X</td></tr><tr><td>OP-29: Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients</td><td>0658</td><td>X</td><td>X</td><td>X</td></tr><tr><td>OP-31: Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery</td><td>1536</td><td>X*</td><td>X*</td><td>X*</td></tr><tr><td>OP-32: Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy</td><td>2539</td><td>X</td><td>X</td><td>X</td></tr><tr><td>OP-35: Admissions and ED Visits for Patients Receiving Outpatient Chemotherapy</td><td>3490</td><td>X</td><td>X</td><td>X</td></tr><tr><td>OP-36: Hospital Visits after Outpatient Surgery</td><td>2687</td><td>X</td><td>X</td><td>X</td></tr><tr><td>OP-37: OAS CAHPSa-e (five individual measures)</td><td>None</td><td>X</td><td>X</td><td>X</td></tr><tr><td>OP-38: COVID-19 Vaccination Coverage Among Health Care Personnel</td><td>3636</td><td>X</td><td>X</td><td>Z</td></tr><tr><td>OP-39: Breast Cancer Screening Recall Rates</td><td>None</td><td>X</td><td>X</td><td>X</td></tr><tr><td>OP-40: ST-Segment Elevation Myocardial Infarction (STEMI) eCQM</td><td>None</td><td>X</td><td>X</td></tr><tr><td>Risk-standardized Patient-reported Outcomes Following Elective Primary Total Hip and/or Total Knee Arthroplasty</td><td>None</td><td>X*</td><td>X*</td><td>X*</td></tr><tr><td>Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults</td><td>3663e</td><td>X*</td><td>X**</td><td>X**</td></tr><tr><td>Patient Understanding of Key Information Related to Recovery After a Facility-Based Outpatient Procedure or Surgery PRO-PM</td><td>4210</td><td>X*</td><td>X</td><td>X</td></tr><tr><td>Hospital Commitment to Health Equity</td><td>None</td><td>Y</td><td>Y</td><td>Z</td></tr><tr><td>Screening for Social Drivers of Health (SDOH)</td><td>None</td><td>Y</td><td>Y</td><td>Z</td></tr><tr><td>Screen Positive Rate for SDOH</td><td>None</td><td>Y</td><td>Y</td><td>Z</td></tr><tr><td>Emergency Care Access & Timeliness</td><td>4625e</td><td> </td><td>Y*</td><td>Y</td></tr></tbody></table><p>X= Measure currently included in OQR</p><p>Y=Measure proposed for adoption</p><p>*=Voluntary reporting</p><p>**=Proposed for voluntary reporting</p><p>Z=Proposed for removal</p><hr><h4>Proposed Measure Removals</h4><p>CMS proposes to remove six measures from the OQR. Each of these measures, its proposed timeline for removal, and CMS’ rationale for its removal is listed below.</p><h5>COVID-19 Vaccination Coverage Among Healthcare Personnel</h5><p>CMS proposes to remove this measure beginning with the CY 2024 reporting period/CY 2026 payment determination. The measure was adopted in the CY 2022 OPPS/ASC final rule. Citing the end of the COVID-19 public health emergency as well as the decreasing number of deaths from the condition, CMS believes the costs and burdens of reporting this measure outweigh the benefits of its continued use in the program. If finalized, hospitals that did not report their CY 2024 reporting period data for this measure would not be penalized in the CY 2026 payment determination.</p><h5>Hospital Commitment to Health Equity</h5><p>CMS proposes to remove this measure beginning with the CY 2025 reporting period. The measure was adopted in the CY 2025 OPPS/ASC final rule. Citing the agency’s priority to re-focus quality reporting programs on measurable clinical outcomes as well as identifying quality measures on topics of prevention, nutrition and well-being, CMS believes that this structural measure results in more burden for hospitals than benefit. If finalized, hospitals that do not report their CY 2025 reporting period data would not be penalized in the CY 2027 payment determination.</p><h5>Screening for and Screen Positive Rate for SDOH</h5><p>CMS proposes to remove these two measures beginning with the CY 2025 reporting period. The measures were adopted in the CY 2025 OPPS/ASC final rule. Data collection for these measures was scheduled to begin voluntarily in 2025 and mandatory in 2026. However, citing the high costs of manual screening processes, data storage, staff training and workflow alterations, as well as the questionable usefulness of aggregated results gleaned by the measures, CMS believes the burdens associated with them outweigh their benefit. If finalized, hospitals would not be required to collect or submit data for these measures.</p><h5>Median Time for Discharged ED Patients and Left Without Being Seen</h5><p>CMS proposes to remove these two measures beginning with the CY 2028 reporting period. As described in the next section, the numerators overlap with those included in the proposed Emergency Care Access & Timeliness measure and would thus be duplicative. In addition, these two measures are informed by chart abstraction, which CMS believes is more burdensome than the proposed eCQM.</p><h4>Proposed Adoption of the Emergency Care Access & Timeliness eCQM</h4><p>CMS proposes to adopt this measure related to ED throughput into the OQR beginning with voluntary reporting in CY 2027 and mandatory reporting in CY 2028 and beyond. An eCQM, the measure is informed by data extracted electronically from the hospital’s EHR.</p><p>The measure calculates the proportion of all ED encounters during a 12-month period where the patient experiences any one of the following:</p><ol><li>Waited more than one hour after arrival in the ED to be placed in a treatment room/area for evaluation.</li><li>Left the ED without being evaluated.</li><li>Boarded in the ED for longer than four hours, as defined by the time between the Decision to Admit order and ED Departure for admitted patients, excluding encounters with ED observation stays.</li><li>Had an ED length of stay longer than eight hours, as defined by the time from ED arrival to ED physical departure, excluding encounters with ED observation stays.</li></ol><p>Raw measure scores are standardized by ED case volume using z-scores; this process provides a comparison to the average for EDs with similar volumes (in strata of 20,000 ED visits). For CMS Certification Numbers with more than one ED, the adjusted scores are combined as a weighted average. Results are stratified into four groups based on age (18 years and older, under 18 years) and whether or not the patient received a principal diagnosis of mental illness (not including substance use disorder diagnoses).</p><p>The measure received conditional endorsement by a CBE in February 2025. The conditions included monitoring of outcomes by the measure developer within three years, such as unintended consequences to patients and providers, and identification of data elements that may address challenges with the measure.</p><h4>Proposed Modification of Excess Radiation Dose eCQM</h4><p>CMS proposes extending the voluntary reporting period for this measure indefinitely. The measure was originally adopted in the CY 2024 OPPS/ASC final rule, beginning with voluntary reporting in CY 2025 and mandatory reporting beginning in CY 2027. CMS makes this proposal in response to concerns from the field about the financial burden and operational infeasibility of translating CT radiology data into standardized eCQM-consumable data for the measure.</p><h4>Proposed Extraordinary Circumstances Exception (ECE) Policy Updates</h4><p>CMS can grant exceptions to data submission deadlines and requirements for quality reporting programs in the event of extraordinary circumstances beyond the control of the facility (hospital, REH or ASC), such as natural disasters. In this rule, CMS proposes to update regulations to specify that the agency can provide an extension of time to comply with data reporting requirements as part of an ECE. Under this proposal, a facility may request an ECE within 30 calendar days of the date of the extraordinary circumstance; this is a change from the current 90-day window for these programs. Additionally, CMS proposes to be able to grant an ECE to facilities that have not requested one if the agency determines that either a systemic CMS problem or an extraordinary circumstance has affected an entire region or locale.</p><h4>RFI: Measure Concepts Under Consideration for Future Years — Well-Being and Nutrition</h4><p>CMS seeks comments on tools and measures that assess overall health, happiness, and satisfaction in life, and optimal nutrition and preventive care. The agency intends to use this input to inform future measure development efforts.</p><h2 id="cy2026asc">CY 2026 ASC Proposed Rule Changes</h2><h3 id="ascpaymentupdate">ASC Payment Update</h3><p>For CYs 2019 through 2023, CMS adopted a policy to update the ASC payment system using the hospital market basket. In light of the impact of the COVID-19 public health emergency on health care utilization, the agency extended this policy through CYs 2024 and 2025. In this proposed rule, the agency proposes extending the utilization of the hospital market basket update as the update factor for the ASC payment system for one additional year, through CY 2026.</p><p>As such, CMS proposes to increase payment rates by 2.4% for ASCs that meet the quality reporting requirements under the ASC QRP. ASCs that fail to meet their quality reporting requirements would have a 2.0 percentage point reduction to this market basket update for CY 2026, resulting in a 0.4% update. The proposed CY 2026 ASC conversion factor is $56.207 for ASCs that successfully meet the quality reporting requirements. For ASCs not meeting quality reporting requirements, CMS proposes a conversion factor of $55.109.</p><h3 id="proposedchangestothelist">Proposed Changes to the List of ASC-covered Surgical Procedures</h3><p>CMS proposes revising the regulatory criteria used to evaluate potential additions to the ASC covered procedures list (CPL). This would include modifying the general standard criteria and eliminating five of the general exclusion criteria and instead moving them into a new section as nonbinding physician considerations for patient safety.</p><p>Utilizing these revised criteria, CMS proposes adding, beginning in CY 2026, 276 procedure codes spanning the musculoskeletal, respiratory, cardiovascular, digestive, genitourinary, endocrine and nervous systems to the ASC CPL. It would also add an additional 271 procedure codes to the ASC CPL that are proposed for removal from the IPO list for CY 2026. These codes, including their long descriptors and proposed payment indicator assignments, are listed in Tables 80 and 81 with this proposed rule.</p><h3 id="ascqualityreporting">ASC Quality Reporting Program</h3><p>CMS proposes adopting the same three health equity-focused measures in the ASCQR as proposed for the OQR and adopting one new measure. In addition, CMS issues a RFI on the development of new frameworks for quality reporting in ASCs.</p><p>The table below summarizes finalized measures for the ASCQR Measure Set for the CY 2025-CY 2026 payment determinations, including each measure’s CBE identifier (if the measure has been endorsed by a CBE).</p><h3>Proposed and Finalized ASCQR Measures by Reporting Year</h3><table><thead><tr><th>Measure Name</th><th>CBE #</th><th>CY 2026</th><th>CY 2027</th><th>CY 2028</th></tr></thead><tbody><tr><td>ASC-1: Patient Burn</td><td>Endorsement Removed</td><td>X</td><td>X</td><td>X</td></tr><tr><td>ASC-2: Patient Fall</td><td>Endorsement Removed</td><td>X</td><td>X</td><td>X</td></tr><tr><td>ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant</td><td>Endorsement Removed</td><td>X</td><td>X</td><td>X</td></tr><tr><td>ASC- 4: All-Cause Hospital Transfer/Admission</td><td>Endorsement Removed</td><td>X</td><td>X</td><td>X</td></tr><tr><td>ASC-9: Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients</td><td>0658</td><td>X</td><td>X</td><td>X</td></tr><tr><td>ASC-11: Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery</td><td>Endorsement Removed</td><td>X*</td><td>X*</td><td>X*</td></tr><tr><td>ASC-12: Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy</td><td>2539</td><td>X</td><td>X</td><td>X</td></tr><tr><td>ASC-13: Normothermia Outcome</td><td>None</td><td>X</td><td>X</td><td>X</td></tr><tr><td>ASC-14: Unplanned Anterior Vitrectomy</td><td>None</td><td>X</td><td>X</td><td>X</td></tr><tr><td>ASC-15a-e: OAS CAHPS (five individual measures)</td><td>None</td><td>X</td><td>X</td><td>X</td></tr><tr><td>ASC-17: Hospital Visits after Orthopedic ASC Procedures</td><td>3470</td><td>X</td><td>X</td><td>X</td></tr><tr><td>ASC-18: Hospital Visits after Urology ASC Procedures</td><td>3366</td><td>X</td><td>X</td><td>X</td></tr><tr><td>ASC-19: Facility-Level 7-Day Hospital Visits after General Surgery Procedures Performed at ASCs</td><td>3357</td><td>X</td><td>X</td><td>X</td></tr><tr><td>ASC-20: COVID-19 Vaccination Coverage Among Health Care Personnel</td><td>3636</td><td>X</td><td>X</td><td>Z</td></tr><tr><td>Risk-Standardized PRO-PM Following Elective THA/TKA in the ASC</td><td>None</td><td>X*</td><td>X*</td><td>X*</td></tr><tr><td>Facility Commitment to Health Equity</td><td>None</td><td>Z</td><td>Z</td><td>Z</td></tr><tr><td>Screening for Social Drivers of Health</td><td>None</td><td>Z</td><td>Z</td><td>Z</td></tr><tr><td>Screen Positive Rate for Social Drivers of Health</td><td>None</td><td>Z</td><td>Z</td><td>Z</td></tr><tr><td>Patient Understanding of Key Information Related to Recovery After a Facility-Based Outpatient Procedure or Surgery</td><td>4210</td><td> </td><td>Y*</td><td>Y*</td></tr></tbody></table><p>X= Measure included</p><p>Y= Measure proposed for adoption</p><p>Z= Measure proposed for removal</p><p>*=Voluntary reporting</p><hr><h4>Proposed Measure Removals</h4><p>CMS proposes to remove the same three health equity-related measures from the ASCQR as proposed for the OQR. Beginning with the CY 2025 reporting period, CMS would no longer use the Facility Commitment to Health Equity, Screening for SDOH, and Screen Positive Rate for SDOH measures. The proposals are identical to those for the OQR (see above).</p><h4>Proposed Adoption of the Patient Understanding of Key Information Related to Recovery After a Facility-Based Outpatient Procedure or Surgery Patient Reported Outcome-Based Performance Measure</h4><p>CMS proposes to adopt this patient-reported outcome measure with voluntary reporting in CY 2027 and CY 2028 and mandatory reporting beginning in CY 2029. The measure was adopted for the OQR in the CY 2025 OPPS/ASC final rule.</p><p>The measure reports the average score of a patient’s ratings on a three-domain, nine-item post-operative survey regarding the clarity of clinical information given before, during, and after an outpatient surgery or procedure. The domains include:</p><ol><li>Applicability to patient needs: whether the information the patient received about their recovery considered their health needs, such as medical conditions, and personal situation, such as transportation needs and financial status (on a scale of yes, somewhat, or no).</li><li>Medications: how clear the information the patient received about their recovery was regarding the purpose, potential side effects, and course of new medications (on a scale of very, somewhat, or not clear or does not apply).</li><li>Daily activities: how clear the information the patient received about their recovery was regarding changes to diet and physical activities, when they could return to work, and when they could drive (on a scale of very, somewhat, or not clear or does not apply).</li></ol><p>Data would be collected via web-based (email or text message) survey administered two to seven days after the surgery or procedure; patients would have 65 days to respond for responses to be considered valid. CMS notes that ASCs could administer the survey directly or work with authorized third-party vendors, although the survey is currently specified to be anonymous. CMS acknowledges the issues with anonymous surveys, including limited ability to follow up and potentially necessitating the use of a third-party vendor. The measure has been tested in English and Spanish and was endorsed by the CBE in 2024.</p><p>ASCs would submit their data in aggregate numerators and denominators by May 15 of the year prior to the applicable payment determination year in CMS’ online system. ASCs would be required to collect at least 200 completed surveys to ensure measure reliability; if the ASC is unable to do so, it would be required to submit data on survey responses from all completed surveys received. If the ASC has a large patient population and anticipates collecting more than 200 completed surveys, it would be allowed to perform random sampling of its patient population to administer the survey; otherwise, ASCs would be required to offer all patients meeting the measure’s denominator specifications the opportunity to complete the survey.</p><h2 id="otherqualityrelated">Other Quality-Related Proposals</h2><h3 id="proposedmodifications">Proposed Modifications to the Overall Star Rating Methodology to Emphasize Safety of Care</h3><p>To calculate a hospital’s Overall Star Rating, CMS uses hospital performance on measures in five categories: Safety, Mortality, Readmissions, Patient Experience, and Timely & Effective Care. To have a score calculated for each category (or “group”), a hospital must report at least three measures in that category; in addition, to have an Overall Star Rating, a hospital must report at least three measures in either the Safety or Mortality group. For details on how the Overall Star Ratings are calculated, see AHA’s 2022 <a href="/2022-07-13-hospital-star-ratings-details-help-you-prepare-july-update?check_logged_in=1">Member Advisory</a>.</p><p>In the CY 2025 OPPS/ASC proposed rule, CMS requested feedback on how it could more heavily emphasize the Safety measure group.</p><p>Based on analysis of the July 2024 calculation of Overall Star Ratings, CMS found that there was generally a strong relationship between hospital performance on measures in the Safety group and the hospital’s Overall Star Rating (i.e., hospitals that had good scores on measures related to patient safety tended to also have higher star ratings, and vice versa). However, the agency found that a small number of hospitals (14, or 0.5 percent of all rated hospitals) had scores in the bottom quartile of performance on Safety measures and still received the highest Overall Star Rating of five stars. CMS interprets this information to mean that it is possible for a hospital to be rated highly while delivering unsafe patient care and thus believes that a methodological change to increase the importance of the Safety measure group is appropriate.</p><p>To address this issue, CMS proposes making methodological updates to the Star Ratings in two phases. First, in 2026, CMS would limit hospitals in the lowest quartile of scores in the Safety group that were eligible to receive a score for that group (that is, hospitals that reported at least three measures in that group) to a maximum of 4 stars. Using this cap on stars as a transition to a permanent change, CMS would implement a blanket reduction in score of 1 star for hospitals in the lowest quartile of scores in the Safety group that were eligible to receive a score beginning in 2027. The minimum possible Overall Hospital Star Rating would remain one star.</p><p>Based on a simulation using 2024 data, just 14 hospitals would be affected by the first stage of the methodological change (cap on Stars), while 459 hospitals (out of 2,847 receiving a Star Rating) would be affected by the second stage (blanket 1-Star reduction). According to CMS’ analysis, affected hospitals would more likely be urban, large (more than 100 beds), and non-specialty; this follows the methodology for the Overall Star Rating, as these hospitals are more likely able to report data for all measures and thus be eligible for scores in the Safety group.</p><h3 id="rehquality">REH Quality Reporting Program</h3><p>The Consolidated Appropriations Act of 2021 established requirements for a new type of provider, the REH, for payment beginning Jan. 1, 2023. As part of this program, an REH must submit quality measure data for the REH Quality Reporting Program (REH QR). In this rule, CMS proposes to remove several of the same measures proposed for removal from the OQR and ASCQR, establish new requirements for REH reporting of eCQMs, and adopt one new eCQM beginning CY 2027. Proposed and Finalized REHQR Measures by Reporting Year</p><table><thead><tr><th>Measure Name</th><th>CBE #</th><th>CY 2026</th><th>CY 2027</th><th>CY 2028</th></tr></thead><tbody><tr><td>Abdomen Computed Tomography (CT) – Use of Contrast Material</td><td>None</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Median Time from ED Arrival to ED Departure for Discharged ED Patients</td><td>None</td><td>X</td><td>X*</td><td>X*</td></tr><tr><td>Risk Standardized Hospital Visits within 7 Days After Hospital Outpatient Surgery</td><td>2687</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Facility 7-Day Risk-Standardized Hospital Visit Rate After Outpatient Colonoscopy</td><td>2539</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Hospital Commitment to Health Equity</td><td>None</td><td>Z</td><td>Z</td><td>Z</td></tr><tr><td>Screening for Social Drivers of Health</td><td>None</td><td>Z*</td><td>Z</td><td>Z</td></tr><tr><td>Screen Positive Rate for Social Drivers of Health</td><td>None</td><td>Z*</td><td>Z</td><td>Z</td></tr><tr><td>Emergency Care Access & Timeliness</td><td>4625e</td><td> </td><td>Y*</td><td>Y*</td></tr></tbody></table><p>X= Measure included in program</p><p>Y= Measure proposed for adoption</p><p>Z= Measure proposed for removal</p><p>*=Voluntary or Optional reporting</p><hr><h4>Proposed Measure Removals</h4><p>CMS proposes to remove the same three health equity-related measures from the REHQR as proposed for the OQR and ASCQR. Beginning with the CY 2025 reporting period, CMS would no longer use the Hospital Commitment to Health Equity, Screening for SDOH, and Screen Positive Rate for SDOH measures. The proposals are identical to those for the OQR (see above).</p><h4>Proposed Adoption of the Emergency Care Access & Timeliness eCQM</h4><p>CMS proposes to adopt this measure related to ED throughput into the REHQR beginning with optional reporting in CY 2027. The same measure is being proposed for adoption in the OQR and is described above.</p><p>Unlike in the OQR, CMS proposes that REHs may choose to report this measure or the Median Time for Discharged ED Patients measure. The measure was tested at only one REH; further, CMS acknowledges the differences in EHR infrastructure across REHs. Accordingly, CMS believes allowing REHs to choose between reporting the new eCQM or the chart-abstracted measure currently used in the program will provide greater flexibility for facilities.</p><h4>eCQM Submission Requirements</h4><p>With the proposed introduction of eCQMs into the REHQR, CMS proposes to establish corresponding eCQM data submission and reporting requirements. These requirements would apply to the proposed Emergency Care Access & Timeliness measure if adopted as proposed, and align with requirements of the OQR, Inpatient Quality Reporting Program, and Medicare Promoting Interoperability Program.</p><p>Policies include:</p><ul><li>Utilization of technology certified to the Office of National Coordinator for Health Information Technology’s health IT most recent certification criteria for all available eCQMs under the REHQR program.</li><li>Submission of eCQM data via the QRDA Category I file format, either by using third parties to submit files on their behalf or by using abstraction or pulling data from non-certified sources to input into certified EHR technology for reporting.</li><li>Submission of zero denominator qualifies as a successful submission.</li><li>Case threshold exemption declaration if an REH’s EHR system has five or fewer outpatient encounters or discharges per quarter or 20 or fewer per year across Medicare and Medicaid.</li><li>Data submission by May 15 of the following year for the applicable reporting period.</li><li>Application of the review and corrections period to eCQM data.</li></ul><h2 id="otherproposals">Other Proposals</h2><h3 id="marketbasedweights">Market-based Weights for the Inpatient PPS</h3><p>In the FY 2021 inpatient PPS final rule, CMS finalized a requirement that hospitals report the median payer-specific charge negotiated by Medicare-severity diagnosis-related group (MS-DRG) with Medicare Advantage organizations (MAOs) on their Medicare cost reports. This information was intended to be used to set the inpatient PPS relative weights beginning in FY 2024. These policies were repealed one year later.</p><p>However, CMS is now proposing to collect market-based payment rate data on the Medicare cost report for cost reporting periods ending on or after Jan. 1, 2026. Hospitals would use the payer-specific negotiated charges from their most recent machine-readable file (MRF) published prior to the submission of their cost report to report the median payer-specific negotiated charge that they negotiated with their MAOs. CMS cites the requirements in sections 1815(a) and 1833(e) of the Act as the authority under which it is requiring this information to be furnished. These provisions provide that no Medicare payments will be made to a provider unless it has furnished the information, as may be requested by the secretary, to determine the amount of payments due to the provider under the Medicare program.</p><p>The proposed rule provides a 4-step process for determining the weighted median payer-specific negotiated charge by MAO by MS-DRG from the hospital’s most recent MRF. If the payer-specific negotiated charge is based on a percentage or algorithm, the hospital would substitute the dollar amount for the percentage or algorithm. Negotiated charges that represent capitated payment are excluded. If the payer-specific negotiated charge is not by MS-DRG, the hospital would reclassify the case to an MS-DRG rate using the MS-DRG Grouper (software that uses information on each claim to classify or group a case to an MS-DRG).</p><p>These requirements would apply to subsection (d) hospitals in the 50 states and Puerto Rico. As such, they would not apply to, for example, critical access hospitals, rural emergency hospitals, children’s hospitals or cancer hospitals. Maryland hospitals would be subject to these reporting requirements once the Maryland Total Cost of Care Model ends.</p><h3 id="changestothehospitalprice">Changes to the Hospital Price Transparency Requirements</h3><p>CMS proposes several changes to the Hospital Price Transparency requirements, specifically related to the machine-readable files (MRFs) and enforcement processes.</p><p>These changes include four new required data elements for payer-specific negotiated charges based on a percentage or algorithm:</p><ul><li>Median allowed amount.</li><li>10th percentile allowed amount.</li><li>90th percentile allowed amount.</li><li>Count of all allowed amounts.</li></ul><p>CMS also proposes two new general data elements:</p><ul><li>The name of the hospital leader responsible for overseeing MRF creation and attesting to the file’s completeness and accuracy.</li><li>The hospital’s National Provider Identifier(s).</li></ul><p>In addition, CMS proposes a new attestation statement and an optional change to the civil monetary penalty process. These changes build on CMS’ previous updates to these requirements, including the substantial changes finalized in the CY 2024 OPPS/ASC rule.</p><h4>New Allowed Amount Data Elements</h4><p>CMS proposes requiring several new MRF data elements in instances when payer-specific negotiated charges are based on a percentage or algorithm, beginning Jan. 1, 2026. The new data elements would be the median allowed amount, the 10th percentile allowed amount, the 90th percentile allowed amount, and a count of all allowed amounts. These data elements would replace the “estimated allowed amount” in the machine-readable files, which was added in the final CY 2024 OPPS/ASC rule and went into effect Jan. 1, 2025. CMS argues these changes are necessary to address ongoing confusion around the “estimated allowed amount,” citing recent audits and public feedback received since the value went into effect. CMS also notes that these changes are consistent with the recent <a href="/advisory/2025-02-26-administration-releases-executive-order-health-care-price-transparency">executive order on price transparency</a>.</p><p>To create more consistency across calculations, CMS proposes requiring a specific methodology to calculate these values, including a set lookback period and data source.</p><h5>Methodology</h5><p>To calculate each of the new data elements, CMS would require hospitals to calculate a <em>total allowed amount,</em> defined as the total amount a hospital was reimbursed by a third-party payer for an item, service or service package. This value is necessary for the calculations but would not need to be encoded in the machine-readable files.</p><p>For the <em>count of allowed amounts,</em> hospitals would encode the total number of non-zero allowed amounts within the claims transaction data set (discussed in more detail below). This count would not include claims where the payment amount is zero, for example, when the service is provided in conjunction with a mix of other services. CMS argues that including the count will provide necessary context for patients and researchers assessing the median, 10th percentile, and 90th percentile data elements.