What to expect from the next round of Medicare pay regulations

Modern Healthcare – Tuesday, October 14, 2025
By Bridget Early

The Centers for Medicare and Medicaid Services is slated to publish regulations setting Medicare reimbursements for outpatient care in 2026 over the coming weeks.

The final rules for physician services, hospital outpatient procedures, home healthcare and dialysis also are expected to enact significant new changes, including new policies on “site-neutral” outpatient reimbursement, 340B Drug Pricing Program payments and the system that calculates physician fees.

Typically, CMS issues these regulations, which take effect in January, by Nov. 1 but the ongoing federal government shutdown could force a delay.

Here’s a refresher on what CMS proposed for Medicare outpatient reimbursements in 2026:

Reimbursements

CMS proposed modest pay increases for physicians, hospitals and dialysis providers and a substantial cut for home health providers.

Doctors would receive a 2.5% reimbursement increase through provisions in the new tax law. The conversion factor that translates the work physicians do into payment rates would be 3.62%, but 3.83% for doctors participating in alternative payment models.

Hospital outpatient reimbursements would rise 2.4%. Dialysis providers would get a 1.9% raise.

Home health providers would see a 6.4% pay cut. In a letter to CMS, the National Alliance for Care at Home criticized the proposal. “This is a systemic defunding of the Medicare home health benefit,” the home health trade group wrote.

340B clawbacks

The CMS plan to recoup $7.8 billion in overpayments made from 2018-2022 to safety-net hospitals participating in 340B relies on a steeper-than-anticipated across-the-board reimbursement cut.

Beginning in 2018, CMS reduced 340B payments by almost 30% and redistributed the savings across all hospital outpatient reimbursements. After years of litigation that reached the Supreme Court, CMS was ordered to unwind the policy.

In 2023, CMS announced it would handle the clawback by reimbursing 340B payments to the appropriate hospitals, then reducing all hospital outpatient payments 0.5% over 16 years beginning in 2026.

But in July, CMS proposed speeding up the process by cutting payments 2% for six years starting in 2026.

“Hospitals have been preparing for nearly two years,” the American Hospital Association wrote in a letter to CMS. “If the agency finalizes this unexpected quadruple annual increase from 0.5% to 2.0% just two months before 2026, the budgets that hospitals produced based on that 0.5% figure will be thrown out of whack, upsetting settled expectations with little time to readjust and creating serious cash flow problems.”

The Federation of American Hospitals, which represents for-profit health systems, and America’s Essential Hospitals, which represents safety-net facilities, likewise slammed the proposal and urged CMS to rethink its plans.

“The sudden reversal, which has occurred absent any meaningful change in statute, court ruling or substantive facts, amounts to a bait-and-switch that threatens the solvency of essential hospitals,” America’s Essential Hospitals wrote in a letter to CMS.

Physician ‘efficiency adjuster’

CMS proposed a 2.5% payment reduction for nearly 9,000 billing codes, many of which are associated with specialty care such as surgery or diagnostic imaging. CMS contends this “efficiency adjuster” would balance payments among different types of physicians and better support primary care.

The agency also proposed moving away from calculating rates using survey data from the Relative Value Update Committee, which the American Medical Association oversees. In a letter to CMS, the AMA argued the agency should work with doctors to increase primary care payments and ensure frequent reviews of codes with empirical data.

Other groups have criticized the approach, which they contend doesn’t account for complex services and could incentivize providers to prioritize volume over quality.

“CMS’ proposed efficiency adjustment and site-of-service payment differential focus on marginal redistributions while ignoring the core issue: Medicare Part B payments are insufficient and do not cover the full cost of care delivery,” the American Medical Group Association wrote in a letter to CMS.

The American Academy of Family Physicians described the proposal as “directionally appropriate” in a letter to CMS but encouraged the agency to begin with a narrower range of codes.

Physician payment model

CMS proposed the Ambulatory Specialty Model, a five-year mandatory payment program meant to improve prevention and early management of chronic conditions. The model, which would begin in 2027, requires medical specialists to share financial risk with CMS and improve care for heart failure and lower back pain.

CMS would use the Merit-based Incentive Payment System’s Value Pathways program to track quality, spending, technological interoperability and early intervention.

The AMA and the Medical Group Management Association asked CMS to make the model voluntary. The AMA also recommended the agency set a performance threshold rather than make comparisons within groups of participants.

The medical society also cautioned the policy may encourage smaller practices to seek buyers. “We are concerned that the current model design will not provide better support for independent practices and may lead them to look to help from larger organizations to maintain their financial sustainability,” the AMA wrote.

Site-neutral payment

CMS proposed paying hospital-owned outpatient facilities the same rate as physicians to administer medications, which it projects would save $270 million in 2026.

Hospitals criticized the site-neutral payment plan as having no statutory basis and as potentially devastating to emergency departments.

Others, such as the Blue Cross Blue Shield Association, favor the proposal.

“We encourage CMS to finalize this policy and expand other site-neutral payment policies within Medicare that will curb incentives for hospital acquisition of physician practices, reduce unnecessary Medicare spending and ensure beneficiaries are not subject to higher costs based solely on site of care,” the Blue Cross Blue Shield Association wrote in a letter to CMS.

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