CMS proposes $280 million hit to hospital payments

POLITICO – Tuesday, July 15, 2025
By Robert King

The Trump administration wants to cut $280 million in payments to certain hospital clinics for administering drugs to patients.

The goal of the cut, according to a proposed CMS payment rule released Tuesday, is to ensure Medicare beneficiaries don’t pay more for the same service at a hospital compared with an independent clinic. If finalized, the cut is likely to generate fierce blowback from the hospital industry, which has successfully fought similar congressional efforts.

Other parts of the proposed rule, which outlines 2026 Medicare payment rates for hospital outpatient services and ambulatory surgical centers, include new changes to boost price transparency. The rule has a 60-day comment period before final approval.

“These reforms expand options and enforce the transparency Americans deserve to ensure they receive high-quality care without hidden costs,” CMS Administrator Dr. Mehmet Oz said in a statement.

The first Trump administration in 2019 adopted a policy to lower payments for outpatient hospital clinics to bring them in line with independent clinics. Now CMS wants to expand that policy to include services for storing or administering pharmaceuticals to patients.

CMS estimates the change will reduce Medicare spending by $280 million, with $210 million going to Medicare and $70 million to Medicare beneficiaries thanks to lower coinsurance rates, according to a fact sheet on the rule.

Site-neutral payments — when Medicare pays the same amount for the same service, regardless of whether it’s provided — have gotten bipartisan support on Capitol Hill, but packages have never made it across the finish line in part due to fervent lobbying from the hospital industry.

Hospital groups have said the payment cuts will imperil finances for vulnerable hospitals. The American Hospital Association has said the higher payments are needed as hospitals must adhere to stricter regulatory and accreditation standards than standalone clinics.

Despite the proposed site-neutral cuts, the agency proposed increasing Medicare payment rates for outpatient services and ambulatory surgical center payments by 2.4 percent compared with last year.

The agency also proposed changes to price transparency, calling on hospitals to post “real, consumer-usable prices, not estimates, and provide data in standardized formats that allow patients to understand what their care will actually cost,” according to a release on the rule. Hospitals face fines if they fail to comply.

Both the Trump and Biden administrations have sought to bolster hospital price transparency, a traditionally opaque process. But compliance with the requirements have been mixed and it remains unclear whether consumers want to shop for lower hospital prices like they do for a car.

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