2026 Medicare rules are ‘advancing site neutrality’ for pay, CMS leader says

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Medicare payment to hospitals could move toward site neutrality among health systems and physician offices under new rules proposed by the U.S. Centers for Medicare & Medicaid Services (CMS).

Leaders of Medicare say new patient-focused reforms will “modernize payments, expand access to care, and enhance hospital accountability,” with regulations proposed in the calendar year 2026 Hospital Outpatient Prospective Payment System (OPPS) and the Ambulatory Surgical Center (ASC) Payment System proposed rule. CMS this week announced the rule and the opening of a 60-day public comment period.

According to the CMS plan for 2026, Medicare “seeks to equalize payments for certain services delivered in hospitals and off-campus facilities, helping ensure beneficiaries aren’t penalized with additional copays simply based on where they receive care.”

The 2026 rule also proposes phasing out the inpatient-only list. The CMS leaders said that will give physicians greater flexibility to determine the most clinically appropriate setting for care and allow more patients to choose outpatient surgical options.

“We are building on our efforts to modernize Medicare payments by advancing site neutrality, simplifying hospital billing, and ensuring real prices — not estimates — are available to patients,” CMS Deputy Administrator and Medicare Director Chris Klomp said in the news release. “These changes help make hospital care more predictable, accountable, and affordable.”

Hospitals say: hold on

At first glance, it appears the new rule ignores key differences between hospital outpatient departments and other sites of care, said a statement by Ashley Thompson, senior vice president, public policy analysis and development for the American Hospital Association.

“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,” Thompson said. “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.”

The 2026 proposed rule could add fuel to a debate that has arisen in recent years about site-neutral payment. At times, independent physicians and hospital leaders have split on the issue. The doctors and site-neutral payment advocates have argued health care providers should get the same pay for the same services, regardless of the point of care, and that more payment for hospitals creates an incentive for hospitals to scoop up local doctors’ offices, leading to market consolidation. Hospital leaders argue they have greater expenses and regulations that physicians’ offices don’t have to deal with, and there is a perception that hospitals are overpaid when in reality many operate on thin financial margins.

Four goals for Medicare

CMS Administrator Mehmet Oz, MD, MBA, outlined four goals of the proposed changes:

• Reduce out-of-pocket costs for Medicare beneficiaries
• Expand choices in where patients can receive care
• Increase hospital accountability and transparency
• Safeguard the Medicare Trust Fund from waste and abuse

“We are advancing our mission to protect Medicare and its beneficiaries, fight fraud, and empower patients with access to the latest innovations, all while holding providers accountable and ensuring taxpayer dollars are spent wisely,” Oz said in the news release. “These reforms expand options and enforce the transparency Americans deserve to ensure they receive high-quality care without hidden costs.”

Healthy nation, healthy hospitals?

The CMS announcement referred to the agency’s role in the campaign to Make America Healthy Again, the initiative of Health and Human Services Secretary Robert F. Kennedy, Jr., in the administration of President Donald J. Trump.

For 2026, hospitals performing in the lowest quartile for safety would not qualify for a five-star rating; they would get an automatic one-star downgrade in CMS’s Hospital Star Rating System in future years.

The 2026 rule also would:

• Eliminate health equity and COVID-19 vaccine reporting requirements, which CMS described as “burdensome.”
• Adopt a measure to evaluate emergency department wait times, which are long.
• Solicit public input on new potential quality measures to rate nutrition, wellness and preventive health.

“CMS projects these proposals will improve access to outpatient care, reduce unnecessary costs, and deliver savings for both the Medicare program and beneficiaries, estimated at nearly $11 billion over the next 10 years,” the CMS announcement said. “The changes also support program sustainability by aligning payments more closely with the actual cost of care, helping ensure Medicare continues to deliver high-quality, patient-centered services nationwide.”

The proposed rule will be open for public comment for 60 days following its publication in the Federal Register.