</p><p>For the <em>median, 10th percentile,</em> and <em>90th percentile allowed amounts,</em> the hospital would need to calculate the median, 10th percentile and 90th percentile of the total allowed amount using the count of allowed amounts. Should these calculations fall between two observed allowed amounts (i.e., in instances when the count of allowed amounts is an even number), the encoded value should be the higher of the observed allowed amount values. In other words, if the allowed amounts were: $20, $20, $30, $40, the median allowed amount for this purpose would be $30, not $25. CMS expects that providing this range of numbers will give patients and researchers valuable insights into what to expect in terms of a final payment amount, while keeping the range narrow enough to exclude most outlier payments.</p><p>Should a hospital have no valid claims remittance history for an item, service or service package for a particular payer and plan, they should encode 0 as the <em>count of allowed amounts</em> value and leave the <em>median, 10th percentile and 90th percentile</em> fields blank. In this instance, the hospital should explain why there is insufficient data to calculate the data elements in the <em>additional notes</em> field. In instances when hospitals cannot calculate the value due to a new or revised payer contract, CMS proposes requiring hospitals to encode “new or recently revised payer contract” in the <em>additional notes</em> field.</p><h5>Data Source</h5><p>CMS proposes to require hospitals to use electronic data interchange (EDI) 835 electronic remittance advice (ERA) transaction data to calculate the new data elements.</p><h5>Lookback Period</h5><p>CMS proposes to require hospitals to base their calculations, whenever possible, on EDI 835 ERA transaction data from the period 12 months prior to posting the MRF. However, in instances when the contract terms change during the 12-month period, the lookback period should only include the months that include allowed amounts based on the current contract terms. CMS acknowledges that transaction data can lag at times and notes that hospitals are only expected to use the data available at the time the MRF is created.</p><p>CMS seeks comment on these new data elements, as well as the methodology, data source, and lookback period. In particular, CMS questions whether a range of counts would suffice, rather than encoding the exact count. CMS also ask whether the 10th and 90th percentiles are the correct outer bounds of the allowed amount range to provide a reasonable expectation of variance while eliminating outliers.</p><h4>Updated Attestation Language</h4><p>CMS also proposes updating the required affirmation statement that hospitals must attest to in their machine-readable files, beginning Jan. 1, 2026. The new attestation would state: “The hospital has included all applicable standard charge information in accordance with the requirements of § 180.50, and the information encoded is true, accurate, and complete as of the date in the file. The hospital has included all payer-specific negotiated charges in dollars that can be expressed as a dollar amount. For payer-specific negotiated charges that cannot be expressed as a dollar amount in the machine-readable file or not knowable in advance, the hospital attests that the payer-specific negotiated charge is based on a contractual algorithm, percentage or formula that precludes the provision of a dollar amount and has provided all necessary information available to the hospital for the public to be able to derive the dollar amount, including, but not limited to, the specific fee schedule or components referenced in such percentage, algorithm or formula.”</p><p>If finalized, this affirmation statement would replace the current affirmation statement declaring that a hospital has made a good faith effort to ensure that the machine-readable file data is true, accurate and complete. CMS argues that updating the affirmation statement language would provide greater assurance to CMS auditors, patients, and researchers that the machine-readable files are complete and accurate. CMS also states that this language establishes CMS’ expectation that hospitals include all available information needed to derive payer-specific negotiated rates in their machine-readable files.</p><p>In addition, CMS proposes to add a new general data element to the machine-readable file, <em>attester name,</em> which would be defined as the hospital CEO, president, or alternative senior official designated to oversee the creation of the machine-readable file and attest to its accuracy and completeness.</p><p>CMS notes that the new attestation language and data element do not change monitoring or enforcement of these requirements and that the False Claims Act is outside of the scope of these proposed changes.</p><p>CMS seeks comments on these proposals.</p><h4>New National Provider Identifier (NPI) General Data Element</h4><p>CMS proposes to require hospitals to encode a new NPI general data element in their machine-readable files, beginning Jan. 1, 2026. Specifically, CMS would require hospitals to include any active Type 2 NPI(s) that have a primary taxonomy code beginning with “28” or “27” in their machine-readable file. CMS argues that including a standard identifier would better allow for cross-comparison between the hospital machine-readable files and other data sources, including the insurer machine-readable files. CMS seeks comments on this proposal, including whether another standard identifier should be considered.</p><h4>Changes to Civil Monetary Penalties (CMP)</h4><p>CMS proposes that the CMP amount be reduced by 35% in certain instances when a hospital admits to a price transparency violation and waives its right to an administrative law judge (ALJ) hearing. CMS notes that the CMP reduction would not be available should the violation continue. The right to an ALJ hearing would still be waived, however, and would not be available to the hospital. In addition, hospitals would be ineligible to receive the reduced CMP if the violation is due to the hospital failing to disclose a machine-readable file and/or a shoppable service list or price estimator tool.</p><p>CMS argues that this change would help to expedite CMP payments. In the proposed rule, CMS expresses concerns that 20 out of the 27 hospitals that have received a CMP notice to date have appealed the decision to an ALJ, which has delayed payment of the CMPs. CMS also argues that this opportunity would be beneficial to hospitals as they would incur a lower CMP and would avoid expending resources on the ALJ process.</p><p>CMS seeks comments on this proposal.</p><h4>Burden Estimate</h4><p>CMS estimates that hospitals will only incur a one-time cost of $478.08 per hospital to implement the proposed changes to the machine-readable files. This estimate is based on CMS’ assumption that hospitals have already built the necessary infrastructure to easily create the new required data elements. In total, CMS calculates a total national cost of $3,545,441.28 ($478.08 × 7,416 hospitals).</p><h3 id="medicarepartbdrugs">Medicare Part B Drugs Without a Medicaid National Drug Rebate Agreement</h3><p>CMS proposes that manufacturers or labelers of identified covered outpatient drugs who do not have in effect a Medicaid National Drug Rebate Agreement (NDRA) and who do not enter into one will no longer receive Medicare Part B payment for the drugs, which includes payment made under the OPPS and ASC payment systems. Per statutory requirements, to receive a payment for a covered outpatient drug under Medicare Part B, the manufacturer must have a Medicaid NDRA in effect.</p><p>In their review, CMS identified 20 HCPCS codes describing single-source drugs, biologicals and radiopharmaceuticals that are manufactured by labelers without a Medicaid NDRA. If manufacturers do not enter a Medicaid NDRA, HCPCS codes will be assigned a non-payable status by Medicare (i.e., OPPS status indicator of E1 and ASC payment indicator of B5). CMS lists these single-source drugs, biologicals, and radiopharmaceuticals in Table 66 in the proposed rule. No effective date is specified for this policy.</p><h3 id="graduatemedicaleducation">Graduate Medical Education Accreditation</h3><p>To receive direct graduate medical education (GME) and indirect medical education payments from Medicare, hospitals must be in an “approved medical residency training program.” A GME program may be an approved medical residency training program if it is accredited by the Accreditation Council on Graduate Medical Education (ACGME).</p><p>In this rule, CMS indicates that ACGME has identified “diversity, equity, and inclusion” as a primary value of the organization and a central component of its vision for graduate medical education. The rule states that many such diversity, equity and inclusion programs unlawfully discriminate against Americans based on race. Therefore, the agency says to ensure compliance with federal law, it proposes that accreditors may not require, as part of accreditation, or otherwise encourage institutions to put in place, diversity, equity and inclusion programs that encourage unlawful discrimination based on race, beginning Jan. 1, 2026. In addition, the rule indicates that CMS may recognize other organizations that meet or exceed Medicare’s requirements as accreditors to increase the potential for competition in the accreditation space and improve the quality of the accreditation process.</p><h3 id="allinclusive">All-inclusive Rate Add-on Payment for High-Cost Drugs Provided by Indian Health Services and Tribal Facilities</h3><p>Currently, the Indian Health Service (IHS) and tribal outpatient departments are excluded from the Medicare OPPS and are paid the Medicare outpatient hospital all-inclusive rate (AIR). The IHS determines the AIR from cost reports and updates the rate annually. However, IHS and tribal hospitals have increasingly provided higher-cost drugs along with more complex and expensive services, such as cancer-related services. Therefore, beginning on Jan. 1, 2025, CMS began separately pay IHS and tribal hospitals for high-cost drugs furnished in hospital outpatient departments through an add-on payment in addition to the AIR. CMS proposes to continue this policy in CY 2026.</p><h2 id="furtherquestions">Further Questions</h2><p>CMS will accept comments on the proposed rule until Sept. 15, 2025. The final rule will be published around Nov. 1, and the policies and payment rates will generally take effect Jan. 1, 2026.</p><p>If you have further questions, contact Roslyne Schulman, AHA’s director of outpatient payment policy, at <a href="mailto:rschulman@aha.org?subject=RE: Regulatory Advisory: Hospital Outpatient, Ambulatory Surgical Center Proposed Rule for CY 2026">rschulman@aha.org</a>.</p></div><div class="col-md-4"><a href="/system/files/media/file/2025/07/Regulatory-Advisory-Hospital-Outpatient-Ambulatory-Surgical-Center-Proposed-Rule-for-CY-2026.pdf" target="_blank" title="Click here to download the Regulatory Advisory: Hospital Outpatient, Ambulatory Surgical Center Proposed Rule for CY 2026 PDF."><img src="/sites/default/files/inline-images/Page-1-Regulatory-Advisory-Hospital-Outpatient-Ambulatory-Surgical-Center-Proposed-Rule-for-CY-2026.png" data-entity-uuid="da7c207b-59a3-4297-81e9-d5d5c971be9f" data-entity-type="file" alt="Hospital Outpatient, Ambulatory Surgical Center Proposed Rule for CY 2026 page 1." width="695" height="900"></a></div></div></div> table, th, td { border: 1px solid; } tr:nth-child(even) { background-color: #b9d9eb33; } th { background-color: #002855; color: white; } div.sticky { position: sticky; top: 0; } .meta.custom-lock-position { position: relative; top: 0px; right: inherit; display: block; float: right; } .views-field-title { font-weight: bold; } .views-field-created { color: #000000 !important; } .views-row { margin-bottom: 20px; } .toc-indent { margin-left: 20px; } Mon, 28 Jul 2025 13:43:00 -0500 Advisory /advisory/2025-07-21-ongoing-attack-impacting-microsoft-sharepoint-servers-managed-premises <div class="container"><div class="row"><div class="col-md-8"><p>There is an ongoing attack targeting flaws in Microsoft’s SharePoint server software. Microsoft has <a href="https://msrc.microsoft.com/blog/2025/07/customer-guidance-for-sharepoint-vulnerability-cve-2025-53770/" target="_blank">published guidance</a> on protecting vulnerable systems, and these vulnerabilities only impact on-premises installations of SharePoint. Users whose data is in the Microsoft 365 Cloud are not impacted.</p><p><strong>Please share this Cybersecurity Advisory with your IT and cybersecurity teams. Hospitals should ensure that, if they have potentially vulnerable systems, they are updated as quickly as possible.</strong></p><h2>Background</h2><p>Microsoft was aware of two critical vulnerabilities (CVEs) in their SharePoint server software. These flaws, CVE-2025-53770 and CVE-2025-53771, were patched on July 15. After patching, attackers used two previously unknown (zero-day) flaws, known as ToolShell, to bypass the patches. Microsoft issued additional patches to address these issues in Microsoft SharePoint Server Subscription Edition and Microsoft SharePoint Server 2019. They are still working on a fix for Microsoft SharePoint Server 2016. <strong>Microsoft also advised that if users could not enable recommended malware protection, they should disconnect their servers from the internet until a security update is available.</strong></p><p>Microsoft recommends the following actions:</p><ol><li>Use supported versions of on-premises SharePoint Server.</li><li>Apply the latest security updates, including the July 2025 Security Update.</li><li>Ensure the Antimalware Scan Interface is turned on and configured correctly, with an appropriate antivirus solution such as Defender Antivirus.</li><li>Deploy Microsoft Defender for Endpoint protection or equivalent threat solutions.</li><li>Rotate SharePoint Server ASP.NET machine keys.</li></ol><p>The Cybersecurity and Infrastructure Security Agency also has published a <a href="https://www.cisa.gov/news-events/alerts/2025/07/20/microsoft-releases-guidance-exploitation-sharepoint-vulnerability-cve-2025-53770" target="_blank">bulletin</a> with additional technical details and indicators for technical threat hunters. It is important to note that these vulnerabilities only impact SharePoint instances managed on premises. If your SharePoint instance is in the cloud, you are not impacted by this issue. At this time, we are not aware of any specific hospitals impacted by this vulnerability, but hospitals are encouraged to ensure that any potentially vulnerable systems are updated and malware protections are enabled. Hospitals using potentially vulnerable versions should be aware that Microsoft will end support for Microsoft SharePoint 2016 and 2019 on July 14, 2026, so organizations should begin planning to migrate off these systems.</p><h2>Further Questions</h2><p>For more information, please contact John Riggi, AHA national advisor for cybersecurity and risk, at <a href="mailto:jriggi@aha.org?subject=RE: Cybersecurity Advisory: Ongoing Attack Impacting Microsoft SharePoint Servers Managed on Premises">jriggi@aha.org</a>, or Scott Gee, AHA deputy national advisor for cybersecurity and risk, at <a href="mailto:sgee@aha.org?subject=RE: Cybersecurity Advisory: Ongoing Attack Impacting Microsoft SharePoint Servers Managed on Premises">sgee@aha.org</a>.</p></div><div class="col-md-4"><a href="/system/files/media/file/2025/07/Cybersecurity-Advisory-Ongoing-Attack-Impacting-Microsoft-SharePoint-Servers-Managed-on-Premises.pdf" target="_blank" title="Click here to download the Cybersecurity Advisory: Ongoing Attack Impacting Microsoft SharePoint Servers Managed on Premises PDF."><img src="/sites/default/files/inline-images/Page-1-%20Cybersecurity-Advisory-Ongoing-Attack-Impacting-Microsoft-SharePoint-Servers-Managed-on-Premises.png" data-entity-uuid="4f200a70-53ea-4b66-b7fd-3fee328acec4" data-entity-type="file" alt="Cybersecurity Advisory: Ongoing Attack Impacting Microsoft SharePoint Servers Managed on Premises page 1." width="695" height="900"></a></div></div></div> Mon, 21 Jul 2025 16:59:05 -0500 Advisory /advisory/2025-07-18-detailed-summary-one-big-beautiful-bill-act-obbba-public-law-no-119-21 <div class="container"><div class="row"><div class="col-md-8"><p>President Trump July 4 signed into law the <a href="https://www.congress.gov/bill/119th-congress/house-bill/1?s=1&r=1&q=%7B%22search%22%3A%22%5C%22One+Big+Beautiful+Bill+Act%5C%22%22%7D" target="_blank" title="Congress.gov: H.R.1 - One Big Beautiful Bill Act">OBBBA; Public Law No. 119-21</a>, a sweeping package that enacts many of the administration’s legislative priorities on taxes, border security and energy. The bill includes significant policy changes to Medicaid and the Health Insurance Marketplaces.</p><p>According to the <a href="https://www.cbo.gov/publication/61570" target="_blank">Congressional Budget Office (CBO) score of the bill</a>, the OBBBA will lead to more than $1 trillion in Medicaid and Marketplace cuts and will increase the number of people without health insurance by 10 million in 2034. A significant portion of the savings will result from new limits on the use of Medicaid provider taxes and state-directed payments (SDPs), which have historically allowed hospitals to bridge the chronic underpayments for the care they deliver to Medicaid enrollees. The CBO estimates that the policy changes related to SDPs and provider taxes will save more than $340 billion and result in direct decreases in provider payments.</p><div><h2>Key Highlights</h2><p>Among other provisions, the OBBBA:</p><ul><li>Restricts the ability of states to increase Medicaid provider taxes and phases the existing provider tax cap for expansion states down to 3.5% in FY 2032.</li><li>Lowers the upper payment limit for SDPs to 100% of the total published Medicare rate for expansion states and 110% of the total published Medicare rate in non-expansion states; for grandfathered SDPs, beginning CY 2028, reduces payment rates by 10 percentage points annually until the specified upper payment limit is achieved.</li><li>Increases the frequency of eligibility redeterminations to every six months for Medicaid expansion enrollees beginning CY 2027.</li><li>Requires states to establish work requirements for Medicaid expansion enrollees.</li><li>Establishes a $50 billion rural health transformation program for rural providers that allocates funds to states with an approved application from FYs 2026 through 2030.</li><li>Restricts eligibility for certain non-citizens under Medicaid, Medicare and the Health Insurance Marketplaces.</li><li>Establishes graduate and professional annual and aggregate loan limits for students, including medical students, beginning July 1, 2026.</li></ul></div><h2>AHA Take</h2><p>In a statement sent to the media July 3, upon passage of the bill, AHA President and CEO Rick Pollack stated, “Today is an extremely disappointing and very difficult day for health care in America. Despite months of clearly demonstrating the implications that these Medicaid proposals will have on the patients and communities we serve, especially the most vulnerable populations, Congress has enacted cuts of nearly a trillion dollars to the Medicaid program. No matter how often repeated, the magnitude of these reductions — and the number of individuals who will lose health coverage –- cannot be simply dismissed as waste, fraud, and abuse. The faces of Medicaid include our children, our disabled, our seniors, our veterans, our neighbors, and friends. The real-life consequences of these reductions will negatively impact access to care for all Americans.</p><p>“The AHA remains committed to working with all stakeholders to mitigate the impact of these cuts wherever possible. Our goal is to help ensure hospitals can remain open for their communities, and people can get the care they need when they need it. Our nation’s health and economic future depend on it.”</p><h2>What You Can Do</h2><ul><li>Review the OBBBA provisions with key members of your team to understand the implications for your organization.</li><li>Use the implementation timeline resource available here as well as at the end of this Advisory to keep track of when key provisions go into effect.</li><li>Watch for more information and resources from the AHA.</li></ul><h2>Further Questions</h2><p>If you have further questions, please contact the AHA at <a href="tel:1-800-424-4301">800-424-4301</a>.</p><hr><h2>Table of Contents</h2><p><a href="#subbchapter1">CHAPTER 1 — MEDICAID</a><br><a href="#section71101"><span>Section 71101: Moratorium on Implementation of Medicaid Savings Program Eligibility and Enrollment Rule</span></a><br><a href="#section71102"><span>Section 71102: Moratorium on Implementation of Medicaid, CHIP and Basic Health Program Eligibility and Enrollment Rule</span></a><br><a href="#section71107"><span>Section 71107: Eligibility Redeterminations</span></a><br><a href="#section71109"><span>Section 71109: Alien Medicaid Eligibility</span></a><br><a href="#section71110"><span>Section 71110: Expansion FMAP for Emergency Medicaid</span></a><br><a href="#section71111"><span>Section 71111: Moratorium on Implementation of Rule Relating to Staffing Standards for Long-term Care Facilities Under the Medicare and Medicaid Programs.</span></a><br><a href="#section71112"><span>Section 71112: Reducing State Medicaid Costs</span></a><br><a href="#section71113"><span>Section 71113: Federal Payments to Prohibited Entities</span></a><br><a href="#section71114"><span>Section 71114: Sunsetting Increased FMAP Incentive</span></a><br><a href="#section71115"><span>Section 71115: Provider Taxes</span></a><br><a href="#section71116"><span>Section 71116: State-directed Payments</span></a><br><a href="#section71117"><span>Section 71117: Requirements Regarding Waiver of Uniform Tax Requirement for Medicaid Provider Tax</span></a><br><a href="#section71119"><span>Section 71119: Requirement for States to Establish Medicaid Community Engagement Requirements for Certain Individuals</span></a><br><a href="#section71120"><span>Section 71120: Modifying Cost-sharing Requirements for Certain Expansion Individuals Under the Medicaid Program</span></a><br><a href="#section71121"><span>Section 71121: Making Certain Adjustments to Coverage of Home or Community-based Services Under Medicaid</span></a></p><p><a href="#subbchapter2">CHAPTER 2 — MEDICARE</a><br><a href="#section71201"><span>Section 71201: Limiting Medicare Coverage of Certain Individuals</span></a><br><a href="#section71202"><span>Section 71202: Temporary Payment Increase Under the Medicare Physician Fee Schedule to Account for Exceptional Circumstances</span></a><br><a href="#section71203"><span>Section 71203: Expanding and Clarifying the Exclusion for Orphan Drugs Under the Drug Price Negotiation Program</span></a></p><p><a href="#subbchapter3">CHAPTER 3 — HEALTH TAX</a><br><a href="#section71301"><span>Section 71301: Permitting Premium Tax Credit Only for Certain Individuals</span></a><br><a href="#section71302"><span>Section 71302: Disallowing Premium Tax Credits During Periods of Medicaid Ineligibility Due to Alien Status</span></a><br><a href="#section71303"><span>Section 71303: Requiring Verification of Eligibility for the Premium Tax Credit</span></a><br><a href="#section71304"><span>Section 71304: Disallowing Premium Tax Credit in Case of Certain Coverage Enrolled in During the Special Enrollment Period</span></a><br><a href="#section71305"><span>Section 71305: Eliminating Limitation on Recapture of Advance Payment of Premium Tax Credit</span></a><br><a href="#section71306"><span>Section 71306: Permanent Extension of Safe Harbor for Absence of Deductible for Telehealth Services</span></a><br><a href="#section71307"><span>Section 71307: Allowance of Bronze and Catastrophic Plans in Connection with Health Savings Accounts</span></a><br><a href="#section71308"><span>Section 71308: Treatment of Direct Primary Care Service Arrangements</span></a></p><p><a href="#subbchapter4">CHAPTER 4 — PROTECTING RURAL HOSPITALS AND PROVIDERS</a><br><a href="#section71401"><span>Section 71401: Rural Health Transformation Program </span></a></p><p><a href="#subtitlea">SUBTITLE A — TAX 17</a></p><p><a href="#subachapter4">CHAPTER 4 — INVESTING IN AMERICAN FAMILIES, COMMUNITIES AND SMALL BUSINESSES</a><br><a href="#section70415"><span>Section 70415: Endowment Tax for Universities</span></a><br><a href="#section70416"><span>Section 70416: Executive Compensation</span></a><br><a href="#section70424"><span>Section 70424: Charitable Contributions for Non-itemizers</span></a><br><a href="#section70425"><span>Section 70425: Floor on Charitable Contributions</span></a><br><a href="#section70426"><span>Section 70426: One Percent Floor on Deduction of Charitable Contributions Made by Corporations</span></a></p><p><a href="#subachapter5">CHAPTER 5 — ENDING GREEN NEW DEAL SPENDING, PROMOTING AMERICA-FIRST ENERGY AND OTHER REFORMS</a><br><a href="#section70503"><span>Section 70503: Termination of Qualified Commercial Clean Vehicles Credit</span></a><br><a href="#section70504"><span>Section 70504: Termination of Alternative Fuel Vehicle Refueling Property Credit</span></a><br><a href="#section70507"><span>Section 70507: Termination of Energy Efficient Commercial Buildings Deduction</span></a><br><a href="#section70513"><span>Section 70513: Termination and Restrictions on Clean Energy Investment Credit</span></a></p><p><a href="#subtitleb">SUBTITLE B — LOAN LIMITS</a></p><p><a href="#section81001"><span>Section 81001: Establishment of Loan Limits for Graduate and Professional Students and Parent Borrowers; Termination of Graduate and Professional PLUS Loans</span></a></p><hr><h2>AHA Summary of OBBBA Provisions of Interest to Hospitals and Health Systems</h2><h3 id="subbchapter1">CHAPTER 1 — MEDICAID</h3><h4 id="section71101">Section 71101: Moratorium on Implementation of Medicaid Savings Program Eligibility and Enrollment Rule (Effective from enactment through Sept. 30, 2034)</h4><p>This section prohibits the Department of Health and Human Services (HHS) Secretary from implementing, administering or enforcing the amendments made by the Medicare Savings Program (MSP) rule for 10 years. The MSP is a Medicaid program that covers the cost of Medicare Parts A and B premiums and cost-sharing requirements for low-income older adults. The rule would streamline eligibility determination and enrollment in the MSP and result in an estimated additional 860,000 eligible individuals enrolled in an MSP, according to the Centers for Medicare & Medicaid Services (CMS). While several provisions of the final rule were not due to be fully implemented until 2026, CBO estimates that this provision will result in a $66 billion reduction in federal spending over 10 years.</p><ul><li><strong>Auto-enrollment.</strong> The moratorium will remove the requirement for states to participate in auto-enrollment into the MSP program until 2034. Under the rule, states would have been required to automatically enroll Supplemental Security Income (SSI) recipients in the qualified Medicare beneficiary (QMB) eligibility group of the MSP program. As of Oct.1, 2024, 36 states and the District of Columbia (i.e., Part A “buy-in” states) were required to automatically enroll certain SSI recipients in the QMB eligibility group of MSP. The auto-enrollment policy was optional but recommended for 14 “group payer” states.</li><li><strong>Low-income Subsidy Program Data.</strong> Under the rule, by April 1, 2026, states must use data from the Low-Income Subsidy (LIS) program as an application for MSPs; limit requests to applicants for additional information needed that was not collected by the Social Security Administration for LIS; and align the family size definitions of MSPs and LIS. The moratorium delays these requirements until 2034.</li><li><strong>Self-attestation.</strong> Under the rule, by April 1, 2026, states were required to accept self-attestation for certain types of income and resources (e.g., burial funds, non-liquid resources, face value of whole life insurance, income from interest and dividends). The moratorium delays implementation and enforcement of these requirements until 2034.</li></ul><h4 id="section71102">Section 71102: Moratorium on Implementation of Medicaid, CHIP and Basic Health Program Eligibility and Enrollment Rule<br>(Effective from enactment through Sept. 30, 2034)</h4><p>The section prohibits the HHS secretary from implementing, administering or enforcing the amendments made by the provisions of the eligibility and enrollment rule for 10 years. The rule was intended to streamline eligibility processes for Medicaid applicants and beneficiaries and make it easier for eligible beneficiaries to apply for and maintain coverage. Several key provisions have not yet been implemented, as states were required to be in full compliance with the provisions of the rule by June 2027. CBO estimates that this provision will result in a $55.9 billion reduction in federal spending over 10 years.</p><ul><li><strong>Enrollment and Renewal Requirements.</strong> The law removes the requirement (until 2034) that states must conduct beneficiary renewals for elderly, blind or disabled beneficiaries and individuals who receive long-term services and supports (i.e., non-modified adjusted gross income (MAGI) populations) no more than once every 12 months, use prepopulated forms for renewals, eliminate mandatory in-person interviews at application and renewal, provide beneficiaries with 30 days to return a signed renewal form or to confirm a change in circumstances, and provide a 90-day reconsideration period for terminations tied to a failure to respond.