Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems; Quality Reporting Programs; Overall Hospital Quality Star Rating; Hospital Price Transparency; and Notice of Closure of a Teaching Hospital and Opportunity To Apply for Available Slots

In this final rule with comment period, we are updating the payment policies and payment rates for services furnished to Medicare beneficiaries in hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs), beginning January 1, 2026. Section 1833(t) of the Social Security Act (the Act) requires us to annually review and update the payment rates for services payable under the Hospital Outpatient Prospective Payment System (OPPS). Specifically, section 1833(t)(9)(A) of the Act requires the Secretary of the Department of Health and Human Services (the Secretary) to review certain components of the OPPS not less often than annually, and to revise the groups, the relative payment weights, and the wage and other adjustments to take into account changes in medical practice, changes in technology, and the addition of new services, new cost data, and other relevant information and factors. In addition, under section 1833(i)(D)(v) of the Act, we annually review and update the ASC payment rates. This final rule with comment period also includes additional policy changes made in accordance with our experience with the OPPS and the ASC payment system and recent changes in our statutory authority. We describe these and various other statutory authorities in the relevant sections of this final rule with comment period. In addition, this final rule with comment period announces the closure of a teaching hospital and the opportunity to apply for available slots, and updates the requirements for the Hospital Outpatient Quality Reporting (OQR) Program, the Rural Emergency Hospital Quality Reporting (REHQR) Program, the Ambulatory Surgical Center Quality Reporting (ASCQR) Program, and Overall Hospital Quality Star Rating. Finally, we are updating and refining the requirements for hospitals to make public their standard charges and CMS enforcement of hospital price transparency (HPT) regulations. 2. Summary of the Major Provisions

OPPS Update: For CY 2026, we are increasing the payment rates under the OPPS by an outpatient department (OPD) fee schedule increase factor of 2.6 percent. This increase factor is based on the final inpatient hospital market basket percentage increase of 3.3 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), reduced by a final productivity adjustment of 0.7 percentage point. Based on this update, we estimate that total payments to OPPS providers (including beneficiary cost sharing and estimated changes in enrollment, utilization, and case mix) for calendar year (CY) 2026 will be approximately $101.0 billion, an increase of approximately $8.0 billion compared to estimated CY 2025 OPPS payments.

We are continuing to implement the statutory 2.0 percentage point reduction in payments for hospitals that fail to meet the hospital outpatient quality reporting requirements by applying a reporting factor of 0.9805 to the OPPS payments and copayments for all applicable services. We note that under the final 340B remedy offset, payments for services at hospitals subject to the 340B remedy offset will be reduced by 0.5 percentage points.

ASC Payment Update: For CYs 2019 through 2023, we adopted a policy to update the ASC payment system using the hospital market basket update. In light of the impact of the COVID-19 public health emergency (PHE) on healthcare utilization, we extended our policy to update the ASC payment system using the hospital market basket update an additional 2 years--through CYs 2024 and 2025. In this final rule with comment period, we are extending our utilization of the hospital market basket update as the update factor for the ASC payment system for 1 additional year (through CY 2026). Using the hospital market basket update, for CY 2026, we are increasing payment rates under the ASC payment system by 2.6 percent for ASCs that meet the quality reporting requirements under the ASCQR Program. This increase is based on a final hospital market basket percentage increase of 3.3 percent reduced by a final productivity adjustment of 0.7 percentage point. Based on this final update, we estimate that total payments to ASCs (including beneficiary cost sharing and estimated changes in enrollment, utilization, and case-mix) for CY 2026 will be approximately $9.2 billion, an increase of approximately $450 million compared to estimated CY 2025 Medicare payments.

Device Pass-Through Payment Applications: For CY 2026, we received eight complete applications for device pass-through payments. We sought public comment on seven applications and make final determinations on these applications in this final rule with comment period.

