CMS’ 2026 Hospital Outpatient Prospective Payment System rule moves Medicare further toward site-neutral payment, as part of an effort to narrow long-standing payment gaps between hospital outpatient departments and ASCs.
According to a Health Affairs analysis, the payment rule not only updates reimbursement for outpatient and surgical care but also explicitly seeks feedback on the development of future site-neutral payment policies. CMS framed the proposal as part of a broader effort to reduce healthcare costs, improve patient care and increase efficiency in Medicare.
Hospitals have historically been paid more for similar outpatient services, largely due to facility-fee differences — an incentive policymakers say can encourage shifts in care from independent physicians and ASCs to higher-cost hospital outpatient settings after acquisitions.
In the 2026 final rule, CMS finalized site-neutral payment for certain drug administration services delivered in excepted off-campus provider-based departments by paying the Physician Fee Schedule-equivalent rate instead of the higher OPPS rate. The agency estimated the change would reduce OPPS spending by about $290 million in 2026, including about $220 million in Medicare savings and about $70 million in beneficiary savings from lower coinsurance.
CMS finalized plans to phase out the inpatient-only list over three years and will remove 285 primarily musculoskeletal procedures from the list next year. CMS will also add 560 codes to the ASC covered procedure list. By reducing the IPO list, CMS is giving beneficiaries and physicians greater flexibility in choosing lower-cost outpatient settings when clinically appropriate.
For ASC operators and physician groups, those shifts reinforce a competitive reset already underway.
“Every payer is focused on [site neutrality]. Medicare is doing away with the approved procedure list over the next three years. Everything is moving in that direction,” Compass Surgical Partners’ CEO Mark Langston told Becker‘s . “If a system is going to get paid much lower for doing procedures inside a higher-cost setting — and hospitals are higher-cost settings because they have more bricks, more overhead — you can’t change the bricks and mortar and the cost structure you have in place today. So they have to focus on getting the right case in the right setting.”
For Mr. Langston, the “day of reckoning” is here. “[It’s] a dynamic of getting hospitals to understand that this is in [their] best interest,” he said. “If they don’t figure [this] out, it’s eventually just going to happen — they’re going to make site neutrality.”
Others agree the impact could be disruptive.
“Site-neutral payments, if they are implemented, will be a true disruptor by removing financial incentives to do outpatient procedures in the hospital setting,” Hari Nathan, MD, PhD, associate professor of surgery at the Ann Arbor-based University of Michigan, told Becker’s. “Site-neutral payments will also remove some incentives for facilities to seek HOPD status through affiliation with hospitals.”
For Michael Bradley, MD, president and CEO of Ortho Rhode Island, site neutrality, combined with more procedures moving out of inpatient-only status, raises the stakes in orthopedics, especially around robotics and other precision technologies.
“That will force everybody to … create as much efficiency as possible — so that’s both cost and time,” he said.
In early February, Providence-based Ortho Rhode Island began offering Mako SmartRobotics for reverse shoulder replacements at the Ortho RI Surgery Center, becoming the first in the state to do so.
“Precision technologies in general, which probably range from navigation to robotic-assisted to autonomous robotics, all of those things give us more information than we had when we were doing these procedures on our own,” Dr. Bradley told Becker’s.
For Ortho Rhode Island, robotics in the ASC is less a branding move than a throughput and margin decision. The organization tracks cost, time and margin by procedure to evaluate new technology on a “margin per minute” basis.
“I don’t think ASCs are going to get away with just being bargain-basement places where you get cheap implants,” he said. “I don’t know that you can expense-reduce yourself to profitability. I think you need to invest. I think it needs to be the best operation you can do.”