</li><li><strong>Eligibility Verification.</strong> The law removes the requirement (until 2034) that if the information provided by an individual is reasonably compatible with the information returned from an asset verification system, states are not allowed to request further information verifying assets for the individual. Further, it rolls back the guidance that verifications of birth and U.S. citizenship with the state's vital statistics records and the Department of Homeland Security's Systematic Alien Verification Entitlements (SAVE) system do not require additional proof of identity.</li><li><strong>Lifetime Children’s Health Insurance Program (CHIP) Limits.</strong> The law delays, until 2034, the prohibition on states from imposing annual and/or lifetime limits on CHIP benefits.</li><li><strong>Medicaid and CHIP Program Transitions.</strong> The law removes the requirement (until 2034) that Medicaid and CHIP agencies make eligibility determinations on behalf of the other program, accept eligibility determinations made by these programs (except for Medicaid eligibility determinations that are not made on the basis of MAGI), and transition individuals to the program for which they are determined eligible based on available data.</li><li><strong>CHIP Lock Out Period.</strong> The law delays the implementation and enforcement of the requirement that states allow CHIP beneficiaries to remain enrolled or re-enroll in coverage without a lock-out period due to failure to pay premiums.</li></ul><h4 id="section71107">Section 71107: Eligibility Redeterminations<br>(Effective Jan. 1, 2027)</h4><p>The section requires states (i.e., the 50 states and the District of Columbia) to redetermine eligibility once every six months for beneficiaries enrolled through the Medicaid expansion eligibility pathway, beginning in calendar year (CY) 2027. Currently, states are required to conduct redeterminations every 12 months for populations whose eligibility is determined on the basis of MAGI, including expansion adults. Non-expansion enrollees will continue to have their eligibility redetermined at least every 12 months. The HHS secretary must issue guidance related to implementing the rule no later than 180 days after enactment, or Dec. 31, 2025. The bill appropriates $75 million to CMS for fiscal year (FY) 2026 for implementation of the provisions. CBO estimates that this provision will result in a $62.5 billion reduction in federal spending over 10 years.</p><h4 id="section71109">Section 71109: Alien Medicaid Eligibility<br>(Effective Oct. 1, 2026)</h4><p>The section restricts eligibility for Medicaid and CHIP to the following groups, based on the modified definition of “qualified alien”: legal permanent residents, certain Cuban immigrants and Compact of Free Association migrants lawfully residing in the United States. Under this section, non-citizens, including refugees, asylees and humanitarian enrollees, are no longer eligible for coverage. The bill appropriates $15 million to CMS for FY 2026 for implementation of the provisions. CBO estimates that this provision will result in a $6.2 billion reduction in federal spending over 10 years.</p><h4 id="section71110">Section 71110: Expansion FMAP for Emergency Medicaid<br>(Effective Oct. 1, 2026)</h4><p>The section limits the Federal Medical Assistance Percentage (FMAP) to the state’s traditional FMAP for emergency Medicaid services provided to aliens who, except for their immigration status, would qualify for Medicaid expansion. Prior to this change, states could receive a 90% federal match for such services when provided to an individual who would otherwise be eligible for Medicaid expansion. The provision has no impact on the statutory requirement under the Emergency Medical Treatment and Labor Act (EMTALA) that requires hospitals to provide emergency care for individuals regardless of their immigration or coverage status. The bill appropriates $1 million in FY 2026 for implementation of the provision. CBO estimates that this provision will result in a $28.2 billion reduction in federal spending over 10 years.</p><h4 id="section71111">Section 71111: Moratorium on Implementation of Rule Relating to Staffing Standards for Long-term Care Facilities Under the Medicare and Medicaid Programs.<br>(Effective from enactment through Sept. 30, 2034.)</h4><p>The section prohibits HHS from implementing the Minimum Staffing Standards for long-term care (LTC) facilities and the Medicaid Institutional Payment Transparency Reporting regulation for 10 years. Within two years of the final rule publication (May 10, 2026), non-rural LTC facilities would have had to comply with minimum nurse staffing requirements, which include 3.48 hours of total direct nursing care per resident per day. The rule also requires that a registered nurse be on-site 24 hours per day, seven days per week. Through this provision, the minimum staffing standards will not be implemented until 2034. CBO estimates that this provision will result in a $23.1 billion reduction in federal spending over 10 years.</p><h4 id="section71112">Section 71112: Reducing State Medicaid Costs<br>(Effective Jan. 1, 2027)</h4><p>The section limits the timeframe for retroactive Medicaid eligibility to 30 days prior to the application date for Medicaid expansion enrollees, and 60 days prior to the application date for all other enrollees. Additionally, retroactive CHIP eligibility is limited to 60 days prior to the application date. Currently, states have the option to allow retroactive eligibility 90 days prior to the application date for all enrollees. The provision applies to applications submitted on or after Jan. 1, 2027. CBO estimates that this provision will result in a $4.2 billion reduction in federal spending over 10 years.</p><h4 id="section71113">Section 71113: Federal Payments to Prohibited Entities<br>(Effective on enactment through July 4, 2026)</h4><p>The section prohibits states from receiving federal matching funds for services rendered by providers who provide abortions (other than Hyde Amendment exceptions) and received more than $800,000 in Medicaid payments (including both federal and state reimbursements) in 2023. This prohibition of federal funds applies for one year, beginning on the date of enactment and ending July 4, 2026. The bill appropriates $1 million for FY 2026 for the implementation of the provisions. CBO estimates that this provision will result in a $53 million increase in federal spending over 10 years.</p><ul><li><strong>Prohibited Entities.</strong> Prohibited entities include not-for-profit, essential community providers primarily engaged in family planning services, reproductive health and related medical care. An essential community provider is defined as a provider that serves low-income and medically underserved individuals, which include 340B providers, public or nonprofit entities; entities based at an institution of higher learning whose primary purpose is to provide health care services to students of that institution; a state-owned, governmental or not-for profit family planning service site that does not receive federal funding under special programs; or an Indian health care provider.</li><li><strong>Hyde Amendment Exceptions.</strong> The law allows for exceptions for the use of federal funds for abortion, including for pregnancies that result from rape or incest, or pregnancies wherein a woman requires an abortion due to a physical disorder, physical injury or physical illness, including a life-endangering physical condition arising from the pregnancy that would place the woman in danger of death.</li></ul><h4 id="section71114">Section 71114: Sunsetting Increased FMAP Incentive<br>(Effective Jan. 1, 2026)</h4><p>The section repeals the ability for non-expansion states to receive a temporary 5 percentage point increase to a state’s traditional FMAP if they expand Medicaid. The temporary enhancement would have been applied to a states’ traditional population and would have been available for eight quarters upon expansion. Beginning Jan. 1, 2026, the incentive will no longer be available to the 10 states that have not adopted Medicaid expansion. CBO estimates that this provision will result in a $13.6 billion reduction in federal spending over 10 years.</p><h4 id="section71115">Section 71115: Provider Taxes<br>(Provider tax rate freeze begins Oct. 1, 2026; reduction for expansion states begins Oct. 1, 2027)</h4><p>Beginning in federal FY 2027, the law prohibits all states from increasing the provider tax hold harmless threshold above the rate that was in place on the date of enactment. The law also incrementally reduces the hold harmless threshold for provider taxes in expansion states beginning in federal FY 2028. These changes effectively freeze provider tax rates to the rates that were in place on the date of enactment for all states, but there appears to be some flexibility for states to make temporary changes until FY 2027, at which point the rates would revert to the provider tax rates that were in place on the date of enactment. The bill appropriates $20 million for FY 2026 to CMS for implementation of the provisions. CBO estimates that this provision will result in a $191.1 billion reduction in federal spending over 10 years.</p><ul><li><strong>Non-expansion States.</strong> Beginning in federal FY 2027, the law freezes the hold harmless threshold to the existing provider tax rate imposed by a state or local unit of government as of the date of enactment (July 4, 2025). For states that have not enacted or do not impose provider taxes as of the date of enactment, the hold harmless threshold for FY 2027 and subsequent years is 0%.</li><li><strong>Expansion States.</strong> In addition to the freeze described above, the law reduces the hold harmless threshold for expansion states beginning in FY 2028 by 0.5 percentage points annually. The hold harmless threshold will be the lower of the existing percentage in a state or: 5.5% in federal FY 2028, 5.0% in federal FY 2029, 4.5% in federal FY 2030, 4.0% in federal FY 2031, and 3.5% for federal FY 2032 and subsequent years. Provider taxes imposed on nursing homes and intermediate care facilities will remain frozen at the rates that were in place as of enactment. The section defines expansion states as any state that provides Medicaid expansion coverage beginning on Jan. 1, 2014, or thereafter.</li></ul><h4 id="section71116">Section 71116: State-directed Payments<br>(SDP cap effective on enactment; reduction effective by the rating period on or after Jan. 1, 2028)</h4><p>This section establishes an upper payment limit for state-directed payments — 100% of the total published Medicare rate in expansion states and 110% of the total published Medicare rate in non-expansion states. The total published Medicare rate is defined as provided in 438.6(a) of title 42 of the Code of Federal Regulations or any future regulation that replaces it. The bill appropriates $7 million for each fiscal year between 2026 and 2033 for the implementation of the provision. CBO estimates that this provision will result in a $149.4 billion reduction in federal spending over 10 years.</p><ul><li><strong>Grandfathering.</strong> SDPs approved (or where there was a good faith effort to be approved) by May 1, 2025, and SDP payments for rural hospitals approved (or where there was a good faith effort to be approved) by the date of enactment (July 4, 2025) can continue at that rate (subject to HHS approval). Rural hospitals are defined as those located in a rural area, treated as being in a rural area, or located in a rural census tract, as well as critical access hospitals, sole community hospitals, Medicare-dependent hospitals, low-volume hospitals and rural emergency hospitals. Beginning with the rating period on or after Jan. 1, 2028, all grandfathered SDPs would be reduced by 10 percentage points annually until the specified Medicare payment rate limit is achieved.</li></ul><h4 id="section71117">Section 71117: Requirements Regarding Waiver of Uniform Tax Requirement for Medicaid Provider Tax<br>(Effective from enactment)</h4><p>This section modifies the requirements regarding the waiver of uniformity available for provider taxes in the 50 states and the District of Columbia and, specifically, whether a state’s non-uniform provider tax is considered “generally redistributive.” The HHS secretary will determine an applicable transition period (up to three fiscal years) for taxes considered not generally redistributive. CBO estimates that this provision will result in a $34.6 billion reduction in federal spending over 10 years.</p><ul><li><strong>Generally Redistributive Requirement.</strong> The section clarifies that any class of provider tax will not be considered generally redistributive if lower-volume Medicaid health care entities are taxed at a lower rate than higher-volume Medicaid health care entities, high Medicaid volume health care entities are taxed more heavily than non-Medicaid health care entities, or if the tax establishes any target or exclusion related to a health care entity’s Medicaid participation status. Currently, states may obtain a waiver of non-uniform tax requirements if they meet the statistical test established by CMS to determine whether a tax is generally redistributive. This provision expands the definition of generally redistributive.</li><li><strong>Medicaid Taxable Unit Definition.</strong> The section establishes a new definition for a “Medicaid taxable unit,” which includes any unit that is used as the basis for payment under Medicaid (e.g., Medicaid bed days), Medicaid revenue, costs associated with Medicaid (e.g., claims or expenditures), or other units associated with Medicaid.</li></ul><h4 id="section71119">Section 71119: Requirement for States to Establish Medicaid Community Engagement Requirements for Certain Individuals<br>(Effective Jan. 1, 2027)</h4><p>The section establishes that states (i.e., the 50 states and the District of Columbia) must require certain nonpregnant, nondisabled adults applying for or enrolled in Medicaid expansion coverage to meet community engagement requirements (work requirements) beginning Dec. 31, 2026. The bill provides $200 million in FY 2026 grants for state implementation and $50 million for federal administration. CBO estimates that this provision will result in a $325.6 billion reduction in federal spending.</p><ul><li><strong>Qualifying Activities.</strong> Medicaid expansion enrollees must work or engage in qualifying activities for no less than 80 hours per month. An enrollee will be compliant with the requirement if they meet at least one or a combination of the following qualifying activities each month: work, community service, participation in a work program, or enrollment in an educational program at least half-time. An individual also may meet the requirement if they have a monthly income not less than the federal minimum wage (under the Fair Labor Standards Act) multiplied by 80 hours, or if they are a seasonal worker with an average monthly income over the previous six months that meets the same minimum income threshold (i.e., federal minimum wage multiplied by 80 hours).</li><li><strong>Mandatory Exceptions.</strong> States must treat an applicable individual as having met community engagement requirements for a given month and may choose not to require proof of meeting the requirement if the individual is a specified excluded individual, under the age of 19, enrolled in Medicare Parts A or B, or an inmate in a public institution. A specialized excluded individual is defined as an individual who meets any of the following criteria:<ul><li>An Indian or Urban Indian or eligible for Indian Health Service benefits.</li><li>The parent, guardian, caretaker relative or family caregiver (i.e., as defined in the RAISE Family Caregivers Act) of a child under 14 or a disabled individual.</li><li>A veteran with a disability.</li><li>Medically frail or has special medical needs (as defined by the secretary).</li><li>A member of a household that receives Supplemental Nutrition Assistance Program (SNAP) benefits.</li><li>Participating in a drug addiction or alcohol treatment program.</li><li>Pregnant or entitled to postpartum medical assistance.</li></ul></li><li><strong>Optional Exception for Short-term Hardship Events.</strong> States have the option to determine that an individual has met engagement requirements for a given month if they experience a short-term hardship event. Short-term hardship events include receiving inpatient hospital, nursing facility, intermediate care, and/or inpatient psychiatric hospital services; residing in a county where an emergency or disaster is declared; or residing in an area with a high unemployment rate. Individuals who themselves or their dependents must travel outside of their community to receive medical services may also qualify for a short-term hardship exception.</li><li><strong>State Exemptions.</strong> Subject to HHS approval, a state may apply for and receive temporary exemptions from compliance if it demonstrates a good-faith effort to comply with the provision. Exemptions may be granted until no later than Dec. 31, 2028, and cannot be renewed. The secretary may rescind the exemption at any time if reporting requirements are not met or the state fails to make a continued good-faith effort toward compliance.</li><li><strong>Non-compliance.</strong> If an individual is not compliant with community engagement requirements, they will have 30 days to become compliant and will continue to receive Medicaid benefits during that period. If the individual does not come into compliance, the state may deny the individual’s application or disenroll the individual from Medicaid no later than the end of the month following the month that the 30-day period ends. An individual who is disenrolled for failure to comply is not eligible for subsidized Marketplace coverage.</li><li><strong>Conflicts of Interest.</strong> Medicaid Managed Care Organizations (MCOs) and other contractors with a financial relationship with a Medicaid MCO are prohibited from administering community engagement requirements.</li></ul><h4 id="section71120">Section 71120: Modifying Cost-sharing Requirements for Certain Expansion Individuals Under the Medicaid Program<br>(Effective Oct. 1, 2028)</h4><p>This section requires Medicaid expansion enrollees with incomes above 100% of the federal poverty level (FPL) to pay up to $35 in cost sharing per service beginning Oct. 1, 2028. Cost sharing for non-emergency services provided in a hospital emergency department may exceed $35. The provision excludes certain services, including primary care, pregnancy-related services, and mental health and substance use disorder services. Additionally, certain services provided by federally qualified health centers, behavioral health clinics and rural health clinics are excluded. Total cost sharing may not exceed 5% of the family income of the family involved, as applied on a quarterly or monthly basis, as specified by the state. Currently, states have the option to set cost-sharing requirements for certain enrollees above 100% FPL, which can be applied to institutional care, non-institutional care, non-emergency use of the ER, and prescription drug services and supplies. The provision would make cost sharing mandatory for specified expansion enrollees and would not impact existing cost-sharing policies states may have in place for other populations. The bill appropriates $15 million for FY 2026 for the implementation of the provision. CBO estimates that this provision will result in a $7.4 billion reduction in federal spending over 10 years.</p><h4 id="section71121">Section 71121: Making Certain Adjustments to Coverage of Home or Community-based Services Under Medicaid<br>(Effective July 1, 2028)</h4><p>The section provides states with the option to pursue a standalone waiver under section 1915(c) and expand access to home and community-based services (HCBS). A waiver may be approved for an initial term of three years and may be extended for additional five-year periods. States are required to establish needs-based criteria (subject to the secretary’s approval) for determining whether an individual requires the level of care provided in a hospital, nursing facility or intermediate care facility. States may use funding to support HCBS waivers under section 1115. States may not make payments to a third party on behalf of an individual HCBS practitioner for health insurance benefits, skills training and other benefits customary for employees. The bill appropriates $50 million for FY 2026 to the HHS secretary for implementation of the provisions. Further, the bill appropriates $100 million for FY 2027 for making payments to states delivering HCBS. CBO estimates that this provision will result in a $6.6 billion increase in federal spending over 10 years.</p><h3 id="subbchapter2">CHAPTER 2 — MEDICARE</h3><h4 id="section71201">Section 71201: Limiting Medicare Coverage of Certain Individuals<br>(Effective 18 months from enactment)</h4><p>The section restricts eligibility for Medicare for non-citizens to the following groups: legal permanent residents, certain Cuban immigrants and Compact of Free Association migrants lawfully residing in the United States. CBO estimates that this provision will result in a $5.1 billion reduction in federal spending over 10 years.</p><h4 id="section71202">Section 71202: Temporary Payment Increase Under the Medicare Physician Fee Schedule to Account for Exceptional Circumstances<br>(Effective Jan. 1, 2026)</h4><p>This section provides a set update to the Physician Fee Schedule of 2.5% for calendar year (CY) 2026 only. There is no adjustment for CY 2025. CBO estimates that this provision will result in a $1.9 billion increase in federal spending over 10 years.</p><h4 id="section71203">Section 71203: Expanding and Clarifying the Exclusion for Orphan Drugs Under the Drug Price Negotiation Program<br>(Effective Jan. 1, 2028)</h4><p>This section expands and clarifies the exemption for orphan drugs under the Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program. Under the IRA, certain drugs designated for rare diseases — known as orphan drugs — were excluded from mandatory price negotiations under Medicare; however, that was limited to orphan drugs with one rare disease or condition indication. This section now expands this exclusion to allow for orphan drugs that are indicated for one or more rare diseases or conditions. This section is set to take effect on Jan. 1, 2028. CBO estimates that this provision will result in a $4.9 billion increase in federal spending over 10 years.</p><h3 id="subbchapter3">CHAPTER 3 — HEALTH TAX</h3><h4 id="section71301">Section 71301: Permitting Premium Tax Credit Only for Certain Individuals<br>(Effective Jan. 1, 2027)</h4><p>Prior law allowed lawfully present immigrants to access premium tax credits for Marketplace coverage if other eligibility criteria were met. At the time, “lawfully present” was defined as immigrants with permanent residence status, humanitarian statuses or circumstances (e.g., immigrants with Temporary Protected Status, refugees, asylees, victims of trafficking), and those with valid non-immigrant visas.</p><p>This section amends the premium tax credit eligibility criteria to exclude most lawfully present immigrants. Beginning in 2027, only the following groups of non-citizens will be eligible for premium tax credits: legal permanent residents, certain Cuban immigrants, and immigrants residing in the United States under the Compact of Free Association. CBO estimates that this provision will result in a $69.8 billion reduction in federal spending over 10 years.</p><h4 id="section71302">Section 71302: Disallowing Premium Tax Credits During Periods of Medicaid Ineligibility Due to Alien Status<br>(Effective Jan. 1, 2026)</h4><p>Prior law allowed undocumented immigrants who reported income below 100% of the FPL and were in their five-year Medicaid waiting period due to immigration status to be eligible for premium tax credits for Marketplace coverage. This section removes that provision, thereby disallowing access to premium tax credits for this population. CBO estimates that this provision will result in a $49.5 billion reduction in federal spending over 10 years.</p><h4 id="section71303">Section 71303: Requiring Verification of Eligibility for the Premium Tax Credit<br>(Effective Jan. 1, 2028)</h4><p>This section requires those receiving premium tax credits for Marketplace coverage to verify their tax credit eligibility annually. This will require enrollees to resubmit on an annual basis: household income, family size, immigration status, other health care coverage and eligibility, place of residence, and other information deemed necessary by the HHS secretary.</p><p>Until premium tax credit eligibility is verified, enrollees will not have access to premium tax credits. They can enroll in Marketplace coverage while they wait, but will be required to pay the full premium amount.</p><p>This section also effectively ends the automatic renewal process for individuals receiving tax credits, which allowed previous year enrollees to passively reenroll by not actively disenrolling or switching plans. In 2025, nearly 11 million people enrolled through this process, which is over half of all returning enrollees.<a href="#fn1"><sup>1</sup></a> CBO estimates that this provision will result in a $36.9 billion reduction in federal spending over 10 years.</p><h4 id="section71304">Section 71304: Disallowing Premium Tax Credit in Case of Certain Coverage Enrolled in During the Special Enrollment Period<br>(Effective Jan. 1, 2026)</h4><p>Most marketplace enrollees must enroll in coverage during the annual open enrollment period. However, some enrollees qualify to enroll outside of the open enrollment during a special enrollment period (SEP). Typically, enrollees must experience a qualifying life event, such as a move, job loss, marriage or new baby, to enroll during a SEP. However, recently, marketplaces had a monthly SEP that all low-income enrollees qualified for, regardless of other changes in their personal circumstances.</p><p>This section prohibits the reestablishment of the monthly low-income SEP by prohibiting individuals from receiving premium tax credits if they enroll in health coverage on the Marketplace through a SEP based on their income rather than a qualifying life event. CBO estimates that this provision will result in a $39.5 billion reduction in federal spending over 10 years.</p><h4 id="section71305">Section 71305: Eliminating Limitation on Recapture of Advance Payment of Premium Tax Credit<br>(Effective Jan. 1, 2026)</h4><p>Premium tax credit amounts are based on expected income for the enrollment period. Previously, if an enrollee received excess premium tax credits due to their actual income exceeding their expectations, they were required to repay some or all the excess during the tax filing process. For most enrollees, there was a repayment cap based on household income.</p><p>This section removes the repayment cap so that all premium tax credit recipients are required to pay the full amount of the excess, regardless of their income. In addition to those with incomes that exceed their expectations, those with incomes below 100% of the FPL who expected to make above 100% of the FPL will have to repay the full premium tax credit amount. This is because household income must be at least 100% of the federal poverty level to be eligible for premium tax credits. CBO estimates that this provision will result in a $17.3 billion reduction in federal spending over 10 years.</p><h4 id="section71306">Section 71306: Permanent Extension of Safe Harbor for Absence of Deductible for Telehealth Services<br>(Effective Jan. 1, 2025)</h4><p>The section provides a safe harbor to allow telehealth and other remote care services to be provided pre-deductible for patients with high-deductible health plans. CBO estimates that this provision will result in a $4.3 billion reduction in federal revenue over 10 years.</p><h4 id="section71307">Section 71307: Allowance of Bronze and Catastrophic Plans in Connection with Health Savings Accounts<br>(Effective Jan. 1, 2026)</h4><p>This section changes the definition of high-deductible health plans to include bronze and catastrophic individual Marketplace plans. This allows bronze and catastrophic plan enrollees to contribute to health savings accounts — a tax-advantaged savings account available to high-deductible health plan enrollees to use for certain health care expenses. CBO estimates that this provision will result in a $3.6 billion reduction in federal revenue over 10 years.</p><h4 id="section71308">Section 71308: Treatment of Direct Primary Care Service Arrangements<br>(Effective Jan. 1, 2026)</h4><p>The section allows individuals in high-deductible health plans to enroll in direct primary care service arrangements and to use their health savings accounts for payment. Through the provision, fees paid for direct primary care service arrangements may be treated as qualified medical expenses as eligible under health savings accounts. Monthly fees may not exceed $150 for an individual or $300 for more than one individual. Certain primary care services are excluded, such as procedures requiring anesthesia, prescription drugs and lab services not administered in an ambulatory primary care setting. CBO estimates that this provision will result in a $2.8 billion reduction in federal revenue over 10 years.