Changes to the List of ASC Covered Surgical Procedures and Ancillary Services Lists: For CY 2026, we are expanding the ASC covered procedures list (CPL) by revising the criteria under Sec. 416.166 to modify the general standard criteria and to eliminate five of the general exclusion criteria, moving them into a new section as nonbinding physician considerations for patient safety. We also are adding 276 procedures to the ASC CPL based on these criteria changes and adding an additional 271 codes to the ASC CPL that we are finalizing for removal from the IPO list for CY 2026.

Changes to the Inpatient Only (IPO) List: For CY 2026, we are phasing out the IPO list over 3 years, beginning with the removal of 285 mostly musculoskeletal services for CY 2026.

Add-on Payment for Radiopharmaceutical Technetium-99m (Tc- 99m) Derived from Domestically Produced Molybdenum-99 (Mo-99): In the CY 2025 OPPS/ASC final rule with comment period, we finalized that for CY 2026 the add-on payment for radiopharmaceuticals produced without the use of Tc-99m derived from non-Highly Enriched Uranium sources would be replaced with an add-on payment for radiopharmaceuticals that use Tc-99m derived from domestically produced Mo-99. For CY 2026, we are finalizing a $10 per dose amount for this add-on payment, and that at least 50 percent of the Mo-99 used in the Tc-99m generator that produces a dose of Tc-99m must be domestically produced for the dose to qualify for the add-on payment. We are also codifying our definition for domestically produced Mo-99, and to establish new HCPCS C-code C9176 (Tc-99m from domestically produced non-HEU Mo-99, [minimum 50 percent], full cost recovery add-on, per study dose).

Cross-Program Updates for the Hospital Outpatient Quality Reporting (OQR), Rural Emergency Hospital Quality Reporting (REHQR), and Ambulatory Surgical Center Quality Reporting (ASCQR) Programs: We are finalizing the removal of: (1) the COVID-19 Vaccination Coverage Among Healthcare Personnel (HCP) measure from the Hospital OQR and ASCQR Program measure sets beginning with the CY 2024 reporting period/ CY 2026 payment determination; (2) the Hospital Commitment to Health Equity (HCHE) measure from the Hospital OQR and REHQR Program measure sets, and the Facility Commitment to Health Equity (FCHE) measure from the ASCQR Program measure set beginning with the CY 2025 reporting period/CY 2027 payment or program determination; and (3) the Screening for Social Drivers of Health (SDOH) measure and the Screen Positive Rate for SDOH measure from the Hospital OQR, REHQR, and ASCQR Program measure sets beginning with the CY 2025 reporting period. Additionally, we received comments regarding measure concepts related to well-being and nutrition for future consideration in the Hospital OQR, REHQR, and ASCQR Programs. We are finalizing our proposal to update and codify the Extraordinary Circumstance Exception (ECE) policy to clarify that CMS has the discretion to grant an extension in response to an ECE request for the Hospital OQR, REHQR, and ASCQR Programs.

Hospital Outpatient Quality Reporting (OQR) Program: In addition to the cross-program measure and policy updates, we are finalizing: (1) adoption of the Emergency Care Access & Timeliness eCQM with 1 year of voluntary reporting for the CY 2027 reporting period followed by mandatory reporting for the CY 2028 reporting period/CY 2030 payment determination and subsequent years; (2) removal of the Median Time from Emergency Department (ED) Arrival to ED Departure for Discharged ED Patients and the Left Without Being Seen measures beginning with the CY 2028 reporting period/2030 payment determination; and (3) modification of the Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults (Hospital Level--Outpatient) measure (Excessive Radiation eCQM) from mandatory reporting beginning with the CY 2027 reporting period to continue voluntary reporting in the CY 2027 reporting period and subsequent years.