</p><h3 id="subbchapter4">CHAPTER 4 — PROTECTING RURAL HOSPITALS AND PROVIDERS</h3><h4 id="section71401">Section 71401: Rural Health Transformation Program<br>(Effective from enactment)</h4><p>The section establishes a rural health transformation program that appropriates $50 billion in funding for rural providers, with $10 billion allocated each year in FYs 2026-2030.</p><ul><li><strong>Application.</strong> States will need to submit a one-time application to CMS to be eligible for these funds. CMS must approve or deny all applications by Dec. 31, 2025. (Note: CMS has not yet released the application.) The application must include a rural health transformation plan that describes how the funds will support rural residents in the state, including but not limited to ways to improve access to hospitals and other providers, strategies to manage hospitals’ long-term financial solvency and operating models, and certification that none of the funds will be used by the state to finance the non-federal share of expenditures.</li><li><strong>Funding Distribution.</strong> Only the 50 states are eligible for these funds (i.e., not the District of Columbia or U.S. territories). The $50 billion in funding will be distributed from FYs 2026 through 2030, with $10 billion distributed each year. For each fiscal year, 50% of the funds will be equally distributed among all the states with an approved application. The other 50% of the funds will be distributed in a method determined by CMS; however, CMS must allot funds to at least a quarter of the states with an approved application. The law requires CMS to consider the following as its allocation methodology: the percentage of the state population that is located in rural geographies, the proportion of rural health facilities in the state relative to the nation, the situation of hospitals in the state, and any other factors deemed appropriate by CMS. Not more than 10% of the amount allocated to the states can be used for administrative expenses.</li><li><strong>Rural Health Facilities Definition.</strong> The law defines a “rural health facility” to include hospitals located in a rural area or treated as being located in a rural area, critical access hospitals, sole community hospitals, Medicare-dependent hospitals, low-volume hospitals, rural emergency hospitals, rural health clinics, federally qualified health centers, community mental health centers, opioid treatment programs in rural areas, and community behavioral health clinics in rural areas.</li><li><strong>Use of Funds.</strong> Funds allocated to the state will need to be used for the following health activities:<ul><li>Providing payments to health care providers.</li><li>Recruiting and retaining clinical workforce talent in rural areas.</li><li>Promoting evidence-based interventions to improve prevention and chronic disease management.</li><li>Promoting technology-driven solutions and training for the adoption of such technology.</li><li>Assisting rural communities to right-size health delivery systems.</li><li>Supporting access to opioid use disorder treatment services.</li><li>Developing projects that support value-based care arrangements.</li><li>Other additional uses as determined by CMS.</li></ul></li></ul><h3 id="subtitlea">SUBTITLE A — TAX</h3><h3 id="subachapter4">CHAPTER 4 — INVESTING IN AMERICAN FAMILIES, COMMUNITIES AND SMALL BUSINESSES</h3><h4 id="section70415">Section 70415: Endowment Tax for Universities<br>(Effective Jan. 1, 2026)</h4><p>This section amends the excise tax rate for universities based on student endowments. The rates are as follows: 1.4% for student endowments ranging from $500,000-$750,000 (current law), 4% for student endowments ranging from $750,000-$2 million, and 8% for all student endowments above $2 million. CBO estimates that this provision will result in a $761 million increase in federal revenue over 10 years.</p><h4 id="section70416">Section 70416: Executive Compensation<br>(Effective Jan. 1, 2026)</h4><p>This section limits tax-exempt organizations’ ability to deduct compensation over $1 million, including for former employees, dating back to tax year 2017. CBO estimates that this provision will result in a $3.8 billion increase in federal revenue over 10 years.</p><h4 id="section70424">Section 70424: Charitable Contributions for Non-itemizers<br>(Effective Jan. 1, 2026)</h4><p>This section creates a permanent deduction on charitable contributions for taxpayers who do not elect to itemize. CBO estimates that this provision will result in a $73.8 billion reduction in federal revenue over 10 years.</p><h4 id="section70425">Section 70425: Floor on Charitable Contributions<br>(Effective Jan. 1, 2026)</h4><p>This section imposes a 0.5% floor on charitable contributions for taxpayers who elect to itemize for taxable years after Dec. 31, 2025. CBO estimates that this provision will result in a $63.1 billion increase in federal revenue over 10 years.</p><h4 id="section70426">Section 70426: One Percent Floor on Deduction of Charitable Contributions Made by Corporations<br>(Effective Jan. 1, 2026)</h4><p>This section allows a deduction for corporate charitable contributions only to the extent that the aggregate of corporate charitable contributions exceeds 1% of a taxpayer’s taxable income and does not exceed 10% of the taxpayer’s taxable income. CBO estimates that this provision will result in a $16.6 billion increase in federal revenue over 10 years.</p><h3 id="subachapter5">CHAPTER 5 — ENDING GREEN NEW DEAL SPENDING, PROMOTING AMERICA-FIRST ENERGY AND OTHER REFORMS</h3><h4 id="section70503">Section 70503: Termination of Qualified Commercial Clean Vehicles Credit<br>(Credit terminates Sep. 30, 2025)</h4><p>This section terminates the tax credit that allowed for tax-exempt entities to receive a direct payment for the lesser of 1) 15% of the vehicle’s cost (30% for vehicles not powered by gas or diesel) or 2) the incremental cost of the vehicle relative to a comparable vehicle. Under the previous law, the credit expired Dec. 31, 2032. CBO estimates that this provision will result in a $104.5 billion increase in federal revenue over 10 years.</p><h4 id="section70504">Section 70504: Termination of Alternative Fuel Vehicle Refueling Property Credit<br>(Credit terminates June 30, 2026)</h4><p>This section terminates the tax credit that allowed a tax-exempt owner of property to receive direct payment for the cost of installing a qualified alternative fuel vehicle refueling station on property, such as electric charging stations. Under the previous law, the credit expired Dec. 31, 2032. The credit will now be eliminated for projects place in service after June 30, 2026. CBO estimates that this provision will result in a $2 billion increase in federal revenue over 10 years.</p><h4 id="section70507">Section 70507: Termination of Energy Efficient Commercial Buildings Deduction<br>(Deduction terminates June 30, 2026)</h4><p>This section terminates the tax deduction for tax-exempt organizations to be allocated for energy-saving commercial building property. The deduction terminates for any property with construction beginning after June 30, 2026. CBO estimates that this provision will result in a $134 million increase in federal revenue over 10 years.</p><h4 id="section70513">Section 70513: Termination and Restrictions on Clean Energy Investment Credit<br>(Credit terminates Dec. 31, 2027)</h4><p>This section phases out and terminates the clean energy investment tax credit. Under the previous law, the credit was phased out in 2032.</p><ul><li>Terminates for covered wind and solar facilities for properties placed into service after Dec. 31, 2027.<ul><li>Increases the domestic content requirement for projects to be eligible for the domestic content bonus. The current law requires that 40% of the manufactured products in a facility must be from a domestic source. The bill would increase the required threshold to 45% (or 27.5% for offshore wind) from June 16, 2025, until Dec. 31, 2025; 50% (or 35% for offshore wind) for CY 2026; and 55% after Dec. 31, 2026.</li><li>Prevents access to credits for wind and solar if the taxpayer rents or leases the property to a third party.</li><li>Prohibition on credit that includes any material assistance from a prohibited foreign entity.</li></ul></li><li>Eliminates the energy credit for energy property not listed in the underlying statute (those listed include property such as small wind, biogas, and energy storage technology. This applies to construction beginning on or after June 16, 2025.</li></ul><p>CBO estimates that this provision will result in a $164 billion increase in federal revenue over 10 years.</p><h3 id="subtitleb">SUBTITLE B — LOAN LIMITS</h3><h4 id="section81001">Section 81001: Establishment of Loan Limits for Graduate and Professional Students and Parent Borrowers; Termination of Graduate and Professional PLUS Loans<br>(Effective July 1, 2026)</h4><p>This section establishes graduate and professional annual and aggregate loan limits and eliminates the Federal Direct PLUS Loan Program for students beginning July 1, 2026 (i.e., 2026-2027 academic year). Under the provision, graduate students who are not professional students can borrow up to $20,500 annually under the Federal Direct Unsubsidized Stafford Loan Program. Professional students may borrow up to $50,0000 annually. In aggregate, the maximum amount of Federal Direct Unsubsidized Stafford loans will be limited to $100,000 for a graduate student who is not a professional student, and $200,000 for a professional student. Students are subject to a lifetime maximum aggregate borrowing limit across all loan programs of $257,500, not including loans borrowed by parents on behalf of a dependent student. Previously, graduate and professional loans were limited to the cost of attendance.</p><p>Under the provision, Federal Direct PLUS loans will no longer be available to graduate or professional student borrowers. Parents borrowing through the Federal Direct PLUS Loan Program on behalf of a dependent student will be limited to borrowing $20,000 per student annually or $65,000 per student in aggregate.</p><ul><li><strong>Professional student.</strong> A professional student is defined as a student enrolled in a program of study that awards a professional degree upon completion of the program, including medical students (as defined under section 668.2 of title 34, Code of Federal Regulations).</li><li><strong>Interim exception for certain students.</strong> Individuals who, as of June 30, 2026, are enrolled in higher education and have received a loan will not be subject to the annual or aggregate limits for the lesser of the duration of their program or up to three academic years.</li></ul><p>CBO estimates that this provision will result in a $44.2 billion reduction in federal spending over 10 years.</p><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/advisory/2025-07-18-one-big-beautiful-bill-act-obbba-provisions-timeline" target="_blank" title="Click here to view the One Big Beautiful Bill Act (OBBBA) Provisions Timeline.">View the One Big Beautiful Bill Act (OBBBA) Provisions Timeline</a></div><hr><ol><li id="fn1"><a href="https://cms.gov/files/document/health-insurance-exchanges-2025-open-enrollment-report.pdf">cms.gov/files/document/health-insurance-exchanges-2025-open-enrollment-report.pdf</a></li></ol></div><div class="col-md-4"><a href="/system/files/media/file/2025/07/Legislative-Advisory-Detailed-Summary-of-One-Big-Beautiful-Bill-Act-OBBBA-Public-Law-No-119-21-w-Timeline.pdf" target="_blank" title="Click here to download the Legislative Advisory: Detailed Summary of One Big Beautiful Bill Act (OBBBA; Public Law No. 119-21) PDF."><img src="/sites/default/files/inline-images/Page-1-Legislative-Advisory-Detailed-Summary-of-One-Big-Beautiful-Bill-Act-OBBBA-Public-Law-No-119-21-w-Timeline.png" data-entity-uuid="16fb6a0d-ac19-4b1a-b24c-6a089e04fe78" data-entity-type="file" alt="Legislative Advisory: Detailed Summary of One Big Beautiful Bill Act (OBBBA; Public Law No. 119-21) page 1." width="695" height="900"></a><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/advisory/2025-07-18-one-big-beautiful-bill-act-obbba-provisions-timeline" target="_blank" title="Click here to view the One Big Beautiful Bill Act (OBBBA) Provisions Timeline.">View the OBBBA Timeline</a></div><hr><p><div class="views-element-container"><div class="js-view-dom-id-34cad88ee13442fa5903326c4f46a9c582b9d2a761765aedbf0bbaecf029aaf9"> <header> <h3>The Latest on the One Big Beautiful Bill Act</h3> </header> <div class="views-row"> <div class="views-field views-field-field-access-level"> <div class="field-content"> <div class="meta custom-lock-position"> <div class="views-field-access-level access-type-public" data-toggle="tooltip" data-placement="bottom" title="Members only"><a href="/taxonomy/term/278" hreflang="en">Public</a></div> </div></div> </div><div class="views-field views-field-title"> <span class="field-content"><a href="/news/chairpersons-file/2025-07-28-chair-file-obbba-and-whats-next-health-care" hreflang="en">Chair File: The OBBBA and What’s Next for Health Care</a></span> </div><div class="views-field views-field-created"> <span class="field-content"><time datetime="2025-07-28T10:16:20-05:00" title="Monday, July 28, 2025 - 10:16">Jul 28, 2025</time> </span> </div></div> <div class="views-row"> <div class="views-field views-field-field-access-level"> <div class="field-content"></div> </div><div class="views-field views-field-title"> <span class="field-content"><a href="/news/headline/2025-07-21-cbo-projects-obbba-increase-uninsured-10-million-federal-deficit-34-trillion" hreflang="en">CBO projects OBBBA to increase uninsured by 10 million, federal deficit by $3.4 trillion</a></span> </div><div class="views-field views-field-created"> <span class="field-content"><time datetime="2025-07-21T15:37:59-05:00" title="Monday, July 21, 2025 - 15:37">Jul 21, 2025</time> </span> </div></div> <div class="views-row"> <div class="views-field views-field-field-access-level"> <div class="field-content"> <div class="meta custom-lock-position"> <div class="views-field-access-level access-type-public" data-toggle="tooltip" data-placement="bottom" title="Members only"><a href="/taxonomy/term/278" hreflang="en">Public</a></div> </div></div> </div><div class="views-field views-field-title"> <span class="field-content"><a href="/lettercomment/2025-07-16-aha-expresses-support-protect-medicaid-and-rural-hospitals-act" hreflang="en">AHA Expresses Support for Protect Medicaid and Rural Hospitals Act </a></span> </div><div class="views-field views-field-created"> <span class="field-content"><time datetime="2025-07-16T14:21:17-05:00" title="Wednesday, July 16, 2025 - 14:21">Jul 16, 2025</time> </span> </div></div> <div class="views-row"> <div class="views-field views-field-field-access-level"> <div class="field-content"> <div class="meta custom-lock-position"> <div class="views-field-access-level access-type-public" data-toggle="tooltip" data-placement="bottom" title="Members only"><a href="/taxonomy/term/278" hreflang="en">Public</a></div> </div></div> </div><div class="views-field views-field-title"> <span class="field-content"><a href="/news/chairpersons-file/2025-07-16-chair-file-leadership-dialogue-continuing-work-strengthen-health-america-aha-president-and" hreflang="en">Chair File: Leadership Dialogue — Continuing the Work to Strengthen Health in America With AHA President and CEO Rick Pollack</a></span> </div><div class="views-field views-field-created"> <span class="field-content"><time datetime="2025-07-16T10:53:03-05:00" title="Wednesday, July 16, 2025 - 10:53">Jul 16, 2025</time> </span> </div></div> <div class="views-row"> <div class="views-field views-field-field-access-level"> <div class="field-content"> <div class="meta custom-lock-position"> <div class="views-field-access-level access-type-public" data-toggle="tooltip" data-placement="bottom" title="Members only"><a href="/taxonomy/term/278" hreflang="en">Public</a></div> </div></div> </div><div class="views-field views-field-title"> <span class="field-content"><a href="/resources-one-big-beautiful-bill-act-signed-law-july-4-2025" hreflang="en">Resources on the One Big Beautiful Bill Act Signed Into Law July 4, 2025</a></span> </div><div class="views-field views-field-created"> <span class="field-content"><time datetime="2025-07-15T14:49:30-05:00" title="Tuesday, July 15, 2025 - 14:49">Jul 15, 2025</time> </span> </div></div> <div class="more-link"><a href="/topics/budget-reconciliation">More on the One Big Beautiful Bill Act (OBBBA)</a></div> </div> </div> </p></div></div></div> div.sticky { position: sticky; top: 0; } .meta.custom-lock-position { position: relative; top: 0px; right: inherit; display: block; float: right; } .views-field-title { font-weight: bold; } .views-field-created { color: #000000 !important; } .views-row { margin-bottom: 20px; } Mon, 21 Jul 2025 06:00:00 -0500 Advisory /advisory/2025-07-18-home-health-prospective-payment-system-proposed-rule-cy-2026 <div class="container"><div class="row"><div class="col-md-8"><p>The Centers for Medicare & Medicaid Services (CMS) June 30 issued its <a href="https://www.federalregister.gov/documents/2025/07/02/2025-12347/medicare-and-medicaid-programs-calendar-year-2026-home-health-prospective-payment-system-hh-pps-rate" target="_blank">proposed rule</a> for the calendar year (CY) 2026 home health (HH) prospective payment system (PPS). Comments are due Sept. 2, and a final rule is expected around Nov. 1. New policies would generally be effective Jan. 1, 2026.</p><div><h2>Key Highlights</h2><p>The proposed rule would:</p><ul><li>Reduce net HH payments by an estimated 6.4%, or $1.135 billion, compared to CY 2025 payments. This reduction includes:<ul><li>A 3.2% market basket update, reduced by a 0.8% productivity adjustment.</li><li>A permanent behavioral adjustment (applied to the 30-day episode payment rate only) that is expected to reduce payments by 3.7%.</li><li>A temporary behavioral adjustment (applied to the 30-day episode payment rate only) that is expected to reduce payments by 4.6%.</li><li>An estimated 0.5% decrease in payments due to changes in outlier payments.</li></ul></li><li>Allow the face-to-face visit to be performed by any physician or non-physician practitioner, regardless of which practitioner certifies the need for HH services.</li><li>Remove a measure on patient COVID-19 vaccination and four patient assessment data elements related to social drivers of health.</li><li>Adopt a revised HH Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey and related measures.</li><li>Adopt one claims-based and three Outcome and Assessment Information Set (OASIS) based measures to the HH value-based payment (VBP) program.</li><li>Make several updates to the Medicare provider enrollment and accreditation regulations for durable medical equipment providers and suppliers.</li></ul></div><h2>AHA Take</h2><p>The AHA is concerned with CMS’ substantial proposed cuts to the HH PPS. Hospitals and other providers rely on both hospital-based and freestanding HH agencies to care for patients following discharge. Reimbursement cuts of this magnitude would reduce capacity and place a burden and strain back on hospitals, as well as patients who may be unable to access safe, effective and appropriate post-hospital care. The AHA will urge CMS to reconsider its approach to these payment reductions to ensure access for those in need of continued recovery at home.</p><h2>What You Can Do</h2><ul><li>Share this advisory with your senior management team to examine the impact these payment changes would have on your organization in CY 2026.</li><li>Submit a comment letter on the proposed rule to CMS by Sept. 2 explaining the rule’s impact on your patients, staff, facility and local health care partners.</li></ul><h2>Proposed CY 2026 Payment Updates</h2><p>The rule proposes a decrease in payments of 6.4%, or $1.135 billion, in CY 2026 as compared to CY 2025. This includes a proposed market basket update of 3.2%, reduced by a statutorily required 0.8% productivity factor. Further, CMS proposes a cut of 4.059% as a permanent behavioral adjustment (discussed further below); this would reduce payments by 3.7% overall, or $655 million. The agency also proposes a cut of 5.0% as a temporary adjustment (also discussed further below); this would reduce payments by 4.6% or $815 million. In addition, CMS estimates there would be a 0.5% decrease in payments because of an updated fixed-dollar loss ratio for outlier payments.</p><p>CMS also provides an estimate of impact by type of HH agency. It estimates that freestanding HH agencies would see a 6.3% decrease in payments, and facility-based HH agencies would receive a 5.7% decrease. In addition, HH agencies located in rural areas would receive a 6.1% decrease, while those in urban areas would see a 6.5% decrease.</p><h3>Proposed 30-day Episode Rates</h3><p>Applying the net market basket increase, behavioral adjustments, as well as budget neutrality factors for updated case-mix weights and wage indexes, CMS proposes an updated 30-day payment amount of $1,933.61. This is the standardized amount that is multiplied by case-mix weight and other factors to determine the final payment. This amount is 6.4% lower than the current 30-day payment rate of $2,057.35. Table 26 in the proposed rule (copied below) provides a breakdown of these changes. These proposed factors are subject to change due to updated data that become available prior to the publication of the final rule. Providers who fail to submit quality data would receive a 2-percentage-point reduction in their 30-day payment rate.</p><img src="/sites/default/files/inline-images/Table-26-CY-2026-National-Standardized-30-Day-Period-Payment-Amount.jpg" data-entity-uuid="97af0294-541a-486d-a76b-a8e841fdfc00" data-entity-type="file" alt="Table 26: CY 2026 National, Standardized 30-Day Period Payment Amount" width="854" height="258" class="align-center"><h3>Proposed Low Utilization Payment Adjustment (LUPA) Threshold and Rates</h3><p>Under the Patient-driven Groupings Model (PDGM), claims that do not meet a certain threshold of total visits are paid under the LUPA methodology, which is a per-visit rate. The LUPA methodology sets a visit threshold for each payment group at the 10th percentile of visits or two visits, whichever is higher. If the LUPA threshold is met, the case is paid the full 30-day period payment; if not, the LUPA per-visit rates apply. The proposed rule would update the LUPA thresholds using CY 2024 HH claims. These thresholds are listed in Table 25 of the proposed rule, which also includes the proposed recalibrated weights and other factors for payment groups.</p><p>CMS also updates the per-visit payment amount for each visit type using the payment update factors. As mentioned previously, the behavioral adjustments do not apply to these rates and only apply to the 30-day episode payment rate. Below are the proposed updated LUPA visit amounts from Table 28 of the proposed rule. Agencies that do not submit required quality data would have LUPA payments reduced by 2 percentage points.</p><img src="/sites/default/files/inline-images/Table-28-CY-2026-National-Per-Visit-Payment-Amounts.jpg" data-entity-uuid="a51f90ad-4cf7-4d3b-8d08-2b42ccbe6389" data-entity-type="file" alt="Table 28: CY 2026 National Per-Visit Payment Amounts" width="870" height="255" class="align-center"><h3>Case-mix Weights</h3><p>PDGM categorizes patients into one of 432 payment units, known as HH resource groups, using patient assessment data collected with the OASIS tool and other data. CMS annually recalibrates the HH case-mix weights based on the most recent, complete year of claims and patient assessment data. To recalibrate the CY 2026 weights, CMS proposes to use CY 2024 data to weight 30-day episodes under PDGM. This is the same methodology CMS used for CY 2025. The proposed 2026 case-mix weights are provided in Table 25 in the proposed rule and are available for download from CMS’ <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/home-health/home-health-prospective-payment-system-regulations-and-notices/cms-1828-p" target="_blank">HH PPS webpage</a>. These proposed weights are subject to change due to updated data that becomes available prior to the publication of the final rule.</p><p>CMS also applies a budget neutrality factor to the 30-day payment rate to ensure that case-mix weight changes do not increase or decrease overall payments. This year, CMS is proposing a budget neutrality factor of 1.0051, or 0.51% to account for proposed case-mix weight changes.</p><h3>Functional Impairment Levels</h3><p>Under PDGM, the functional impairment-related case-mix adjustment is determined by responses to certain OASIS items associated with activities of daily living and risk of hospitalization. A HH period of care receives points based on responses from these functional OASIS items. The sum of all these points is used to group HH periods into low, medium and high functional impairment levels, designed so that about one-third of HH periods fall within each level. For CY 2026, CMS proposes to use the CY 2024 claims data to update the functional points and functional impairment levels by clinical group and the same methodology used for CY 2025. The proposed OASIS functional points and the functional impairment thresholds by clinical group for CY 2026 are listed in the rule’s Tables 20 and 21, respectively.</p><h3>Comorbidity Groups</h3><p>Thirty-day episodes of care receive a comorbidity adjustment based on the presence of certain secondary diagnoses reported on HH claims. These diagnoses are based on a list of clinically and statistically significant secondary diagnoses subgroups with similar resource use. A “low-comorbidity adjustment” would be applied if one secondary diagnosis is present that is associated with higher resource use, and a “high-comorbidity” adjustment would be applied if two or more qualifying secondary diagnoses are present. For CY 2026, CMS proposes to continue using the same methodology, in combination with CY 2024 data. This would result in 20 low-comorbidity adjustment subgroups and 100 high-comorbidity adjustment subgroups. These subgroups are listed in Tables 22 and 23 of the proposed rule.</p><h3>High-cost Outliers</h3><p>HH PPS outlier payments are applied to 30-day episodes with estimated costs that exceed the outlier threshold, which is the sum of the payment amount and a wage-adjusted fixed-dollar loss (FDL) amount. The FDL amount is calculated by multiplying the FDL ratio by the payment amount for that claim. The payment made to providers for qualifying outlier claims is a percentage (referred to as the loss-sharing ratio) of the costs that surpass the threshold. For the HH PPS, the statute requires that the FDL amount and the loss-sharing ratio be set to target total outlier payments at 2.5% of aggregate payments. For CY 2026, CMS proposes no change to the existing 0.80 (80%) loss-sharing ratio. However, it proposes to increase the FDL ratio from 0.35 to 0.46, which it says would decrease overall payments by 0.5%, or $90 million, relative to CY 2025.</p><h2>Proposed Behavioral Adjustments Related to PDGM Implementation</h2><p>In 2018, Congress mandated that CMS implement the PDGM, which transitioned on Jan. 1, 2020, the HH PPS from a 60-day payment episode to a 30-day payment episode. The PDGM case-mix system bases payments on the clinical characteristics of a patient, abandoning the prior methodology of relying on therapy volume to determine payment. The clinical characteristics used to determine payment amounts include admission source and timing, principal diagnosis, functional impairment level and comorbidities. Under the PDGM, each 30-day episode is assigned to one of 432 HH resource groups.</p><p>CMS was required to set the initial PDGM 30-day episode payment amount at a budget-neutral level. To accomplish budget neutrality, CMS made several assumptions regarding providers’ expected behavioral changes. Specifically, CMS assumed that HH agencies would alter their coding of primary and secondary diagnoses on which payments are based. In addition, CMS assumed that the number of LUPA cases would decrease. After estimating the impact of these assumed behavioral changes, CMS finalized a behavioral offset of 4.36% to the 30-day payment rate in the CY 2020 final rule.</p><p>Congress also required that CMS maintain budget neutrality relative to the former payment system through CY 2026. The agency says it must apply two types of adjustments to maintain budget neutrality. The first is permanent adjustments to the 30-day payment rate to ensure that <em>future</em> spending neither increases nor decreases relative to what would have been paid. The second is temporary adjustments to recoup or repay <em>past</em> over- or underspending. Accordingly, the agency calculated and applied additional <em>permanent</em> budget neutrality adjustments in CYs 2023, 2024 and 2025 once data became available for payments post-implementation of the PDGM. CMS did not apply any <em>temporary</em> adjustments in these years, but it did provide estimates of the expected temporary recoupments needed to meet its statutory obligations for these years.