Rural Emergency Hospital Quality Reporting (REHQR) Program: In addition to the cross-program measure and policy updates, we are finalizing the: (1) adoption of the Emergency Care Access & Timeliness eCQM beginning with the CY 2027 reporting period/CY 2029 program determination; and (2) related eCQM data submission and reporting requirements, including that REHs will be provided the option of reporting either the Emergency Care Access and Timeliness eCQM or the Median Time from Emergency Department (ED) Arrival to ED Departure for Discharged ED Patients measure beginning with the CY 2027 reporting period/CY 2029 program determination.

Ambulatory Surgical Center Quality Reporting (ASCQR) Program: We are not finalizing the 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 (Information Transfer PRO-PM) at this time.

Overall Hospital Quality Star Rating Modification to Emphasize the Safety of Care Measure Group: We proposed to update the methodology that will be used to calculate the Overall Hospital Quality Star Rating through implementation of a 2-stage methodologic update. We are finalizing our proposed updates to the methodology to emphasize the

importance of the Safety of Care measure group, particularly to address the issue of hospitals receiving a high Star Rating despite performing in the lowest quartile of the Safety of Care measure group. The first- stage methodology update is a narrow but focused transitional step that limits hospitals to a maximum of four out of five stars (based on at least three Safety of Care measure scores) if they performed in the lowest quartile of the Safety of Care measure group in the 2026 Overall Hospital Quality Star Rating. The second stage of the methodology update replaces the first stage update and reduces the Star Rating of any hospital in the lowest quartile of Safety of Care (based on at least three Safety of Care measure scores) by one star, to a minimum 1- star rating for the 2027 Overall Hospital Quality Star Rating and later years. These changes will prioritize safety for both patients and healthcare workers and reflect CMS' fundamental commitment to ensuring high-quality, safe care as a central component of health system performance.

Partial Hospitalization and Intensive Outpatient Programs: We finalizing changes to our methodology used to calculate the CY 2026 Community Mental Health Center (CMHC) Partial Hospitalization Program (PHP), and Intensive Outpatient Program (IOP) costs based on 40 percent of the corresponding proposed hospital-based PHP and IOP costs. This change will resolve a cost inversion in CMHC cost data that resulted in higher geometric mean costs for 3-service days than for 4-service days. It also stabilizes rates for CMHCs by basing them on data from a much larger set of providers while preserving the adjustment for the structural differences between CMHC and hospital costs.

Notice of Intent to Conduct a Medicare OPPS Drugs Acquisition Cost Survey: Section 1833(t)(14)(D)(ii) of the Act requires the Secretary to periodically conduct surveys of hospital acquisition costs for each specified covered outpatient drug for use in setting the payment rates for such drugs. Additionally, on April 18, 2025, President Trump signed Executive Order (E.O.) 14273, “Lowering Drug Prices by Once Again Putting Americans First”. Section 5 of the E.O., “Appropriately Accounting for Acquisition Costs of Drugs in Medicare”, which directs the Secretary of HHS to publish in the Federal Register a plan to conduct a survey under section 1833(t)(14)(D)(ii) of the Act so he can determine the hospital acquisition cost for covered outpatient drugs at hospital outpatient departments. Accordingly, we will be conducting a survey, with the survey submission window opening by early CY 2026, of the acquisition costs for each separately payable drug acquired by all hospitals paid under the OPPS. We intend for the survey to be completed in time for the survey results to be used to inform policymaking beginning with the CY 2027 OPPS/ASC proposed rule.

Two-Midnight Rule Medical Review Activities Exemptions: For CY 2026, we are continuing our existing policy exempting procedures that are removed from the IPO list under the OPPS from certain medical review activities related to the two-midnight policy. Under this policy, procedures removed from the IPO list are exempted from site-of- service claim denials, Medicare review contractor referrals to the Recovery Audit Contractor (RAC) for persistent noncompliance with the 2-midnight rule, and RAC reviews for “patient status” (that is, site- of-service) until claims data demonstrates that the procedures are more commonly billed in the outpatient setting than the inpatient setting. We are also revising 42 CFR 412.3(d)(2) for clarity.