</p><p>In the CY 2023 final rule, CMS determined that 30-day payments in CYs 2020 and 2021 were approximately 7.85% higher than they would have been under the legacy payment model. Therefore, it would need to prospectively reduce the 30-day payment rate permanently to ensure budget neutrality. However, for CY 2023, CMS only applied half of the needed permanent adjustment (-3.925%) and said it would apply the remainder in future years. For CY 2024, CMS determined that an additional adjustment of 5.78% was necessary to ensure budget neutrality based on claims through CY 2022. However, in response to concerns from providers, CMS decided to implement only half of this amount again, or -2.89%. In the CY 2025 rulemaking, CMS found that a -3.95% cut was necessary to achieve budget neutrality based upon claims through CY 2023. Again, CMS only implemented half that amount, or -1.975% in CY 2025.</p><p>CMS has now determined that, based upon claims analysis through CY 2024 claims, the 30-day payment rate is 4.059% higher than it would have been had CMS maintained budget neutrality. This includes both prior years’ adjustments that were not fully implemented and newly calculated adjustments based upon a review of CY 2024 claims. Therefore, CMS is proposing to implement the full permanent adjustment of -4.059% to the 30-day payment rate for CY 2026. CMS says this would reduce payments by approximately $655 million. The table below from the proposed rule shows both the overpayments calculated by CMS as well as the permanent adjustments that have been or are proposed to be implemented to date.</p><img src="/sites/default/files/inline-images/Table-18-Summary-of-Permanent-Adjustments-for-CYs-2020-2026.jpg" data-entity-uuid="8e2f44a4-a53f-4adc-af4b-1261ee35e293" data-entity-type="file" alt="Table 18: Summary of Permanent Adjustments for CYs 2020-2026" width="936" height="447" class="align-center"><p>As mentioned, in addition to permanent adjustments to prospectively ensure budget neutrality, CMS also says it is obligated to apply temporary adjustments to the 30-day payment rate to recoup past overpayments. Prior to this rulemaking, CMS had not yet proposed any of these temporary adjustments, although it did provide estimates for amounts needed to be recouped. In this rulemaking, CMS is proposing to begin implementing temporary adjustments to recoup what it says were overpayments from CY 2020 through CY 2024. To date, CMS says overpayments have totaled $5.3 billion. To recoup this all in CY 2026, CMS says it would need to apply an approximately 34% reduction to the 30-day payment rate. However, it also says that such a big reduction would place a hardship on providers, and instead proposes to implement a 5% temporary reduction to the base payment rate for CY 2026 to begin recouping overpayments. CMS says this would result in recouping about 14.8% of the overpayments to date in CY 2026, or approximately $786 million. Table 19 from the proposed rule below shows the overpayments CMS says must be recouped by CY.</p><img src="/sites/default/files/inline-images/Table-19-Summary-of-Temporary-Adjustments-Dollar-Amounts-for-CYs-2020-2026.jpg" data-entity-uuid="ead53bfe-f6d5-4498-86d2-7e71cd12ca8a" data-entity-type="file" alt="Table 19: Summary of Temporary Adjustments Dollar Amounts for CYs 2020-2026" width="936" height="490" class="align-center"><p>The permanent and temporary adjustments apply to the 30-day payment rate. They do not apply to other payments, such as LUPAs. Therefore, the permanent adjustment of -4.059% would reduce total payments by approximately 3.7%, and the temporary adjustment of 5.0% would reduce overall payments by approximately 4.6%. In addition, the temporary adjustment would not be factored in when determining future rates, so CMS would base its updated 30-day payment rates in future rulemakings on rates without the 5.0% reduction included. Finally, CMS says that all CY 2024 claims data was not available at the time of the proposed rule. Therefore, as it has done in prior rulemakings, it would update its proposed behavioral adjustments in the final rule using updated data.</p><h2>Proposed Change to Face-to-Face Encounter Requirement</h2><p>A HH beneficiary is required to have a face-to-face visit with either a physician or a non-physician practitioner (NPP). Currently, if the visit is performed by a physician, it must be the physician who also provides the certification for the need for home health services.<a href="#fn1"><sup>1</sup></a> However, if the visit is performed by an NPP, a different physician or NPP may certify the need for home health services. However, to provide additional flexibility and simplification, CMS is proposing to allow the visit to be performed by any physician or NPP regardless of which practitioner certifies the need for home health services. In this proposal, CMS also clarifies that the face-to-face visit documentation must still be related to the primary reason the patient requires home health services.</p><h2>HH Quality Reporting Program</h2><p>As mandated by the Social Security Act, HH agencies receiving Medicare payments have been required to collect and submit patient assessment data using the OASIS since 1999 and to participate in the HH Quality Reporting Program (QRP) since 2007. The Improving Medicare Post-Acute Care Transformation (IMPACT) Act required that, starting CY 2020, providers must report standardized patient assessment data elements (SPADEs) as part of the HH QRP. Failure to comply with these requirements results in a 2-percentage-point reduction to the HH agency’s annual market-basket update. In this rule, CMS proposes to remove one quality measure and four SPADEs beginning with the CY 2026 HH QRP. For FY 2025, the HH QRP comprises 19 measures (as the HHCAHPS Survey is reported as a single measure informed by multiple sub-items) based on updates to the QRP in previous rulemaking.</p><h3>Table 1: Previously Finalized Measures for the HH QRP, CY 2024-CY 2026</h3><table><thead><tr><th>Data Source</th><th>Measure</th><th>CY 25</th><th>CY 26</th><th>CY 27</th></tr></thead><tbody><tr><td rowspan="18">OASIS</td><td>Application of Percent of residents experiencing one or more falls with major injury (Long stay)</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Discharge Function Score</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Percent of Patients/Residents who are Up to Date with COVID-19 Vaccination</td><td>X</td><td>Y</td><td>Y</td></tr><tr><td>Improvement in Ambulation/Locomotion</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Improvement in Bathing</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Improvement in Bed Transferring</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Improvement in Dyspnea</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Influenza Immunization Received for Current Flu Season</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Improvement in Management of Oral Medications</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Timely Initiation of Care</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Drug regimen review conducted with follow-up for identified issues</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Transfer of Health Information to Provider</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Transfer of Health Information to Patient</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Total Estimated Medicare Spending per Beneficiary (MSPB)</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Potentially Preventable 30-day Post-Discharge Readmissions</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Home Health Within Stay Potentially Preventable Hospitalization</td><td>X</td><td>X</td><td>X</td></tr><tr><td>Discharge to Community</td><td>X</td><td>X</td><td>X</td></tr><tr><td rowspan="5">HHCAHPS Survey</td><td>Care of Patients</td><td>X</td><td>X</td><td>Y</td></tr><tr><td>Communications between Providers and Patients</td><td>X</td><td>X</td><td>Y</td></tr><tr><td>Specific Care Issues</td><td>X</td><td>X</td><td>Y</td></tr><tr><td>Overall Rating</td><td>X</td><td>X</td><td>Y</td></tr><tr><td>Willingness to Recommend</td><td>X</td><td>X</td><td>Y</td></tr></tbody></table><p>X=Measure required for reporting as previously finalized</p><p>Y=Measure proposed for removal or modification in this rule</p><hr><h3>Proposed Removal of COVID-19 Vaccine: Percent of Patients Who Are Up-to-Date Measure</h3><p>CMS proposes to remove this measure from the HH QRP beginning with the CY 2026 program. The measure was originally adopted in the CY 2024 HH PPS final rule. Citing declining numbers of COVID-19 cases and deaths as well as the continued costs and burden to providers of reporting this measure, CMS estimates that cost savings from the measure’s removal as 47,168 hours annually across 11,904 HH agencies — a total of $4,326,249.</p><p>CMS proposes that, if finalized, data from the OASIS item O0350 would no longer be used to calculate the measure effective with the publication of the final CY 2026 HH PPS rule; the agency would formally remove the measure and associated OASIS beginning April 1, 2026. This means that, upon finalization of the proposal later this year and until the item can be removed from OASIS, HH agencies could enter any response (0, 1 or a dash) for the item with no effect on measure calculation (uncompleted responses would not meet submission requirements).</p><h3>Proposed Removal of Four Recently Adopted SPADEs</h3><p>Beginning with patients discharged on or after April 1, 2026, CMS proposes to remove four SPADEs under the social determinants of health category from all post-acute care patient assessment tools, including OASIS. CMS cites the “undue burden” that the collection of this information places upon providers and estimates that removing the items will save 158,835 hours of labor across all 11,904 HH agencies and $13,484,033 annually (or $1,132 per HH agency).</p><p>These items were finalized for adoption in the CY 2025 HH PPS final rule and slated to begin reporting with patients discharged in CY 2027; they include:</p><ul><li>Living Situation (R0310): What is your living situation today?</li><li>Food (R0320A): Within the past 12 months, you worried that your food would run out before you got money to buy more.</li><li>Food (R0320B): Within the past 12 months, the food you bought just didn’t last, and you didn’t have money to get more.</li></ul><p>Utilities (R0330): In the past 12 months, has the electric, gas, oil, or water company threatened to shut off services in your home?</p><h3>Proposed Revisions to HHCAHPS Survey and Measures</h3><p>CMS proposes to implement a revised (and shortened) version of the HHCAHPS survey and accompanying measures beginning with the April 2026 sample month.</p><p>The revisions were made based on an experiment that CMS conducted with 100 HH agencies in 2022 and include the addition of three new questions (which CMS calls “items”) to assess new topics of importance to patients and the removal of several questions on topics of less importance or not currently used in public reporting composites. CMS also made minor text changes to selected existing questions to help clarify the question or response options. The revised survey and measures were reviewed as part of the 2025 Pre-Rulemaking Measure Review process and recommended for adoption by the Post-Acute Care/Long-Term Care Committee. The table below provides a summary of the proposed changes, and Table 31 in the CY 2026 HH PPS proposed rule provides a comprehensive comparison of the current and proposed survey items.</p><h3>Table 2. Summary of Proposed HHCAHPS Measure Revisions</h3><table><thead><tr><th>Current Measures (Number of Items)</th><th>Proposed Measures (Number of Items)</th></tr></thead><tbody><tr><td>Care of Patients (4 items)</td><td>Care of Patients (5 items)</td></tr><tr><td>Communications between Providers and Patients (6 items)</td><td>Communications between Providers and Patients (5 items)</td></tr><tr><td rowspan="3">Specific Care Issues (7 items)</td><td>Talk About Home Safety (standalone item)</td></tr><tr><td>Review Medicines (standalone item)</td></tr><tr><td>Talk About Medicine Side Effects (standalone item)</td></tr><tr><td>Overall Rating (1 item)</td><td>Overall Rating (1 item)</td></tr><tr><td>Willingness to Recommend (1 item)</td><td>Willingness to Recommend (1 item)</td></tr><tr><td><strong>Total: 19 items</strong></td><td><strong>Total: 15 items</strong></td></tr></tbody></table><hr><p>If the revised survey and associated measures are finalized for adoption as proposed, CMS would adjust the methodology for the Summary Star Rating to account for these updates. Specifically, the Summary Rating would be based on the Overall Rating of Care; the new composite Care of Patients and Communications between Providers and Patients measures at a weight of one each; and the three new standalone measures at a weight of 1/3 each. The rest of the scoring methodology and public reporting policy would not change. Because the Summary Star Rating is calculated using four rolling quarters of data, scores on the new measures would not be publicly reported until October 2027 (based on data from the second quarter of 2026 through the first quarter of 2027); providers would be able to view their interim scores on their confidential Provider Preview reports after two full quarters of data are submitted.</p><p>CMS also proposes one change to the case-mix adjustment to survey scores. These adjustments refer to characteristics of the patient that are not under control of the HH agency that may affect reports of experience and include patient age, patient education, self-reported overall health, self-reported mental health, diagnosis of schizophrenia or dementia, whether the patient lives alone, whether the patient or a proxy answered the survey, and the language in which the survey was completed. Based on the same 2022 experiment, CMS found that the diagnosis adjustments were no longer significant and thus proposes to drop this adjustment from the scoring methodology.</p><p>Also based on findings from the 2022 experiment, CMS proposes to add a mode adjustment to the scoring methodology to account for differences in overall rating by telephone-only respondents. The agency notes that this is because telephone-only respondents were more negative in their evaluations of care relative to mail-only respondents across all measures, but the adjustments were generally small (most around 2 percentage points).</p><h3>Proposed Updates to Reconsideration Process</h3><p>Most CMS quality reporting and value programs — including the HH QRP — include a reconsideration process permitting providers to appeal a CMS initial determination of noncompliance with reporting or other programmatic requirements. In this rule, CMS proposes to specify the deadline for an HH agency to request an extension for a reconsideration request as 30 days from the date of the written notice of noncompliance. In addition, the agency proposes to grant requests for reconsiderations and reverse initial findings of noncompliance if the agency determines that the HH agency was in full compliance with the QRP requirements for the applicable program year, including established policies for extraordinary circumstances exceptions.</p><h3>Regulatory Text Updates to Account for All-Payer OASIS Data Reporting</h3><p>As finalized in the CY 2023 HH PPS final rule, CMS will require HH agencies to submit all-payer OASIS data for purposes of the HH QRP, beginning with voluntary data submission between Jan. 1, 2025, and June 30, 2025, and mandatory data submission beginning July 1, 2025, for the CY 2027 program year. In this proposed rule, CMS proposes updates to the regulatory text to reflect this previously finalized change. Specifically, CMS would change language in the HH Conditions of Participation regarding transmission of OASIS assessments to refer to “patients” instead of “beneficiaries,” as assessment data must now be submitted for all patients, including those who are not beneficiaries of Medicare or Medicaid. This does not change any other policy for assessment data reporting, including any exemptions for the OASIS.</p><h3>Request for Information (RFI): Shortening Data Submission Timelines</h3><p>CMS seeks input on decreasing the amount of time that HH agencies must submit quarterly quality measures and SPADE data to CMS. The agency notes that it is concerned that the time between data collection and measure reporting is too long, at nine months. The agency believes that the primary driver of this lag is the four and a half months after a quarter closes that HH agencies must submit data to CMS. CMS seeks input on potentially requiring that quality and SPADE data be submitted 45 days after the close of a quarter instead. The agency believes this would result in more timely publicly-reported data on HH agency performance. CMS found that, in 2022, only 1.3% of all OASIS assessments were submitted after 60 days, and only 0.9% were submitted between 60 days and the 4.5-month deadline.</p><h3>RFI: Digital Quality Measurement</h3><p>CMS seeks input on how to advance the uptake of digital quality measures in the HH QRP. CMS is particularly interested in the extent to which HH agencies are using application programming interfaces based on the Fast Healthcare Interoperability Resource standard to support any data reporting or exchange functions.</p><h3>RFI: Measure Concepts Under Consideration for Future Years</h3><p>CMS seeks public comment on the importance, relevance, appropriateness and applicability of certain quality measure concepts for future use in the HH QRP. These concepts include:</p><ul><li>Interoperability.</li><li>Cognitive function.</li><li>Nutrition.</li><li>Patient well-being.</li></ul><h2>HH Value-Based Purchasing Program</h2><p>The HH VBP model was adopted as a demonstration in the CY 2016 HH PPS final rule. In the CY 2022 HH PPS final rule, CMS finalized the expansion of the model nationwide beginning Jan. 1, 2022; read about the program methodology in AHA’s <a href="/advisory/2021-11-22-home-health-pps-final-cy-2022-rule">Regulatory Advisory</a> on that rule. In this proposed rule, CMS proposes to adopt one claims-based measure and three OASIS-based measures into the program’s measure set and to adjust the measure set and scoring based on changes proposed herein. The agency reasons that adopting more measures will increase the number of HH agencies that meet minimum HH VBP payment adjustment requirements.</p><h3>Proposed Adoption of Medicare Spending Per Beneficiary Post-Acute Care (MSPB-PAC) Measure</h3><p>CMS proposes to add this claims-based measure to the HHVBP measure set starting in CY 2026. MSPB-PAC assesses Medicare spending for Part A and B services clinically related to HH services during an episode of care relative to the Medicare spending for other HH agencies and is based on two years of data. The measure was added to the HH QRP in 2017 and is used across all post-acute care settings; if finalized as proposed, CMS would likely report scoring thresholds for this measure in the HH VBP program in the October 2025 Interim Performance Reports.</p><h3>Proposed Adoption of OASIS-based Function Measures</h3><p>CMS proposes to add three measures informed by OASIS assessment data to the HH VBP measure set starting in CY 2026. They include Improvement in Bathing (M1830), Improvement in Upper Body Dressing (M1810), and Improvement in Lower Body Dressing (M1820). The Improvement in Bathing measure is used in the HH QRP. CMS explains that it decided against including in the HH VBP measure set the Discharge Function Score measure that was recently adopted into all four post-acute care QRPs, as that measure does not consider bathing and dressing abilities critically important for HH AGENCY patients specifically.</p><h3>Proposed Removal of Three HHCAHPS Survey-based Measures</h3><p>Elsewhere in this proposed rule, CMS proposes to revise the HHCAHPS Survey and associated measures, which would influence the inclusion of these measures in the HH VBP program. Given these changes, CMS proposes to remove the three revised HHCAHPS items as they would not be able to be calculated according to the measure specifications as they appear in the HH VBP program. The measures include Care of Patients, Communications between Providers and Patients, and Specific Care Issues. The agency notes that it may propose to adopt new versions of these measures in future rulemaking.</p><h3>Proposed Weighting Changes</h3><p>If measures are finalized for adoption into the HH VBP measure set as proposed, CMS will need to update the weights of the individual measures and categories, as they contribute to the overall score. The table below lists the current and proposed weights across the larger-volume and smaller-volume cohorts.</p><img src="/sites/default/files/inline-images/Table-34-CY-2025-and-Proposed-Individual-Measure-Weights-and-Category-Weights-for-the-Expanded-HHVBP-Model.png" data-entity-uuid="a4d4ebc0-9ca6-4b0e-ab9f-80f87209ad5d" data-entity-type="file" alt="Table 34: CY 2025 and Proposed Individual Measure Weights and Category Weights for the Expanded HHVBP Model" width="624" height="340" class="align-center"><h3>RFI: Future Performance Measure Concepts</h3><p>CMS seeks feedback on certain performance measurement concepts used in the HH VBP. Specifically, the agency solicits comments on:</p><ul><li>Adopting measures on falls with major injury, well-being, nutrition and interoperability as considered for the HH QRP.</li><li>Calculating the HHCAHPS measure score based solely on achievement versus a benchmark rather than both achievement and improvement over the previous score.</li><li>Adding three HHCAHPS survey items to the HH VBP program from the Specific Care Issues category, which are proposed in this rule to become standalone measures.</li></ul><h2>Durable Medical Equipment, Prosthetics, Orthotics and Supplies Policies</h2><p>CMS has established processes and policies for enrollment of providers and suppliers into the Medicare program, which are designed to confirm that those seeking to bill Medicare for services and items furnished to beneficiaries meet all applicable federal and state requirements. In line with previous attempts to strengthen these processes and policies to guard against fraudulent or abusive behavior by providers and suppliers, CMS proposes several changes in this proposed rule that would update regulations for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) provider enrollment and accreditation. These include:</p><ul><li>Revocation and denial of enrollment policies.</li><li>DMEPOS accreditation and accrediting organization requirements.</li><li>Prior authorization for certain DMEPOS items.</li><li>The DMEPOS competitive bidding process.</li></ul><h2>RFI: Executive Order 14192 “Unleashing Prosperity Through Deregulation”</h2><p>On Jan. 31, 2025, President Trump issued Executive Order (EO) 14192, "Unleashing Prosperity Through Deregulation," which states the administration’s policy to significantly reduce the private expenditures required to comply with federal regulations. Accordingly, CMS is soliciting public input on approaches and opportunities to streamline regulations and reduce administrative burdens on providers, suppliers, beneficiaries and other interested parties participating in the Medicare program. CMS is collecting responses at <a href="https://www.cms.gov/medicare-regulatory-relief-rfi" target="_blank">https://www.cms.gov/medicare-regulatory-relief-rfi</a> and requests stakeholders submit comments through the provided web link.</p><h2>Next Steps</h2><p>The AHA urges all HH agencies to submit comments to CMS by Sept. 2. Comments may be submitted electronically at <a href="http://www.regulations.gov/" target="_blank">www.regulations.gov</a>.</p><h2>Further Questions</h2><p>For questions about payment provisions, contact Jonathan Gold, AHA’s senior associate director of payment policy, at <a href="mailto:jgold@aha.org">jgold@aha.org</a>; for quality-related questions, contact Caitlin Gillooley, AHA’s director of policy, at <a href="mailto:cgillooley@aha.org">cgillooley@aha.org</a>.</p><hr><ol><li id="fn1">The regulations also permit the visit to have been performed by a physician other than the certifying physician if the physician performing the visit cared for the patient in an acute or post-acute facility from which the patient was directly admitted to home health.</li></ol></div><div class="col-md-4"><a href="/system/files/media/file/2025/07/Regulatory-Advisory-Home-Health-Prospective-Payment-System-Proposed-Rule-for-CY-2026.pdf" target="_blank" title="Click here to download the Regulatory Advisory: Home Health Prospective Payment System Proposed Rule for CY 2026 PDF."><img src="/sites/default/files/inline-images/Page-1-Regulatory-Advisory-Home-Health-Prospective-Payment-System-Proposed-Rule-for-CY-2026.png" data-entity-uuid="641e1533-3576-451a-b608-e88a7450fddc" data-entity-type="file" alt="Regulatory Advisory: Home Health Prospective Payment System Proposed Rule for CY 2026 page 1." width="695" height="900"></a></div></div></div> table, th, td { border: 1px solid; } tr:nth-child(even) { background-color: #b9d9eb33; } th { background-color: #002855; color: white; } Fri, 18 Jul 2025 11:40:52 -0500 Advisory /advisory/2025-07-18-one-big-beautiful-bill-act-obbba-provisions-timeline <div class="container"><div class="row"><div class="col-md-8"><p>President Trump July 4, 2025, signed into law the budget reconciliation bill, the <a href="https://www.congress.gov/bill/119th-congress/house-bill/1/text" target="_blank">One Big Beautiful Bill Act</a> (OBBBA), a sweeping package that enacts many of the administration’s legislative priorities on taxes, border security, energy, and deficit reduction. The bill includes significant policy changes to Medicaid and the Health Insurance Marketplaces. The AHA has developed this resource to visualize the enactment timeline for provisions impacting hospitals and health systems. See <a href="/advisory/2025-07-18-detailed-summary-one-big-beautiful-bill-act-obbba-public-law-no-119-21">AHA’s Legislative Advisory</a> for a summary of each provision.</p><h2>In Effect 2025</h2><table><thead><tr><th>Provision Description</th><th>Effective Date(s)</th><th>Section</th></tr></thead><tbody><tr><td>Permanent Extension of Safe Harbor for Absence of Deductible for Telehealth Services</td><td>Applies to taxable years beginning January 1, 2025</td><td>71306</td></tr><tr><td>State Directed Payments – New SDP Payment Cap (110% Medicare for Non-Expansion States, 100% of Medicare for Expansion States)</td><td>Effective upon enactment</td><td>71116</td></tr><tr><td>Uniform Tax Requirement</td><td>Effective upon enactment</td><td>71117</td></tr><tr><td>Rural Health Transformation Program</td><td>Effective upon enactment</td><td>71401</td></tr><tr><td>FMAP for Services Rendered by Abortion Providers (Federal Payments to Prohibited Entities)</td><td>Effective from enactment for one year (July 2026)</td><td>71113</td></tr><tr><td>Moratorium on Implementation of Medicaid Savings Program Eligibility and Enrollment Rule</td><td>Effective from enactment through September 30, 2034</td><td>71101</td></tr><tr><td>Moratorium on Implementation of Medicaid, CHIP and Basic Health Program Eligibility and Enrollment Rule</td><td>Effective from enactment through September 30, 2034</td><td>71102</td></tr><tr><td>Moratorium on Rule Relating to Long-Term Care Staffing Standards</td><td>Effective from enactment through September 30, 2034</td><td>71111</td></tr><tr><td>Termination of Qualified Commercial Clean Vehicles Credit</td><td>Credit terminates September 30, 2025</td><td>70503</td></tr><tr><td>Termination of qualified commercial clean vehicles credit</td><td>Effective September 30, 2025</td><td>70503</td></tr></tbody></table><hr><h2>In Effect 2026</h2><table><thead><tr><th>Provision Description</th><th>Effective Date(s)</th><th>Section</th></tr></thead><tbody><tr><td>Sunsetting Increased FMAP Incentive</td><td>Effective January 1, 2026</td><td>71114</td></tr><tr><td>Temporary Payment Increase Under the Medicare Physician Fee Schedule to Account for Exceptional Circumstances</td><td>Effective January 1, 2026</td><td>71202</td></tr><tr><td>Disallowing Premium Tax Credit in Case of Certain Coverage Enrolled in During the Special Enrollment Period</td><td>Effective January 1, 2026</td><td>71304</td></tr><tr><td>Eliminating Limitation on Recapture of Advance Payment of Premium Tax Credit</td><td>Effective January 1, 2026</td><td>71305</td></tr><tr><td>Allowance of Bronze and Catastrophic Plans in Connection with Health Savings Accounts</td><td>Effective January 1, 2026</td><td>71307</td></tr><tr><td>Treatment of Direct Primary Care Service Arrangements</td><td>Effective January 1, 2026</td><td>71308</td></tr><tr><td>Disallowing Premium Tax Credits During Periods of Medicaid Ineligibility Due to Alien Status</td><td>Effective January 1, 2026</td><td>71302</td></tr><tr><td>Endowment Tax for Universities</td><td>Effective January 1, 2026</td><td>70415</td></tr><tr><td>Executive Compensation</td><td>Effective January 1, 2026</td><td>70416</td></tr><tr><td>Charitable Contributions for Non-itemizers</td><td>Effective January 1, 2026</td><td>70424</td></tr><tr><td>Floor on Charitable Contributions</td><td>Effective January 1, 2026</td><td>70425</td></tr><tr><td>One Percent Floor on Deduction of Charitable Contributions Made by Corporations</td><td>Effective January 1, 2026</td><td>70426</td></tr><tr><td>Termination of Alternative Fuel Vehicle Refueling Property Credit</td><td>Credit terminates June 30, 2026</td><td>70504</td></tr><tr><td>Termination of Energy Efficient Commercial Buildings Deduction</td><td>Deduction terminates June 30, 2026</td><td>70507</td></tr><tr><td>Loan Limits for Graduate and Professional Students and Parent Borrowers</td><td>Effective July 1, 2026</td><td>81001</td></tr><tr><td>Provider Taxes – Hold Harmless Threshold limited to the rate a state had in place as of July 4, 2025.</td><td>Effective October 1, 2026</td><td>71115</td></tr><tr><td>Limiting Qualified Alien Medicaid Eligibility</td><td>Effective October 1, 2026</td><td>71109</td></tr><tr><td>Expansion FMAP For Emergency Medicaid</td><td>Effective October 1, 2026</td><td>71110</td></tr><tr><td>Medicaid Community Engagement Requirements</td><td>Effective December 31, 2026</td><td>71119</td></tr></tbody></table><hr><h2>In Effect 2027</h2><table><thead><tr><th>Provision Description</th><th>Effective Date(s)</th><th>Section</th></tr></thead><tbody><tr><td>Limiting Medicare Coverage of Certain Individuals</td><td>Effective 18 months from enactment (January 2027)</td><td>71201</td></tr><tr><td>Eligibility Redeterminations</td><td>Effective January 1, 2027</td><td>71107</td></tr><tr><td>Limiting Retroactive Eligibility (Reducing State Medicaid Costs)</td><td>Effective January 1, 2027</td><td>71112</td></tr><tr><td>Permitting Premium Tax Credit Only for Certain Individuals</td><td>Effective January 1, 2027</td><td>71301</td></tr><tr><td>Provider Taxes – Hold Harmless Reduction (Expansion States)</td><td>Begins October 1, 2027</td><td>71115</td></tr><tr><td>Termination and Restrictions on Clean Energy Investment Credit</td><td>Credit terminates December 31, 2027</td><td>70513</td></tr></tbody></table><hr><h2>In Effect 2028</h2><table><thead><tr><th>Provision Description</th><th>Effective Date(s)</th><th>Section</th></tr></thead><tbody><tr><td>State Directed Payments – Phased Reduction for Grandfathered SDPs</td><td>Effective for the rating period beginning on or after Jauary 1, 2028</td><td>71116</td></tr><tr><td>Expanding and Clarifying the Exclusion for Orphan Drugs Under the Drug Price Negotiation Program</td><td>Effective January 1, 2028</td><td>71203</td></tr><tr><td>Requiring Verification of Eligibility for the Premium Tax Credit</td><td>Effective January 1, 2028</td><td>71303</td></tr><tr><td>Making Certain Adjustments to Coverage of Home or Community Based Services Under Medicaid</td><td>Effective January 1, 2028</td><td>71121</td></tr><tr><td>Modifying Cost-sharing Requirements for Certain Expansion Individuals Under the Medicaid Program</td><td>Effective October 1, 2028</td><td>71120</td></tr></tbody></table><hr><h2>Regulatory/Guidance Calendar</h2><p>The table below summarizes the provisions that may require regulations or other guidance for implementation. This is subject to change and the administration may release guidance on any provision included in the final OBBBA.</p><table><thead><tr><th>Future Regulation or Guidance</th><th>Agency(ies)</th><th>Due Date</th><th>Section</th></tr></thead><tbody><tr><td>Guidance related to implementing more frequent Medicaid eligibility redeterminations.</td><td>Health and Human Services, Centers for Medicare & Medicaid Services</td><td>December 31, 2025 (No later than 180 days after enactment)</td><td>71107</td></tr><tr><td>Guidance on the implementation of the rural transformation fund (e.g., application period)</td><td>Centers for Medicare & Medicaid Services</td><td><em>TBD;</em> Application period must end no later than December 31, 2025</td><td>71401</td></tr><tr><td>Guidance related to implementing community engagement (work) requirements (e.g., compliance criteria, short term hardship events, and compliance and ex parte verification procedures)</td><td>Health and Human Services</td><td>June 1, 2026</td><td>71119</td></tr><tr><td>Guidance on non-uniform provider tax transition period (up to three years)</td><td>Health and Human Services</td><td><em>TBD</em></td><td>71117</td></tr><tr><td>Regulations or other guidance on the application of excluded services under direct primary care service arrangements</td><td>Health and Human Services, Centers for Medicare & Medicaid Services</td><td><em>TBD</em></td><td>71308</td></tr><tr><td>Potential future rulemaking on the definition of total published Medicare rate in 438.6(a) of title 42</td><td>Health and Human Services, Centers for Medicare & Medicaid Services</td><td>N/A</td><td>71116</td></tr></tbody></table></div><div class="col-md-4"><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/system/files/media/file/2025/07/One-Big-Beautiful-Bill-Act-OBBBA-Provisions-Timeline.pdf" target="_blank" title="Click here to download the One Big Beautiful Bill Act (OBBBA) Provisions Timeline PDF.">Download the Timeline PDF</a></div><p><a href="/system/files/media/file/2025/07/One-Big-Beautiful-Bill-Act-OBBBA-Provisions-Timeline.pdf" target="_blank" title="Click here to download the One Big Beautiful Bill Act (OBBBA) Provisions Timeline PDF."><img src="/sites/default/files/inline-images/Page-1-One-Big-Beautiful-Bill-Act-OBBBA-Provisions-Timeline.png" data-entity-uuid="d6601854-7c6d-4cfd-8e5a-224b8704b45a" data-entity-type="file" alt="One Big Beautiful Bill Act (OBBBA) Provisions Timeline page 1." width="693" height="900"></a></p><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/advisory/2025-07-18-detailed-summary-one-big-beautiful-bill-act-obbba-public-law-no-119-21" target="_blank" title="Click here to view the Legislative Advisory: : Detailed Summary of One Big Beautiful Bill Act (OBBBA; Public Law No. 119-21)">View the Legislative Advisory: Detailed Summary of One Big Beautiful Bill Act</a></div><hr><p><div class="views-element-container"><div class="js-view-dom-id-a123d205f766878d6d92eabbafbf2179120af2b65be14cd5266721c979158d89"> <header> <h3>The Latest on the One Big Beautiful Bill Act</h3> </header> <div class="views-row"> <div class="views-field views-field-field-access-level"> <div class="field-content"> <div class="meta custom-lock-position"> <div class="views-field-access-level access-type-public" data-toggle="tooltip" data-placement="bottom" title="Members only"><a href="/taxonomy/term/278" hreflang="en">Public</a></div> </div></div> </div><div class="views-field views-field-title"> <span class="field-content"><a href="/news/chairpersons-file/2025-07-28-chair-file-obbba-and-whats-next-health-care" hreflang="en">Chair File: The OBBBA and What’s Next for Health Care</a></span> </div><div class="views-field views-field-created"> <span class="field-content"><time datetime="2025-07-28T10:16:20-05:00" title="Monday, July 28, 2025 - 10:16">Jul 28, 2025</time> </span> </div></div> <div class="views-row"> <div class="views-field views-field-field-access-level"> <div class="field-content"></div> </div><div class="views-field views-field-title"> <span class="field-content"><a href="/news/headline/2025-07-21-cbo-projects-obbba-increase-uninsured-10-million-federal-deficit-34-trillion" hreflang="en">CBO projects OBBBA to increase uninsured by 10 million, federal deficit by $3.4 trillion</a></span> </div><div class="views-field views-field-created"> <span class="field-content"><time datetime="2025-07-21T15:37:59-05:00" title="Monday, July 21, 2025 - 15:37">Jul 21, 2025</time> </span> </div></div> <div class="views-row"> <div class="views-field views-field-field-access-level"> <div class="field-content"> <div class="meta custom-lock-position"> <div class="views-field-access-level access-type-public" data-toggle="tooltip" data-placement="bottom" title="Members only"><a href="/taxonomy/term/278" hreflang="en">Public</a></div> </div></div> </div><div class="views-field views-field-title"> <span class="field-content"><a href="/lettercomment/2025-07-16-aha-expresses-support-protect-medicaid-and-rural-hospitals-act" hreflang="en">AHA Expresses Support for Protect Medicaid and Rural Hospitals Act </a></span> </div><div class="views-field views-field-created"> <span class="field-content"><time datetime="2025-07-16T14:21:17-05:00" title="Wednesday, July 16, 2025 - 14:21">Jul 16, 2025</time> </span> </div></div> <div class="views-row"> <div class="views-field views-field-field-access-level"> <div class="field-content"> <div class="meta custom-lock-position"> <div class="views-field-access-level access-type-public" data-toggle="tooltip" data-placement="bottom" title="Members only"><a href="/taxonomy/term/278" hreflang="en">Public</a></div> </div></div> </div><div class="views-field views-field-title"> <span class="field-content"><a href="/news/chairpersons-file/2025-07-16-chair-file-leadership-dialogue-continuing-work-strengthen-health-america-aha-president-and" hreflang="en">Chair File: Leadership Dialogue — Continuing the Work to Strengthen Health in America With AHA President and CEO Rick Pollack</a></span> </div><div class="views-field views-field-created"> <span class="field-content"><time datetime="2025-07-16T10:53:03-05:00" title="Wednesday, July 16, 2025 - 10:53">Jul 16, 2025</time> </span> </div></div> <div class="views-row"> <div class="views-field views-field-field-access-level"> <div class="field-content"> <div class="meta custom-lock-position"> <div class="views-field-access-level access-type-public" data-toggle="tooltip" data-placement="bottom" title="Members only"><a href="/taxonomy/term/278" hreflang="en">Public</a></div> </div></div> </div><div class="views-field views-field-title"> <span class="field-content"><a href="/resources-one-big-beautiful-bill-act-signed-law-july-4-2025" hreflang="en">Resources on the One Big Beautiful Bill Act Signed Into Law July 4, 2025</a></span> </div><div class="views-field views-field-created"> <span class="field-content"><time datetime="2025-07-15T14:49:30-05:00" title="Tuesday, July 15, 2025 - 14:49">Jul 15, 2025</time> </span> </div></div> <div class="more-link"><a href="/topics/budget-reconciliation">More on the One Big Beautiful Bill Act (OBBBA)</a></div> </div> </div> </p></div></div></div> table, th, td { border: 1px solid; } tr:nth-child(even) { background-color: #b9d9eb33; } th { background-color: #002855; color: white; } h2 { color: #9d2235; } div.sticky { position: sticky; top: 0; } .meta.custom-lock-position { position: relative; top: 0px; right: inherit; display: block; float: right; } .views-field-title { font-weight: bold; } .views-field-created { color: #000000 !important; } .views-row { margin-bottom: 20px; } Fri, 18 Jul 2025 06:15:00 -0500 Advisory /advisory/2025-07-16-cms-issues-hospital-outpatient-ambulatory-surgical-center-proposed-rule-cy-2026 <div class="container"><div class="row"><div class="col-md-8"><p>The Centers for Medicare & Medicaid Services (CMS) July 15 issued a <a href="https://www.federalregister.gov/public-inspection/2025-13360/medicare-and-medicaid-programs-hospital-outpatient-prospective-payment-and-ambulatory-surgical">proposed rule</a> that would increase Medicare hospital outpatient prospective payment system (OPPS) rates by a net 2.4% in calendar year (CY) 2026 compared to CY 2025. The rule also includes proposals to pay at the site-neutral rate for drug administration services furnished in grandfathered off-campus hospital outpatient departments (HOPDs) and to phase out the inpatient-only (IPO) list. It also would expedite the timeline for repayment for non-drug services and propose conducting a new drug acquisition cost survey. CMS will accept comments on the proposed rule for 60 days following its publication in the Federal Register. </p><div class="panel module-typeC"><div class="panel-heading"><p><strong>KEY HIGHLIGHTS</strong></p><p>CMS’ proposed policies would:</p><ul><li>Increase Medicare hospital OPPS rates by a net 2.4% in CY 2026.</li><li>Pay for drug administration services furnished in grandfathered off-campus HOPDs at the site-neutral rate of 40% of the OPPS and request comment on expanding site-neutral payment to on-campus clinic visits.</li><li>Phase out the IPO list over three years, starting by removing 285 musculoskeletal services in 2026.</li><li>Expedite the timeline for repayment for $7.8 billion for non-drug services through a 2% annual cut to the OPPS conversion factor (CF), concluding by CY 2031.</li><li>Weaken the criteria for excluding services from coverage in ambulatory surgical centers (ASC) covered procedures list (CPL) and add 547 procedures to the ASC CPL.</li><li>Permanently revise the definition of direct supervision for cardiac rehabilitation (CR), intensive cardiac rehabilitation (ICR) and pulmonary rehabilitation (PR) services and diagnostic services furnished to hospital outpatients to include virtual direct supervision.</li><li>Remove three measures on health equity and one on COVID-19 vaccination among healthcare personnel from the Outpatient, ASC and Rural Emergency Hospital (REH) quality reporting programs.</li><li>Adopt a new emergency department (ED) timeliness measure for the Outpatient and REH quality reporting programs and a new patient-reported outcome measure for the ASC program.</li><li>Change the methodology for the Overall Hospital Star Rating to emphasize Safety of Care measures.</li><li>Make several changes to the hospital price transparency requirements, including adding new data elements to the machine-readable file, updating the attestation statement language and changing the enforcement process.</li></ul></div></div><h2>AHA TAKE</h2><p>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.</p><p>We oppose the proposal to expand “site-neutral” cuts and eliminate the inpatient-only list, as both policies fail to account for the real and crucial differences between hospital outpatient departments and other sites of care. 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.</p><p>We are also concerned with CMS’ proposal to claw back billions of dollars from hospitals at a far faster rate than originally promised. It is important to remember that this claw back punishes 340B hospitals for the agency’s own mistake in implementing a policy that a unanimous Supreme Court held to be unlawful. Doubling down on that unlawfulness, the proposed recoupment is both illegal and unwise, and it should not be finalized.</p><p>Finally, we are concerned about the proposal to pursue a burdensome acquisition cost survey, especially if the agency’s goal is to drastically reduce Medicare payments to hospitals that serve the nation’s most vulnerable communities.</p><p>We look forward to reviewing these proposals in more detail and participating in the comment process with the agency.</p><p>Highlights of the CY 2026 OPPS/ASC proposed rule follow.</p><h2>CY 2026 OPPS PROPOSED RULE CHANGES</h2><h3>Proposed Payment Update</h3><p>CMS proposes to update OPPS rates by a net 2.4% for CY 2026. This includes a proposed market-basket update of 3.2% and a statutorily required productivity cut of 0.8 percentage points. These payment adjustments, in addition to other proposed changes in the rule, are estimated to result in a net increase in OPPS payments to hospitals of 2.0% compared to CY 2025 payments. For hospitals that do not publicly report quality measure data, CMS would continue to impose the statutory 2.0 percentage point additional reduction in payment, resulting in a 0.4% OPPS update. In addition, the agency notes that under its proposal, payments for services at hospitals subject to the 340B remedy offset will be reduced by 2.0 percentage points.</p><p>CMS estimates that total payments to hospitals (including beneficiary cost sharing and estimated changes in enrollment, utilization and case-mix) would increase by approximately $8.1 billion in CY 2026 compared to CY 2025. </p><p>CMS proposes to increase the conversion factor to $91.747 in CY 2026, as compared to $89.169 in CY 2025. This update reflects several proposed factors: the 2.4% OPPS payment update, the wage index budget neutrality adjustment of 1.0116, the 5% annual cap for individual hospital wage index reductions adjustment of 0.9955, the cancer hospital payment adjustment of 1.0000 and a decrease of 0.22 percentage point for the difference in pass-through spending. CMS proposes to use a reduced conversion factor of $89.958 in the calculation of payments for hospitals that fail to meet the Hospital Outpatient Quality Reporting (OQR) Program.</p><h3>Data Proposed for Use in CY 2026 OPPS/ASC Rate Setting</h3><p>To set proposed OPPS and ASC payment rates, CMS would use the most updated cost reports and claims data available. Therefore, the agency proposes using the CY 2024 claims data and the most updated cost report extract available from the Healthcare Cost Report Information System.</p><h3>Proposed Packaging Policy for “Threshold-packaged” and “Policy-packaged” Drugs, Biologicals and Radiopharmaceuticals</h3><p>CMS pays for drugs, biologicals and radiopharmaceuticals that do not have pass-through status in one of two ways: packaged payment or separate payment (individual Ambulatory Payment Classifications (APCs)). For CY 2026, CMS proposes to maintain the packaging threshold for “threshold-packaged” drugs, including non-implantable biologicals and therapeutic radiopharmaceuticals, of $140 per day. This means that such products with a per-day cost of $140 or less would have their cost packaged in the procedure with which they are billed.</p><p>There are exceptions to this threshold-based packaging policy for certain “policy-packaged” drugs, biologicals and contrast agents. CMS proposes to continue to package the costs of all anesthesia drugs; drugs, biologicals and contrast agents, and other drugs that function as supplies when used in a diagnostic test or procedure; and drugs and biologicals that function as supplies when used in a surgical procedure (e.g., skin substitutes), regardless of whether they meet the $140 per day threshold.</p><h3>Diagnostic Radiopharmaceuticals Separate Payment</h3><p>In the CY 2025 final rule, CMS established a policy to pay separately for diagnostic radiopharmaceuticals with per-day costs above a threshold of $630 — which was approximately two times the volume-weighted average cost amount then associated with diagnostic radiopharmaceuticals. It also finalized a policy to update the $630 threshold in CY 2026 and subsequent years by the Producer Price Index for Pharmaceutical Preparations.</p><p>Using this methodology, CMS proposes to set the packaging threshold for diagnostic radiopharmaceuticals at $655 per day for CY 2026 and proposes to pay for diagnostic radiopharmaceuticals with a per-day cost above this threshold based on their Mean Unit Cost derived from OPPS claims data.</p><h3>Add-on Payment for Radiopharmaceutical Technetium-99m</h3><p>In CY 2025, CMS finalized for CY 2026 an add-on payment for radiopharmaceuticals produced without the use of Technetium-99m (Tc-99m) derived from non-Highly Enriched Uranium (HEU) sources, replacing it with an add-on payment for radiopharmaceuticals that use Tc-99m derived from domestically produced Molybdenum-99 (Mo-99). For CY 2026, CMS proposes a $10 per-dose amount for this add-on payment. To qualify for this add-on payment, at least 50% of the Mo-99 used in the Tc-99m generator that produces a dose of Tc-99m must be domestically produced for the dose. CMS also proposes to further define domestically produced Mo-99 and to establish a new Healthcare Common Procedure Coding System (HCPCS) C-code C917X to identify Tc-99m from domestically produced non-HEU Mo-99.</p><h3>Proposal to Expedite Recoupment Timeline Under 340B Remedy Rule</h3><p>Beginning in CY 2018 through CY 2022, CMS instituted a policy to reduce payments for certain providers for separately-payable Part B drugs purchased under the 340B Drug Pricing Program from Average Sales Price (ASP) plus 6% to ASP minus 22.5%. Due to budget-neutrality requirements, this nearly 30% payment cut was offset by increasing payments for non-drug services to all hospitals paid under the OPPS by 3.19%. Upon successful litigation led by the AHA, the U.S. Supreme Court unanimously ruled that the agency’s policy was unlawful. The agency subsequently finalized a remedy that would repay 340B hospitals in one-time lump sum payments totaling $10.6 billion, as well as seek recoupment of $7.8 billion in funds from all hospitals for the increased payments received for non-drug services. The intended goal was to undo the unlawful policy and restore all providers to the same position as if the policy had never been in place. The agency had finalized a recoupment strategy that would reduce the OPPS conversion factor by 0.5% annually beginning in CY 2026 until the full $7.8 billion was recouped, which was estimated to occur in CY 2041.</p><p>CMS is now proposing to expedite the timeline for this recoupment by adjusting the reduction in the OPPS conversion factor from 0.5% to 2%. As a result, the agency estimates that it will recoup the entire $7.8 billion by CY 2031, or about six years. The agency’s stated rationale for a shorter recoupment timeline is to minimize the impact of potential changes in non-drug services over time and ensure a more equitable impact on all hospitals. Specifically, CMS states, “…the longer it takes for us to fully recover the $7.8 billion, the less likely that the relative burden on hospitals from the adjustments will match the relevant benefits those hospitals previously received.”</p><p>CMS also noted that it is considering an alternative proposal that would expedite the timeline even further by adjusting the reduction in the OPPS conversion factor to 5% which would result in the full $7.8 billion being recouped in approximately three years.</p><h3>Hospital Drug Acquisition Cost Survey</h3><p>CMS announced a notice of intent to conduct an acquisition cost survey of all hospitals for covered outpatient drugs. This follows an April 18 Executive Order by President Trump (E.O. 14273), the “Lowering Drug Prices by Once Again Putting Americans First,” that directed the Health and Human Services (HHS) Secretary to publish in the Federal Register a plan to conduct a hospital acquisition cost survey for covered outpatient drugs.</p><p>The survey will open starting at the end of CY 2025, and responses will be collected into early CY 2026. Results of the survey will be compiled and used to set payment rates for covered outpatient drugs in the CY 2027 rulemaking. The agency is also considering various approaches to account for hospital non-responses to the survey to meet the statutory requirement of a large enough sample size and statistically significant results for its usability in setting and varying payment rates among hospitals.   </p><h3>Intensive Outpatient and Partial Hospitalization Programs</h3><p>For CY 2026, CMS proposes to maintain the existing rate structures for Intensive Outpatient Program (IOP) and Partial Hospitalization Program (PHP) services as established in previous rulemaking for hospital-based providers only. For Community Mental Health Centers that offer these services, CMS proposes to calculate costs and thus base payment upon 40% of the corresponding hospital-based costs. To calculate cost information, the agency would use CY 2024 claims data and the OPPS data set to identify services eligible for payment under the IOP and PHP benefits.</p><h3>Proposed Cancer Hospital Payment Adjustment</h3><p>CMS proposes to continue providing additional payments to cancer hospitals so that a cancer hospital’s payment-to-cost ratio (PCR) after the additional payments is equal to the weighted average PCR for the other OPPS hospitals using the most recently submitted or settled cost report data. Current law also requires that this weighted average PCR be reduced by 1.0 percentage point. Therefore, for CY 2026, CMS proposes to use a target PCR of 0.87, the same PCR as non-cancer hospitals using the most recently submitted or settled cost report data, to determine the CY 2026 cancer hospital payment adjustment to be paid at cost report settlement. That is, the payment adjustments will be the additional payments needed to result in a PCR equal to 0.87 for each cancer hospital.</p><h3>Comment Solicitation on Payment Policy for Software as a Service</h3><p>In response to increasing developments in the use of software-based technologies, including artificial intelligence (AI), CMS issues a request for information on alternative and consistent methods of payment for Software as a Service. Specifically, CMS seeks feedback on lessons learned from risk-bearing payment arrangements, sources to accurately capture cost data, and methodology to determine the value of services.</p><h3>Virtual Direct Supervision of CR, ICR and PR Services and Diagnostic Services Furnished to Hospital Outpatients</h3><p>In CY 2025, CMS extended virtual supervision flexibilities for CR, ICR and PR services as well as diagnostic services. Specifically, it allowed direct supervision to be furnished via two-way, audio/visual communication technology (excluding audio-only) for these services.</p><p>For CY 2026, CMS proposes to permanently revise the definition of direct supervision to make permanent the availability of virtual direct supervision of CR, ICR, PR services and diagnostic services via audio-video real-time communications technology (excluding audio-only). This would exclude diagnostic services that have a global surgery indicator of 010 or 090.                                                              </p><h3>Quality Reporting Programs</h3><p>For the Outpatient, ASC and Rural Emergency Hospital (REH) Quality Reporting Programs (QRPs), CMS proposes to remove, beginning with the CY 2025 reporting period, three measures related to health equity that were adopted in previous rulemaking: Hospital/Facility Commitment to Health Equity, Screening for Social Drivers of Health, and Screen Positive Rate for Social Drivers of Health. CMS also proposes to remove the COVID-19 Vaccination Coverage Among Healthcare Personnel measure from all three programs beginning with the CY 2024 reporting period. If finalized, hospitals and ASCs that do not report CY 2025 data for the health equity measures and CY 2024 data for the COVID-19 vaccination measure would not be considered non-compliant. Also, for all three programs, CMS proposes to include extensions of time as a form of relief under the Extraordinary Circumstances Exception policy and to further clarify the policy.</p><p>For the Outpatient QRP, CMS proposes adopting a new electronic clinical quality measure (eCQM), Emergency Care Access and Timeliness, beginning with voluntary reporting for the CY 2027 reporting period, followed by mandatory reporting beginning with the CY 2028 reporting period. Accordingly, the agency would remove the Median Time from ED Arrival to ED Departure for Discharged ED Patients measure as well as the Left Without Being Seen measure. Finally, CMS proposes extending mandatory reporting for the Excessive Radiation eCQM through CY 2027.</p><p>The agency also proposes adopting the Emergency Care Access and Timeliness measure for the REH QRP beginning with the CY 2027 reporting period; if finalized, REHs would have the option of reporting this new measure or the current Median Time for Discharged ED Patients measure. In this rule, CMS also proposes eCQM reporting and submission policies and requirements for the REHQR.</p><p>For the ASC QRP, CMS proposes to adopt a patient-reported outcome measure on Patient Understanding of Key Information Related to Recovery After a Facility-Based Outpatient Procedure or Surgery. If finalized, ASCs could voluntarily report the measure in CYs 2027 and 2028, with mandatory reporting beginning in CY 2029.</p><p>Finally, CMS proposes a two-phase change to the methodology for calculating the Overall Hospital Star Rating to emphasize hospital performance in the Safety of Care measure group. For the 2026 ratings, CMS would implement a cap at four stars for hospitals in the lowest-performing quartile in this measure group and then replace the cap starting in 2027 with a blanket one-star reduction for hospitals in that quartile.</p><h3>Proposed Changes to the Inpatient-only List</h3><p>Currently, there are 1,731 procedures/services included on the IPO list. For CY 2026, CMS proposes to phase out the IPO list over three years. This would begin in CY 2026 with the removal of 285 mostly musculoskeletal type services, but also includes 16 non-musculoskeletal services (cardiovascular, lymphatic, digestive, gynecological and endovascular),  and completing the elimination of the IPO list by Jan. 1, 2029. With this proposal, CMS further proposes to establish a 7-level Musculoskeletal Procedures APC series, allowing for the assignment of musculoskeletal procedures removed from the IPO list to an APC with an applicable range of estimated costs. Given the proposal to eliminate the IPO list in its entirety over three years, the agency further proposes to eliminate the criteria used to determine whether procedures should be removed from the IPO list.</p><h3>Two-midnight Rule Medical Review Activities Exemptions</h3><p>For CY 2026, CMS proposes to continue the existing policy that exempts procedures removed from the IPO list under the OPPS from certain medical review activities related to the two-midnight policy. Per this policy, procedures removed from the IPO list are exempted from site-of service claim denials, Beneficiary and Family-Centered Care Quality Improvement Organization referrals to Recovery Audit Contractor (RAC) for persistent noncompliance with the two-midnight rule, and RAC reviews for “patient status” (i.e. site-of-service) until claims data demonstrates that the procedures are more commonly billed in the outpatient setting than the inpatient setting.