Virtual Direct Supervision of Pulmonary Rehabilitation (PR), Coronary Rehabilitation (CR), Intensive Coronary Rehabilitation and Diagnostic Services. For CY 2026, we are revising Sec. 410.27(a)(1)(iv)(B)(1) and Sec. 410.28(e)(2)(iii) to make the availability of the direct supervision of CR, ICR, PR services and diagnostic services via audio-video real-time communications technology (excluding audio-only) permanent, except for diagnostic services that have a global period indicator of 010 or 090.

Prospective Adjustment to Payments for Non-Drug Items and Services to Offset the Increased Payments for Non-Drug Items and Services Made in CY 2018 Through CY 2022 as a Result of the 340B Payment Policy. For CY 2026, we are applying the previously finalized reduction to the OPPS conversion factor under Sec. 419.32(b)(1)(iv)(B)(12) used to determine the payment amounts for non- drug items and services for hospitals for whom this adjustment applies of 0.5 percent. The Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018-2022 (88 FR 77150) codified a 0.5 percent reduction in the OPPS conversion factor applicable to non-drug items and services, excluding hospitals that enrolled in Medicare after January 1, 2018.

Payment for Skin Substitute Products under the OPPS. For CY 2026, we are finalizing a policy for CMS to separately pay for the provision of 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. We are finalizing a policy to group skin substitutes that are not drugs or biologicals using three FDA regulatory categories (PMAs, 510(k)s, and 361 HCT/Ps) to set payment rates. To effectuate this categorization into a payment policy under the OPPS, we are creating three new APCs for HCPCS codes that describe skin substitute products organized by clinical and resource similarity. These three APCs will divide skin substitutes by their FDA regulatory pathway. Specifically, we are creating: APC 6000 (PMA Skin Substitute Products); APC 6001 (510(k) Skin Substitute Products); and APC 6002 (361 HCT/P Skin Substitute Products). This will result in an initial payment rate of $127.14 for each of the new APCs. We are implementing this policy in both the non- facility, ambulatory surgical center setting, and outpatient hospital settings.

Method to Control Unnecessary Increases in the Volume of Outpatient Services Furnished in Excepted Off-Campus Provider-Based Departments (PBDs): For CY 2026, we are finalizing a policy to use our authority under section 1833(t)(2)(F) of the Act to apply the Physician Fee Schedule equivalent rate for any HPCPCs codes assigned to the drug administration services APCs, when provided at an off-campus PBD excepted from section 1833(t)(21) of the Act. We are finalizing a policy to exempt rural Sole Community Hospitals from this method to control the unnecessary volume of drug administration services.

Final Market-Based MS-DRG Relative Weight Data Collection and Change in Methodology for Calculating MS-DRG Relative Weights Under the Inpatient Prospective Payment System: As discussed in section XX. of this final rule with comment period, in order to reduce the Medicare program's reliance on the hospital chargemaster, and to support the development of a market-based approach to payment under the Medicare FFS system, we are finalizing a policy that hospitals will be required to report certain market-based payment rate information on their Medicare cost report for cost reporting periods ending on or after January 1, 2026, to be used in a finalized change to the methodology for calculating the IPPS MS-DRG relative weights to reflect

relative market-based pricing. Specifically, we are finalizing a requirement for facilities to report market-based rate information on the Medicare cost report; the hospital will be required to report the median of the payer-specific negotiated charges by MS-DRG that the hospital has disclosed for all of its MAOs on the most recent version of the machine-readable file (MRF) that the hospital is required to disclose under the hospital price transparency regulations at 45 CFR part 180. We also are finalizing a change to the methodology for calculating the IPPS MS-DRG relative weights to incorporate this market-based rate information, beginning in FY 2029. This finalized MS- DRG relative weight methodology will utilize the finalized median payer-specific negotiated charge information, collected on the cost report, for calculating the MS-DRG relative weights.