</p><h3>Access to Non-opioid Treatments for Pain Relief</h3><p>CMS proposes continuing its current policies to provide temporary additional payments for certain non-opioid treatments for pain relief in the HOPD and ASC settings from Jan. 1, 2025, through Dec. 31, 2027, consistent with statute.</p><p>CMS proposes that five drugs and six devices would qualify as non-opioid treatments for pain relief, and that these products be paid separately in both the HOPD and ASC settings, starting in CY 2026. CMS requests comments and supporting documentation from interested parties on additional products that may qualify for separate payment under this provision for CY 2026.</p><h3>Payment for Skin Substitute Products under the OPPS</h3><p>CMS proposes to pay separately for certain groups of skin substitute products as supplies when they are used during a covered application procedure paid under the Physician Fee Schedule in the non-facility setting or under the OPPS. This proposal includes grouping skin substitutes that are not drugs or biologicals using three Food and Drug Administration (FDA) regulatory categories (PMAs, 510(k)s, and 361 HCT/Ps) to set payment rates. To accomplish this categorization and incorporation into OPPS payment policy, CMS proposes to create three new APCs for HCPCS codes describing skin substitute products organized by clinical and resource similarity and by their FDA regulatory pathway. The proposed APCs include APC 6000 (PMA Skin Substitute Products), APC 6001 (510(k) Skin Substitute Products), and APC 6002 (361 HCT/P Skin Substitute Products) with an initial payment rate of $125.38 for each of the new proposed APCs.</p><h2>CY 2025 ASC PROPOSED RULE CHANGES</h2><h3>ASC Payment Update</h3><p>For CYs 2019 through 2023, CMS adopted a policy to update the ASC payment system using the hospital market basket. In light of the impact of the COVID-19 public health emergency on health care utilization, the agency extended this policy through CYs 2024 and 2025. In this proposed rule, the agency proposes extending the utilization of the hospital market basket update as the update factor for the ASC payment system for one additional year, through CY 2026. As such, CMS proposes to increase payment rates by 2.4% for ASCs that meet the quality reporting requirements under the ASC QRP.</p><h3>Proposed Changes to the List of ASC-covered Surgical Procedures</h3><p>CMS proposes revising the regulatory criteria used to evaluate potential additions to the ASC-covered procedures list (CPL). This would include modifying the general standard criteria and eliminating five of the general exclusion criteria, and instead moving them into a new section as nonbinding physician considerations for patient safety.</p><p>Utilizing these revised patient safety criteria, CMS proposes adding, beginning in CY 2026, 276 procedure codes (spanning the musculoskeletal, respiratory, cardiovascular, digestive, genitourinary, endocrine and nervous systems) to the ASC CPL based on the revised criteria and adding an additional 271 procedure codes to the ASC CPL that are proposed for removal from the IPO list for CY 2026.</p><h2>OTHER PROPOSALS</h2><h3>Method to Control “Unnecessary Increases in the Volume of Outpatient Services” Furnished in Grandfathered Off-Campus Provider-Based Departments</h3><p>In the CY 2019 OPPS/ASC final rule, CMS applied a previously unused authority in the Social Security Act to develop a “method to control for unnecessary increases in the volume of outpatient services” by imposing a site-neutral payment reduction on clinic visit services furnished in off-campus provider-based departments (PBDs) that had previously been protected from site-neutral provisions under the Bipartisan Budget Act of 2015. The “physician-equivalent” rate applied to grandfathered clinic visit services was ultimately finalized to be 40% of the OPPS payment rate.</p><p>For CY 2026, CMS proposes to expand this authority to impose a site-neutral payment reduction to drug administration procedures furnished in grandfathered off-campus PBDs. The drug administration ambulatory payment classifications (APCs) to which this policy would apply are APCs 5691, 5692, 5693 and 5694. There are currently 61 HCPCS codes describing various drug administration procedures that map to the four drug administration APCs. Once again, the site-neutral payment rate proposed by CMS would be 40% of the OPPS payment rate. The agency proposes to exempt rural sole community hospitals from this site-neutral payment cut for drug administration services.</p><p>As it did in CY 2019, CMS again proposes to implement this payment reduction in a non-budget-neutral manner. For CY 2026, the agency estimates savings of $280 million, with $210 million of the savings accruing to Medicare and $70 million in reduced beneficiary coinsurance.</p><p>In addition, CMS is seeking input on how to create a systematic process to identify other services to which site-neutral payment reductions should be applied to control for “unnecessary increases in the volume of services.” The agency is also requesting information on expanding its volume control method to on-campus clinic visits, which were previously exempted from the CY 2019 site-neutral clinic visit payment policy.</p><h3>Hospital Price Transparency Updates</h3><p>CMS proposes several changes to the hospital price transparency requirements. First, CMS proposes requiring several new data elements in instances when payer-specific negotiated charges are based on a percentage or algorithm. The new data elements are:</p><ul><li>Tenth percentile allowed amount.</li><li>Median allowed amount.</li><li>Ninetieth percentile allowed amount.</li><li>Count of all allowed amounts (excluding zero-dollar claims).</li></ul><p>CMS proposes requiring a specific methodology, including a set lookback period, and the use of electronic data interchange 835 electronic remittance advice transaction data to calculate these values. These values would replace the “estimated allowed amount” value that was added in the final CY 2024 OPPS/ASC rule.</p><p>CMS proposes requiring two new data elements for all hospital machine-readable files:</p><ul><li>The name of the hospital chief executive officer, president or senior official who is responsible for overseeing the machine-readable file creation and attesting to the file’s completeness and accuracy.</li><li>The hospital’s National Provider Identifier(s).</li></ul><p>CMS also proposes updating the required affirmation statement that hospitals must attest to in their machine-readable files. The new attestation would state, “The hospital has included all applicable standard charge information in accordance with the requirements of § 180.50, and the information encoded is true, accurate, and complete as of the date in the file. The hospital has included all payer-specific negotiated charges in dollars that can be expressed as a dollar amount. For payer-specific negotiated charges that cannot be expressed as a dollar amount in the machine-readable file or not knowable in advance, the hospital attests that the payer-specific negotiated charge is based on a contractual algorithm, percentage or formula that precludes the provision of a dollar amount and has provided all necessary information available to the hospital for the public to be able to derive the dollar amount, including, but not limited to, the specific fee schedule or components referenced in such percentage, algorithm or formula.”</p><p>Finally, CMS proposes to reduce the civil monetary penalty amount by 35% in instances when hospitals admit to hospital price transparency violations and waive their right to an administrative law judge hearing.</p><p>If finalized, the new data elements and attestation requirements would go into effect on Jan. 1, 2026.</p><p><strong>Request for Information on Adjusting Payment under the OPPS for Services Predominately Performed in the ASC or Physician Office Settings</strong></p><p>For CY 2026, CMS is requesting information for future rulemaking to develop a systematic process for identifying additional ambulatory services at high risk of “shifting to the hospital setting based on financial incentives rather than medical necessity,” to which it should apply a site-neutral payment policy.</p><h2>FURTHER QUESTIONS</h2><p>CMS will accept comments on the proposed rule for 60 days following publication in the Federal Register. The final rule will be published around Nov. 1, and the policies and payment rates will take effect Jan. 1, 2026.</p><p>If you have further questions, contact Roslyne Schulman, AHA’s director of outpatient payment policy, at <a href="mailto:rschulman@aha.org">rschulman@aha.org</a>.</p></div><div class="col-md-4"><a href="/system/files/media/file/2025/07/cms-issues-hospital-outpatient-ambulatory-surgical-center-proposed-rule-for-cy-2026-advisory-7-16-2025.pdf" target="_blank" title="Click here to download the Regulatory Advisory: CMS Issues Hospital Outpatient, Ambulatory Surgical Center Proposed Rule for CY 2026 PDF."><img src="/sites/default/files/2025-07/cover-cms-issues-hospital-outpatient-ambulatory-surgical-center-proposed-rule-for-cy-2026-advisory-7-16-2025-f.png" data-entity-uuid data-entity-type="file" alt="Regulatory Advisory: CMS Issues Hospital Outpatient, Ambulatory Surgical Center Proposed Rule for CY 2026" width="NaN" height="NaN"></a></div></div></div> Wed, 16 Jul 2025 17:10:18 -0500 Advisory /advisory/2025-07-15-cms-issues-cy-2026-physician-fee-schedule-proposed-rule <div class="container"><div class="row"><div class="col-md-8"><p>The Centers for Medicare & Medicaid Services (CMS) July 14 issued a <a href="https://public-inspection.federalregister.gov/2025-13271.pdf">proposed rule</a> that would update physician fee schedule (PFS) payments for calendar year (CY) 2026. The rule also includes proposals related to the Medicare Shared Savings Program (MSSP) and the Quality Payment Program (QPP), both of which were created by the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. It also would create a new mandatory payment model focused on specialists’ care for beneficiaries with heart failure and low back pain. </p><p> CMS will accept comments on the proposed rule through Sept. 12.</p><div class="panel module-typeC"><div class="panel-heading"><p><strong>KEY HIGHLIGHTS</strong></p><p>CMS’ proposed policies would:</p><ul><li>Implement two separate conversion factors: one for alternative payment model (APM) qualifying participants (QPs) and one for physicians and practitioners who are not QPs.<ul><li>The APM QP conversion factor would increase by 3.83% in CY 2026 as compared to CY 2025.</li><li>The non-QP conversion factor would increase by 3.62% in CY 2026 as compared to CY 2025.</li></ul></li><li>Make an efficiency adjustment of -2.5% to certain work relative value units (RVUs).</li><li>Modify the practice expense (PE) methodology to decrease facility PE RVUs and increase non-facility PE RVUs.</li><li>Extend some, but not all, telehealth waivers, either permanently or through 2026.</li><li>Create a new claims-based methodology to remove units of drugs purchased under the 340B program for the purposes of calculating Medicare drug inflation rebates. The agency is also proposing to create a 340B claims data repository allowing voluntary data submission by 340B providers to potentially use for the same purpose.</li><li>Create a new mandatory payment model, the Ambulatory Specialty Model (ASM), focused on specialists who care for beneficiaries with heart failure and low back pain, to begin Jan. 1, 2027, and run for five years.</li><li>Make several updates to the Medicare Share Savings Programs policies on performance and beneficiary assignment methodology.</li><li>Establish a MIPS performance threshold of 75 points for the CY 2026 performance period through the CY 2028 performance period, as well as adopt six new MIPS Value Pathways and make modifications to performance categories under the Quality Payment Program.</li></ul></div></div><h2>AHA TAKE</h2><p>The AHA is pleased that CMS, as directed by Congress, is proposing a positive payment update for physicians, which will be the first in several years. However, we will be closely evaluating the proposed efficiency adjustment and changes to PE RVUs, which both redistribute payments and may inappropriately disadvantage certain providers, including physicians who are largely hospital-based. </p><p>We also thank CMS for its proposal to extend or make permanent certain telehealth flexibilities, such as permanently removing frequency limitations for subsequent inpatient visits, nursing facility visits and critical care consultations. However, we were disappointed the agency did not propose extending a waiver that allows providers to report practice addresses instead of home addresses when they perform telehealth services from their home. </p><p>We appreciate the recognition of the complexity of identifying Medicare Part D drug units purchased under the 340B drug pricing program. As we review the agency’s proposals in more detail, we caution against any approach that would add unnecessary burden on 340B hospitals or would allow sensitive 340B data to be used outside the scope of the Medicare drug inflation rebate program to diminish the value of the program to 340B hospitals and their patients.</p><p>Finally, while we support moving towards more coordinated and accountable care through APMs, we are concerned about CMS’ proposal to create another mandatory model, as many physicians may not be in a financial position to support the investments necessary to transition to mandatory models.</p><p>Highlights of the PFS rule follow.</p><h2>CY 2026 PROPOSED PAYMENT UPDATE</h2><p>As required by law, beginning in CY 2026, CMS proposes implementing two separate conversion factors: one for APM QPs and one for physicians and practitioners who are not QPs. The rule would increase the APM QP conversion factor by 3.83% in CY 2026 as compared to CY 2025. It would increase the non-QP conversion factor by 3.62% in CY 2026 as compared to CY 2025. These updates include statutory updates of 0.75% and 0.25% for the APM QP and non-QP factors, respectively, another statutory update of 2.5% as required by the One Big Beautiful Bill Act and an increase of 0.55% that CMS states is necessary to account for proposed changes in work RVUs (described below).</p><h3>Efficiency Adjustment</h3><p>CMS proposes an efficiency adjustment to the work RVUs. It states that its proposal is based on an assumption that both the provider’s time directly providing the service to a patient as well as their work intensity would decrease as they develop expertise in performing the service. The agency expects non-time-based codes, such as codes describing procedures, radiology services and diagnostic tests, to become more efficient as they become more common, professionals gain more experience, technology is improved and other operational improvements (including but not limited to enhancements in procedural workflows) are implemented.</p><p>To calculate the efficiency adjustment, CMS proposes using the Medicare Economic Index (MEI) productivity adjustment. This adjustment reflects the most recent historical estimate of the 10-year moving average growth of private nonfarm business total factor productivity, as calculated by the Bureau of Labor Statistics. It is substantively similar to the productivity adjustment used in other Medicare payment systems, such as the inpatient prospective payment system (PPS) and outpatient PPS.</p><p>For CY 2026, CMS would apply the efficiency adjustment using a look-back period of five years. This methodology yields a proposed efficiency adjustment of -2.5%, which will be updated in the final rule. The agency states that, generally, specialties that bill more often for timed codes (such as family practice, clinical psychologists, clinical social workers, geriatrics and psychiatry) would see an increase in RVUs, while specialties that bill more often for procedures, diagnostic imaging and radiology services (such as radiation oncology, radiology, and some surgical specialties) would see a decrease in RVUs. That said, CMS estimates that almost all specialties would experience no more than 1% increase or decrease in RVUs as a result of this proposed policy, although the effect on individual services may be greater. It would be implemented in a budget neutral manner overall, however, and there would be a net increase to the conversion factor because of its implementation. </p><p><u></u></p><h2>Practice Expense Methodology</h2><p>CMS states that over the past two decades or so, there has been a steady decline in the percentage of physicians working in private practice, with a corresponding rise in physician employment by hospitals, as well as growth in the percentage of physicians who practice exclusively, or almost exclusively, in the facility setting. When the PFS was established, the methodology for allocating indirect PE was based in part on an assumption that the physician maintained an office-based practice while also practicing in a facility setting. However, CMS is concerned that this methodology may now overstate the indirect costs incurred by facility-based physicians.</p><p>Beginning in CY 2026, for each service valued in the facility setting under the PFS, CMS proposes to reduce the portion of the facility PE RVUs allocated based on work RVUs to half the amount allocated to non-facility (office-based) PE RVUs. The agency states that specialties that practice primarily in the facility setting would see a decrease in PE RVUs as a result of this redistribution. Specialties that perform services primarily in the non-facility (office-based) setting would see an increase in PE RVUs.</p><h2>Use of Outpatient PPS Data for PFS Rate-setting</h2><p><u> </u></p><p>For several types of PFS services, CMS proposes deviating from its historic use of American Medical Association survey data and instead using auditable, routinely updated hospital data. Specifically, for CY 2026, the agency proposes to:</p><ul><li>Use the relationship between outpatient PPS ambulatory payment classification payment rates to establish PE RVUs for radiation oncology treatment delivery and superficial radiation treatment services.</li><li>Use outpatient PPS cost data to establish the value for the PE portion of remote physiologic monitoring because it believes that these cost data are more accurate than the PE inputs currently used.</li><li>Use hospital outpatient utilization patterns to set payment rates for three categories of skin substitutes.</li></ul><h2>TELEHEALTH SERVICES</h2><p><strong>Medicare Telehealth Services List</strong></p><p>CMS proposes changing its review process for the Medicare Telehealth Services List by removing the distinction between provisional and permanent services. It also would limit its review to whether the service can be furnished using an interactive, two-way audio/video telecommunications system.</p><p><strong>Telehealth Waivers</strong></p><p>The proposed rule would make changes to several telehealth waivers, including:</p><ul><li>Permanently removing frequency limitations for subsequent inpatient visits, nursing facility visits and critical care consultations.</li><li>Permanently adopting a definition of direct supervision to include virtual presence via audio/video real-time communications technology.</li><li>Extending the ability for federally qualified health centers and rural health clinics to bill telehealth services through Dec. 31, 2026.</li></ul><p>CMS does not appear to address its prior waiver that allowed providers to report practice addresses instead of home addresses when they perform services from their home. In addition, for services provided in metropolitan statistical areas (MSAs), it does not propose to continue to allow virtual supervision of residents when the service is performed virtually across teaching settings. Instead, this would only be allowed for services provided in non-MSAs. </p><h2>MEDICARE PRESCRIPTION DRUG INFLATION REBATE PROGRAM</h2><p>CMS proposes new methodologies to calculate units of Medicare Part D drugs purchased under the 340B drug pricing program that must be excluded from the calculation of Medicare inflation rebates starting on Jan. 1, 2026, as required under the Inflation Reduction Act of 2022. The agency proposes a claims-based methodology that would determine which Part D drug units are 340B-eligible for exclusion from the inflation rebate calculation and solicits comments on two such methodologies: a prescriber-pharmacy methodology and a beneficiary-pharmacy methodology.  One method assumes that any drug that is prescribed by a provider that is affiliated with a 340B provider and is dispensed by a 340B retail pharmacy is a 340B drug. The other assumes that any drug prescribed to a patient of a 340B provider and is dispensed by a 340B retail pharmacy is a 340B drug. The agency notes that these methodologies may overestimate the number of 340B units for exclusion from the inflation rebate calculation.</p><p>As a potential future alternative to the claims-based methodology, CMS proposes establishing a claims data repository to receive voluntary submission from 340B covered entities of certain Part D claims data elements to identify which drug units are 340B-eligible. The agency has issued an Information Collection Request alongside the proposed rule that details the format and process of submitting data elements to the repository.</p><p>The agency anticipates the repository would go live in Fall 2026 with the goal of testing the usability of a 340B repository in identifying and excluding 340B drug units in the calculation of Medicare Part D inflation rebates. The agency encourages all 340B covered entities to participate in the voluntary submission process and notes that it may require mandatory reporting in future rulemaking.</p><h2>AMBULATORY SPECIALTY MODEL</h2><p>CMS proposes creating the ASM, which would focus on low back pain and congestive heart failure. ASM would begin on Jan. 1, 2027, and run for five performance years, through Dec. 31, 2031.</p><p>ASM would include specialists who frequently treat low back pain or heart failure, practice within selected core-based statistical areas or metropolitan divisions, and have historically treated at least 20 fee-for-service (FFS) Medicare patients with low back pain or 20 FFS Medicare patients with heart failure over a 12-month period. Physicians would be assessed individually, not at the practice level. Low back pain specialists would include those practicing in anesthesiology, pain management, interventional pain management, neurosurgery, orthopedic surgery, and physical medicine and rehabilitation. Heart failure specialists would include those practicing in cardiology.</p><p>ASM participants would be assessed across four categories: quality, cost, care improvement activities and improving interoperability. Their scores across these categories would determine whether they receive positive, neutral or negative payment adjustments on future Medicare Part B claims for covered services. In the first payment year, these adjustments would range from -9% to +9%. All participants would be subject to this risk. Total positive adjustments for high performers would not exceed the total negative adjustments for low performers.</p><p><strong>BEHAVIORAL HEALTH SERVICES</strong></p><p>CMS proposes updates intended to enhance integration of behavioral health into primary care. First, the agency clarifies that marriage and family therapists and mental health counselors can bill Medicare directly for Community Health Integration and Principal Illness Navigation services. Next, CMS proposes creating add-on codes for Advanced Primary Care Management services that complement previously established Behavioral Health Integration or psychiatric Collaborative Care Model services. Lastly, CMS proposes deleting the HCPCS code finalized in the CY 2024 PFS final rule that describes social determinants of health risk assessment and altering language throughout the regulations to refer to “upstream drivers” of health rather than “social determinants.”</p><p>The agency also proposes updates to previously established payment codes for services provided using digital mental health treatment (DMHT) devices, including expanding payment for use of DMHT for attention deficit hyperactivity disorder. CMS seeks comments on other ways to enhance the use of digital tools, such as those used to maintain or encourage a healthy lifestyle; administration of an FDA-authorized eye-tracking technology in the diagnosis of autism spectrum disorder on pediatric patients; and payment policies for the use of software-based clinical decision support technologies (referred to Software as a Service, or SaaS).</p><p><strong>MEDICARE SHARED SAVINGS PROGRAM</strong></p><p>CMS proposes several changes to the Shared Savings Program’s policies regarding performance, financial methodology, beneficiary assignment methodology, participation options and availability of new payment options (among other changes) beginning with performance year 2027. One such change would be to reduce the time an accountable care organization (ACO) can participate in a one-sided model of the BASIC track from seven to five years to encourage participation in two-sided risk models. CMS also would modify eligibility and financial reconciliation requirements related to the statutory requirement that ACOs have at least 5,000 assigned Medicare FFS beneficiaries; the agency believes these changes would allow for flexibility in the minimum number of assigned beneficiaries required in benchmark years.</p><p>CMS also proposes updates to the quality performance standards and other quality reporting requirements in the program. The agency would revise the definition of a beneficiary eligible for Medicare Clinical Quality Measures to overlap more with the beneficiaries assignable to an ACO. CMS proposes to remove the health equity adjustment applied to an ACO’s quality score beginning with performance year 2025 and remove the screening for social drivers of health measure from the APP Plus quality measure set. The agency also would require Consumer Assessment of Healthcare Providers and Systems for Merit-based Incentive Payment System (MIPS) survey vendors to offer the survey via web mode (in addition to mail and phone) beginning in 2027. CMS also proposes to expand the application of extreme and uncontrollable circumstances policies to ACOs affected by cyberattacks.</p><p><strong>QUALITY PAYMENT PROGRAM</strong></p><p>CMS proposes several changes to further the goal of phasing out MIPS in favor of participation in specialty-specific MIPS Value Pathways (MVPs). Several of these are administrative, including a new requirement for the MVP group registration process to include a multispecialty self-attestation requirement and the maintenance of the MVP group reporting option for multispecialty groups with a small practice designation.</p><p>The agency also makes proposals to support clinicians in data collection and reporting. First, CMS would update the MVP inventory to stratify quality measures by clinical conditions and/or episodes of care to help clinicians select the most clinically relevant measures. Next, the agency would allow qualified clinical data registries additional time (i.e., through the CY 2025 performance period) to support finalized MVPs.</p><p>The agency proposes six new MVPs around the following topics:</p><ul><li>Diagnostic radiology.</li><li>Interventional radiology.</li><li>Neuropsychology.</li><li>Pathology.</li><li>Podiatry.</li><li>Vascular surgery.</li></ul><p>CMS also proposes modifications to the following performance categories:</p><p><strong>Quality Performance.</strong><em> </em>CMS proposes establishing an updated inventory of 190 MIPS measures. The agency would remove 10 measures that are topped out, no longer aligned with clinical guidelines, no longer maintained by measure stewards or focused on process. CMS would adopt five new MIPS electronic clinical quality measures as well as measures that focus on outcomes. CMS also proposes substantive changes to 42 MIPS quality measures.</p><p><strong>Cost Performance.</strong> CMS proposes to modify the total per capita cost measure beginning with the CY 2026 performance period. The agency also proposes updating the operational list of care episodes and patient condition groups and codes to reflect recent coding changes. Finally, CMS proposes adopting, beginning with the CY 2026 performance period, an informational-only feedback period for MIPS cost measures with a lookback period of two years.</p><p><strong>Improvement Activities.</strong> In alignment with the administration’s focus on preventive care and well-being, CMS proposes adding a new “Advancing Health and Wellness” subcategory within the improvement activities performance category. Moreover, CMS will add three new improvement activities into the Population Management and Patient Safety and Practice Assessment subcategories and remove the Achieving Health Equity subcategory.</p><p><strong>Promoting Interoperability. </strong>CMS proposes modifying two measures in this category and adopting one new optional bonus measure related to public health reporting. The agency also proposes measure suppression and exclusion processes and seeks comments on other measures in this category.</p><p>The agency would continue using the CY 2017 performance period (2019 MIPS payment year) to establish the performance threshold, which would be 75 points for the CY 2026 performance period (2028 MIPS payment year) through the CY 2028 performance period (2030 MIPS payment year).</p><p>Finally, CMS seeks comments on several topics related to digital quality measurement in MIPS, specifically the use of Fast Healthcare Interoperability Resource (FHIR)-based quality reporting.</p><h2>REQUEST FOR INFORMATION: EXECUTIVE ORDER 14192 ‘UNLEASHING PROSPERITY THROUGH DEREGULATION’</h2><p>On Jan. 31, 2025, President Trump issued Executive Order 14192, “Unleashing Prosperity Through Deregulation,” which states the administration’s policy to significantly reduce the private expenditures required to comply with federal regulations. Accordingly, CMS is soliciting public input on approaches and opportunities to streamline regulations and reduce administrative burdens on providers, suppliers, beneficiaries and other interested parties participating in the Medicare program. CMS is <a href="https://www.cms.gov/medicare-regulatory-relief-rfi">collecting</a> responses and requests stakeholders submit comments through the provided web link.</p><h2>FURTHER QUESTIONS</h2><p>CMS will accept comments on the proposed rule through Sept. 12. The final rule will be published around Nov. 1. The policies and payment rates will generally take effect Jan. 1, 2026.</p><p>If you have further questions, contact Joanna Hiatt Kim, AHA’s vice president of payment policy, at <a href="mailto:jkim@aha.org">jkim@aha.org</a>. </p></div><div class="col-md-4"><a href="/system/files/media/file/2025/07/cms-issues-cy-2026-physician-fee-schedule-proposed-rule-advisory-7-15-2025.pdf" target="_blank" title="Click here to download the Regulatory Advisory: CMS Issues CY 2026 Physician Fee Schedule Proposed Rule PDF."><img src="/sites/default/files/2025-07/image-cms-issues-cy-2026-physician-fee-schedule-proposed-rule-advisory-7-15-2025-638-px.png" data-entity-uuid data-entity-type="file" alt="Regulatory Advisory: CMS Issues CY 2026 Physician Fee Schedule Proposed Rule Cover." width="NaN" height="NaN"></a></div></div></div> Tue, 15 Jul 2025 17:09:53 -0500 Advisory /advisory/2025-07-02-cms-releases-cy-2026-home-health-pps-proposed-rule <div class="container"><div class="row"><div class="col-md-8"><p>The Centers for Medicare & Medicaid Services (CMS) June 30 issued its calendar year (CY) 2026 <a href="https://www.federalregister.gov/public-inspection/2025-12347/medicare-and-medicaid-programs-calendar-year-2026-home-health-prospective-payment-system-rate-update" title="FY 2026 Proposed Rule">proposed rule</a> for the home health (HH) prospective payment system (PPS). This regulatory advisory reviews highlights of this rule. CMS will accept comments on the HH proposed rule until Sept. 2.</p><div class="panel module-typeC"><div class="panel-heading"><p><strong>KEY HIGHLIGHTS</strong></p><p>The rule would, among other proposals: </p><ul><li>Reduce HH payments by an estimated 6.4%, or $1.14 billion, in CY 2026, relative to CY 2025. This includes a net 2.4% market basket update, an 8.3%reduction due to budget neutrality requirements of the Patient-Driven Groupings Model (PDGM), and a 0.5% reduction for high-cost outlier payments.</li><li>Remove quality measures relating to COVID-19 vaccinations as well as four standardized patient assessment data elements focused on living situation, food and utilities.</li><li>Create several new and revised provider enrollment provisions to reduce improper payments.</li><li>Solicit comments on approaches and opportunities to streamline regulations and reduce administrative burdens on hospitals and other providers.</li></ul></div></div><h2>AHA TAKE</h2><p>The AHA is deeply concerned with CMS’ massive proposed cuts to HH payment rates. Hospitals and other providers rely on both hospital-based and freestanding HH agencies to care for patients following discharge. Reimbursement cuts of this magnitude would reduce capacity and therefore place a burden and strain back on hospitals and patients who would be unable to access safe, effective and appropriate post-hospital care. The AHA will urge CMS to reconsider its approach to these payment reductions to ensure access for patients in need of continued recovery at home.</p><p>Highlights from the rule follow.</p><h2>PROPOSED HH PPS PAYMENT CHANGES</h2><h3>Overall Proposed CY 2026 Payment Update</h3><p>Under this proposed rule, HH PPS payments would decrease by 6.4%, or $1.14 billion, after all policy changes, in CY 2026 compared to CY 2025. This includes a proposed 3.2% market-basket increase, reduced by a 0.8% productivity adjustment as required by statute. CMS also proposes an 8.3% cut that it states is necessary to help achieve budget neutrality with regard to the implementation of the PDGM, which is described in more detail below. Finally, CMS is proposing a 0.5% decrease related to outlier payments.</p><h3>Budget Neutral Implementation of PDGM</h3><p>The Bipartisan Budget Act of 2018 required CMS to implement the PDGM in a budgetneutral manner, as calculated through annual assessments of the differences between assumed and actual behavior changes on aggregate expenditures. These calculations were required to begin in 2020 and end in 2026. The law also allows CMS to make temporary and permanent increases or decreases, as needed. The initial implementation of this new case-mix classification system on Jan. 1, 2020, included a substantial behavioral offset of 4.36 percentage points. Since then, CMS has applied a series of additional permanent adjustments. This year, CMS determined it must apply an additional permanent adjustment to the base payment rate of -4.06% to ensure budget neutrality. Since this adjustment is only applied to the base payment rate and not to per-visit payments for low volume cases, the overall decrease in payments due to this proposal would be -3.7%, or $655 million, according to CMS.</p><p>Statute also requires CMS to implement one or more temporary adjustments to recoup past overpayments if necessary. CMS had not previously proposed such an adjustment but is doing so for the first time in this proposed rule. Specifically, it proposes applying a -5.0% temporary adjustment to the base payment rate for CY 2026, which would result in a net -4.6% decrease to overall payments. CMS says this temporary adjustment would recoup $786 million of the $5.3 billion in overpayments it has estimated for CYs 2020-2024. The agency also says it plans to keep the -5.0% reduction in place indefinitely until it can meet its budget neutrality obligations.</p><h3>Updated 30-day Episode Rates</h3><p>After applying the net market basket increase and behavioral adjustment, as well as budget neutrality factors for updated case-mix weights, wage indices and the laborrelated share, CMS is proposing a standardized 30-day payment amount of $1,933.61. This is the standardized amount that is multiplied by case-mix weight and other factors to determine the final payment for claims. The chart below from the proposed rule provides a breakdown of these changes. Providers who fail to submit quality data would receive a two-percentage-point reduction in this payment factor.</p><img src="/sites/default/files/inline-images/image_59.png" data-entity-uuid="e7cdb9ef-2dcf-4d8c-939d-9224f8483465" data-entity-type="file" alt="Table 26:" width="626" height="218"><h3>Case-mix Weights</h3><p>PDGM categorizes patients into one of 432 payment units, known as HH resource groups (HHRGs), using patient assessment data collected with the OASIS tool and other data. CMS annually recalibrates the HH case-mix weights based on the most recent, complete year of claims and patient assessment data. To recalibrate the proposed CY 2026 weights, CMS used CY 2024 data for 30-day episodes under PDGM. This is the same methodology used by CMS for CY 2025. The proposed CY 2026 case-mix weights are provided in Table 25 in the proposed rule and are available for download from the <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/home-health/home-health-prospective-payment-system-regulations-and-notices/cms-1828-p" title="CMS HH PPS webpage.">CMS HH PPS webpage</a>.</p><h3>High-cost Outliers</h3><p>HH PPS outlier payments are applied to 30-day episodes with estimated costs that exceed the outlier threshold, which is the sum of the payment amount and a wageadjusted fixed-dollar loss (FDL) amount. The FDL amount is calculated by multiplying an FDL ratio by the payment amount for that claim. The payment made to providers for qualifying outlier claims is a percentage (referred to as the loss-sharing ratio) of the costs that surpass the threshold. For the HH PPS, statute requires that the FDL amount and the loss-sharing ratio be set to target total outlier payments at 2.5% of aggregate payments. CMS is not proposing any change to the existing 0.80 (80%) loss-sharing ratio. However, it is proposing a higher FDL ratio, 0.46, up from 0.35, which it says would decrease outlier payments by approximately $90 million (or 0.5% of total payments).</p><h3>Proposed Changes to the Face-to-face Encounter Policy</h3><p>CMS currently allows nonphysician practitioners to perform the required face-to-face encounter regardless of whether they cared for the patient in a hospital or post-acute facility or were the certifying practitioner. However, if a physician performed the face-to-face encounter, they were required to be the certifying physician or have previously cared for the patient. CMS proposes removing this restriction, which would allow physicians to perform the face-to-face encounter regardless of whether they are the certifying physician or have previously cared for the patient.</p><h2>HOME HEALTH QUALITY REPORTING AND VALUE-BASED PURCHASING PROGRAMS</h2><p>For the Home Health Quality Reporting Program, CMS proposes to remove the measure assessing the percentage of patients receiving COVID-19 vaccinations. The agency also would remove four standardized patient assessment data elements focused on living situation, food and utilities. The rule also includes requests for information on changing the data submission deadline for HH QRP data, advancing digital quality measures, and new measure concepts for the HH QRP. CMS also proposes adding four new measures to the HH Value-Based Purchasing Model – Medicare Spending per Beneficiary, and three measures assessing patient functional improvement in dressing and bathing.</p><h2>MEDICARE PROVIDER ENROLLMENT</h2><p>CMS proposes several new and revised provider enrollment provisions to reduce improper payments. These include several new grounds for retroactive revocation of a provider’s enrollment in Medicare, such as if a beneficiary attests that the provider did not furnish the service that was claimed. CMS also proposes deactivating an enrolled physician or practitioner’s billing privileges if they have not ordered or certified services for 12 consecutive months.</p><h2>REQUEST FOR INFORMATION: EXECUTIVE ORDER 14192 “UNLEASHING PROSPERITY THROUGH DEREGULATION</h2><p>On Jan. 31, 2025, President Trump issued Executive Order (EO) 14192, "Unleashing Prosperity Through Deregulation," which states the administration’s policy to significantly reduce the private expenditures required to comply with federal regulations. Accordingly, CMS is soliciting public input on approaches and opportunities to streamline regulations and reduce administrative burdens on providers, suppliers, beneficiaries and other interested parties participating in the Medicare program. CMS is collecting responses at <a href="https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.cms.gov%2Fmedicare-regulatory-relief-rfi&data=05%7C02%7Cjgold%40aha.org%7C4cd60274604142c4278308dd7b7460c2%7Cb9119340beb74e5e84b23cc18f7b36a6%7C0%7C0%7C638802461951091442%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=oVpGbZYA%2Bop4qTxZ4eXdtgj417%2BP2swWi8qUj%2FsAsYw%3D&reserved=0" title="CMS response collection webpage">https://www.cms.gov/medicare-regulatory-relief-rfi</a> and requests stakeholders submit comments through the provided web link.</p><h2>FURTHER QUESTIONS</h2><p> Please contact Jonathan Gold, AHA’s senior associate director of payment policy, at<br><a href="mailto:jgold@aha.org" target="_blank" title="Gold Email address">jgold@aha.org</a> with any questions.</p><p> </p></div><div class="col-md-4"><a href="/system/files/media/file/2025/07/cms-releases-cy-2026-home-health-pps-proposed-rule-advisory-7-2-2025.pdf" target="_blank" title="Click here to download the Regulatory Advisory: CMS Releases CY 2026 Home Health PPS Proposed Rule PDF."><img src="/sites/default/files/2025-07/cover-cms-releases-cy-2026-home-health-pps-proposed-rule-advisory-7-2-2025.png" data-entity-uuid data-entity-type="file" alt="Regulatory Advisory: CMS Releases CY 2026 Home Health PPS Proposed Rule cover." width="638" height="831"></a></div></div></div> Wed, 02 Jul 2025 11:19:44 -0500 Advisory /advisory/2025-06-28-senate-releases-legislative-text-substitute-hr1-one-big-beautiful-bill-act <div class="container"><div class="row"><div class="col-md-8"><p>The Senate has released its <a href="https://www.budget.senate.gov/imo/media/doc/the_one_big_beautiful_bill_act.pdf">legislative text</a> for the substitute to H.R. 1, One Big Beautiful Bill Act (OBBBA), a sweeping package that would enact many of President Trump’s legislative priorities on taxes, border security, energy and deficit reduction. The bill, which Republicans are attempting to pass through the reconciliation — a budget tool that gives Congress a fast-track mechanism to avoid the Senate filibuster and pass legislation with a simple majority — includes significant policy changes to Medicaid and the Health Insurance Marketplaces.</p><p>While the AHA continues to review the bill's text, below are some key provisions of importance to hospitals and health systems, as well as a statement AHA shared with the media.</p><p>While many of the provisions are the same or similar to the Senate Finance Committee (SFC) language released <a href="https://www.finance.senate.gov/chairmans-news/chairman-crapo-releases-finance-committee-reconciliation-text">June 16</a> and delineated in the <a href="/advisory/2025-06-16-senate-finance-committee-releases-legislative-text-reconciliation-bill">AHA Legislative Advisory</a>, there are some additions, including a rural hospital fund and a physician-payment fix for 2026, and modifications, including new start dates for Medicaid provider taxes and state-directed payments. Note that several provisions in the full Senate bill differ from those in the <a href="/advisory/2025-05-22-aha-summary-one-big-beautiful-bill-acts-provisions-impacting-hospitals-and-health-systems">House bill passed</a> on May 22.</p><p>The <a href="/issue-landing-page/2025-02-07-budget-reconciliation-process-resource-page">reconciliation process</a> is not over with the Senate vote. Under the rules, the reconciliation bill is limited to 20 hours of debate followed by unlimited amendments prior to the final vote. Both chambers must pass an identical bill to complete the reconciliation process and send the bill to the president for signature or veto. The AHA today will send members details on next steps and resources to engage lawmakers.</p><h2>AHA Statement</h2><p>In a statement shared with the media this morning, AHA President and CEO Rick Pollack said, “On behalf of the patients and communities we serve, America’s hospitals oppose the Senate substitute to the One Big Beautiful Bill Act<strong>.</strong></p><p>“This legislation will put at risk the 72 million Americans who rely on Medicaid for their health care and jeopardize the hospitals that serve them. It will adversely impact critical care for children, pregnant women, the elderly, disabled and millions of working Americans. The sheer magnitude of these cuts, the largest ever proposed by Congress, will dramatically increase the number of uninsured and undermine the ability of hospitals across America to provide critical services to everyone.</p><p>“We are disappointed that the Senate bill goes in the wrong direction and is substantially worse than its House counterpart.</p><p>“By making severe limitations to provider taxes and state directed payments, two lifelines for hospitals, the bill will result in the curtailing of essential services and the closure of hospitals, particularly in rural areas.</p><p>“Without modifications during the consideration of the legislation, we urge the Senate to reject this bill. As written, it will negatively impact not only Medicaid beneficiaries but also the health care of all Americans.”</p><h2>Key Provisions of Interest to Hospitals and Health Systems</h2><p><strong>Medicaid provider taxes (Section 71117).</strong> The legislation would freeze provider taxes as of the <strong>date of enactment</strong>. For new taxes, the “hold harmless threshold” is set at 0%.</p><ul><li>For expansion states, beginning in fiscal year (FY) 2028 — <em><strong>one year later than the SFC proposal</strong></em> — and continuing through 2032, their threshold will be reduced by 0.5% annually until the threshold reaches 3.5% (excluding nursing homes and intermediate care facilities).</li><li>Non-expansion states will remain frozen at their provider tax rate <strong>as of enactment.</strong></li></ul><p><strong>Medicaid state-directed payments (71118). </strong>The legislation would cap state-directed payments (SDPs) at 100% of Medicare in expansion states and 110% of Medicare in non-expansion states. The legislation would temporarily grandfather those SDPs approved (or where there was a good faith effort to be approved) by May 1, 2025. The updated language includes the following changes:</p><ul><li>Removes language that would have allowed preprints to be submitted to the secretary prior to enactment.</li><li>For payments for <strong>rural hospitals</strong>, if a state has obtained approval or good faith effort <em>before enactment</em> of the legislation,<strong> </strong>the SDP may temporarily exceed Medicare payment limits.  Rural hospitals include those located in a rural area, treated as being in a rural area, or located in a rural census tract, as well as critical access hospitals, sole community hospitals, Medicare dependent hospitals, low volume hospitals and rural emergency hospitals. Payments for non-rural hospitals are subject to the May 1, 2025, deadline for approval (or good faith effort to be approved).</li><li>The total SDP amount for all hospitals in all states would be reduced by 10 percentage points annually until the specified Medicare payment rate limit is achieved, beginning with the rating period on or after Jan. 1, 2028 — <em><strong>one year later than the SFC proposal</strong></em>.</li></ul><p><strong>Rural health transformation program (71401) — New. </strong>The legislation would create a $25 billion rural stabilization fund, to be paid out as follows: $10 billion in FYs 2028 and 2029, $2 billion in FYs 2030 and 2031, and $1 billion in FY 2032. Of that total amount, half is distributed equally among all states, and half is distributed based on CMS’ discretion, with it targeted at states with more rural areas.  </p><p><strong>Temporary payment increase under the Medicare physician fee schedule to account for exceptional circumstances (71202) — New.</strong> The legislation would provide a set update to the Physician Fee Schedule of 2.5% for calendar year (CY) 2026 only. There is no adjustment for CY 2025.</p><h2>Other Additions in the Senate Bill</h2><ul><li>The bill makes certain adjustments to coverage of home and community-based services under Medicaid (Sec. 71123).</li><li>The bill provides an enhanced Federal Medical Assistance Percentage (FMAP) match for certain “high poverty states” determined annually (Sec. 71124).</li><li>The bill modifies the Inflation Reduction Act to exclude orphan drugs under the Drug Price Negotiation Program (Sec. 71203).</li><li>The bill includes a cost-of-living adjustment to the non-labor-related portion of hospital outpatient payments in Alaska and Hawaii (Sec. 71204).</li><li>The bill provides a safe harbor to allow telehealth services to be provided pre-deductible for patients with high-deductible health plans (Sec. 71306).</li><li>The bill allows bronze and catastrophic plans to contribute to health savings accounts (Sec. 7130).</li><li>The bill allows individuals in high-deductible health plans to enroll in direct primary care service arrangements and to use their health savings accounts for payment (Sec. 71308).</li></ul><h2>The Senate Bill No Longer Includes</h2><ul><li>A provision that would have reinstated direct cost-sharing reduction payments to insurers starting in 2026.</li><li>A provision that made changes to the public service loan forgiveness program that would limit eligibility for medical residents.</li><li>A provision that prohibited federal financial participation under Medicaid and CHIP for individuals without verified citizenship, nationality or satisfactory immigration status.</li></ul><h2>The Following Provisions in the Senate Bill Have No Material Changes from the Senate Finance Committee's July 16 Draft Legislation</h2><ul><li><strong>Medicaid community engagement requirements (Section 71121). </strong>The legislation would require certain nonpregnant, nondisabled adult Medicaid beneficiaries to meet certain community engagement requirements (“work requirements”) beginning Dec. 31, 2026. Individuals must work or engage in qualifying activities (e.g., community service, educational programs, job training) for no less than 80 hours/month. The legislation would exempt, among other groups, parents, guardians and caretaker relatives of children aged 14 or under, or a disabled individual. States would be permitted to receive temporary exemptions with Department of Health and Human Services (HHS) approval. The legislation would limit the types of entities that can contract with states to help implement this provision, effectively barring Medicaid managed care plans from assisting. The bill provides $200 million in FY 2026 grants for state implementation and $50 million for federal administration. In contrast, H.R. 1 exempted parents and caretakers of a disabled individual or dependent child (18 or under), did not explicitly prohibit contractors with financial interests, and provided $100 million for state implementation of the provisions.</li><li><strong>Eligibility redeterminations (Section 71107).  </strong>Consistent with H.R. 1, the legislation would require states to redetermine eligibility once every six months for beneficiaries enrolled through the Medicaid expansion eligibility pathway, beginning in calendar year 2027.</li><li><strong>Modifying retroactive eligibility under the Medicaid and CHIP programs (Section 71113). </strong>The legislation would limit the timeframe for retroactive Medicaid and CHIP eligibility to 30 days prior to the application date for expansion enrollees, and 60 days prior to the application date for traditional enrollees, as opposed to the current 90-day period.</li><li><strong>Medicaid cost-sharing requirements for certain expansion individuals (Section 71122). </strong>Consistent with H.R. 1, the legislation would require Medicaid expansion enrollees with incomes above 100% of the federal poverty level (FPL) to pay up to $35 in cost sharing per service. Cost sharing for non-emergency services provided in a hospital emergency department may exceed $35. The provision would exclude certain services, including primary care, pregnancy-related services, mental health or substance use disorder services. Total cost sharing may not exceed 5% of family income.</li><li><strong>Prohibition on implementation of certain regulations (Sections 71101, 71102, and 71112).</strong> Consistent with H.R. 1, the legislation prohibits the HHS secretary from implementing, administering or enforcing the eligibility and enrollment rules (including the final nursing home staffing rule, final Medicaid eligibility and enrollment rule, and final Medicare savings program eligibility and enrollment rule) for 10 years (ending Sept. 30, 2034).</li><li><strong>Public program eligibility for certain non-citizens (Sections 71109, 71201 and 71301). </strong>The legislation would restrict eligibility for Medicare, Medicaid and premium tax credits for marketplace coverage for non-citizens to the following groups: legal permanent residents, certain Cuban immigrants, and Compact of Free Association migrants lawfully residing in the United States. This expands on provisions included in H.R. 1.</li><li><strong>Expansion FMAP for emergency Medicaid (Section 71110).</strong> Beginning Oct. 1, 2026, the legislation would limit the Federal Medical Assistance Percentage (FMAP) for emergency Medicaid services provided to unlawfully present aliens who, except for their immigration status, would qualify for expansion to the state’s traditional FMAP. In contrast, H.R. 1 did not include provisions limiting the FMAP for emergency Medicaid.</li><li><strong>Disallowing premium tax credits during periods of Medicaid ineligibility due to alien status (Section 71302). </strong>Consistent with H.R. 1, the legislation would disallow undocumented immigrants who report income below 100% of the federal poverty level and are in their five-year Medicaid waiting period (due to immigration status) to receive premium tax credits to purchase health insurance on the marketplaces.</li><li><strong>Requiring verification of eligibility for the premium tax credit (Section 71303). </strong>Consistent with H.R. 1, the legislation would prohibit an individual from claiming the premium tax credit if the individual’s eligibility related to income, enrollment and other requirements is not actively verified annually. This would prohibit automatic reenrollment for enrollees receiving premium tax credits by requiring them to actively prove tax credit eligibility each year. Over half of all returning enrollees in 2025 enrolled through automatic reenrollment.</li><li><strong>Disallowing premium tax credit in case of certain coverage enrolled in during the special enrollment period (Section 71304).</strong> Consistent with H.R. 1, the legislation would prohibit individuals from receiving premium tax credits if they enroll in health coverage on the marketplace through a special enrollment period associated with their income.</li><li><strong>Eliminating limitation on recapture of advance payment of premium tax credit (Section 71305). </strong>Mostly consistent with H.R. 1, the legislation would remove the repayment limits and require affected individuals to reimburse the Internal Revenue Service for the full amount of excess tax credit received. The Senate language includes a special rule for those with incomes that unexpectedly fall below 100% of the federal poverty level so that they do not need to repay the full amount of their premium tax credits.</li><li><strong>Endowment tax for universities (Section 70415)</strong>: The legislation would amend the excise tax rate for universities based on student endowments. The rates are as follows: 1.4% for student endowments ranging from $500,000-$750,000 (current law), 4% for student endowments ranging from $750,000-$2 million, and 8% for all student endowments above $2 million. In contrast, H.R. 1 had a maximum excise tax rate of 21% for student endowments above $2 million.</li><li><strong>Executive compensation (Section 70416)</strong>: The legislation would limit tax-exempt organizations’ ability to deduct compensation over $1 million.</li><li><strong>Charitable contributions for non-itemizers (Section 70424)</strong>: The legislation would create a permanent deduction on charitable contributions for taxpayers who do not elect to itemize.</li><li><strong>Floor on charitable contributions (Section 70425)</strong>: The legislation would impose a 0.5% floor on charitable contributions for taxpayers who elect to itemize for taxable years after Dec. 31, 2025.</li><li><strong>1% floor on deduction of charitable contributions made by corporations (Section 70426)</strong>: The legislation would allow a deduction for corporate charitable contributions only to the extent that the aggregate of corporate charitable contributions exceeds 1% of a taxpayer’s taxable income and does not exceed 10% of the taxpayer’s taxable income.</li></ul><h2>Further Questions</h2><p>If you have further questions, please contact AHA at 800-424-4301.</p></div><div class="col-md-4"><a href="/system/files/media/file/2025/06/senate-releases-legislative-text-for-substitute-to-hr-1-the-one-big-beautiful-bill-act-advisory-6-28-2025.pdf" target="_blank" title="Click here to download the Legislative Advisory: Senate Releases Legislative Text for the Substitute to H.R.1, the One Big Beautiful Bill Act PDF."><img src="/sites/default/files/2025-06/cover-senate-releases-legislative-text-for-substitute-to-hr-1-the-one-big-beautiful-bill-act-advisory-6-28-2025-r.png" data-entity-uuid data-entity-type="file" alt="Legislative Advisory: Senate Releases Legislative Text for the Substitute to H.R.1, the One Big Beautiful Bill Act cover." width="640" height="834"></a></div></div></div> Sat, 28 Jun 2025 08:24:25 -0500 Advisory