Graduate Medical Education (GME) Accreditation: In order to ensure that accreditation for approved medical residency programs is in compliance with applicable laws prohibiting race-based and other unlawful discrimination and to improve the accreditation process, we are finalizing that accrediting organizations may not use accreditation criteria that promote or encourage discrimination on the basis of race, color, national origin, sex, age, disability, or religion, including the use of those characteristics or intentional proxies for those characteristics as a selection criterion for employment, program participation, resource allocation, or similar activities, opportunities, or benefits. The effective date of this policy will be January 1, 2026.

Final Updates to Requirements for Hospitals to Make Public a List of Their Standard Charges: We are finalizing our proposals with modifications to the HPT regulations to enhance clarity and standardization in hospital disclosure of standard charges. Specifically, we are finalizing with modification revisions to 45 CFR 180.20 to add definitions for “tenth (10th) percentile allowed amount”, “median allowed amount”, and “ninetieth (90th) percentile allowed amount”, which are values a hospital will encode when a payer- specific negotiated charge is based on a percentage or algorithm, to more accurately reflect the distribution of actual amounts that a hospital has received for an item or service. In tandem with that, we are finalizing revisions to Sec. 180.50 to remove the requirement for hospitals to disclose the estimated allowed amount, and, instead, require hospitals to disclose the 10th percentile, median, and 90th percentile allowed amounts, as well as the count of allowed amounts, in MRFs when payer-specific negotiated charges are based on percentages or algorithms. We are also finalizing with modification our proposal to require that hospitals use electronic data interchange (EDI) 835 electronic remittance advice (ERA) transaction data or an alternative, equivalent source of remittance data to calculate and encode the allowed amounts. We are finalizing our proposals to require that hospitals comply with specific instructions regarding the methodology that must be used to calculate such allowed amounts (including a lookback period), with some modifications. Additionally, we are finalizing, with modifications, our proposals to require hospitals to encode the attestation statement and the name of the hospital chief executive officer, president, or senior official designated to oversee the encoding of true, accurate, and complete data in the MRF. To advance the comparability of HPT data with other healthcare data, we are finalizing our proposal to require that hospitals encode their organizational, or Type 2, National Provider Identifier(s) (NPIs) in the MRFs. These policies are effective as of January 1, 2026, but we will delay enforcement of the requirements until April 1, 2026.

Finally, to encourage faster resolution and payment of CMPs, and in exchange for a hospital's admission of having violated HPT requirements, we are finalizing with clarifying edits our proposal to update Sec. 180.90 to reduce the amount of a CMP by 35 percent, under certain conditions, when a hospital waives its right to an ALJ hearing, beginning January 1, 2026. These changes aim to improve transparency in hospital pricing, facilitate efficient enforcement of the HPT requirements, and empower consumers with actionable pricing information. 3. Summary of Costs and Benefits

In section XXVI. of this final rule with comment period, we set forth a detailed analysis of the regulatory and Federalism impacts that the final changes will have on affected entities and beneficiaries. Key estimated impacts are described below. a. Impacts of all OPPS Changes

Table 167 in section XXVI.C. of this final rule with comment period displays the distributional impact of all the OPPS changes on various groups of hospitals and CMHCs for CY 2026 compared to all estimated OPPS payments in CY 2025. We estimate that the final policies in this final rule with comment period will result in a 2.4 percent increase in OPPS payments to providers for services. We estimate that total OPPS payments for CY 2026, including beneficiary cost-sharing, to the approximately 3,600 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and CMHCs) will increase by approximately $1.77 billion compared to CY 2025 payments due to the OPD update, excluding changes in enrollment, utilization, and case-mix. However, for providers subject to the 340B remedy offset, the 340B remedy offset is estimated to reduce payments by $275 million in CY 2026.

We estimated the isolated impact of our OPPS policies on CMHCs because CMHCs have historically only been paid for partial hospitalization services under the OPPS. Beginning CY 2024, they are also paid for IOP services under the OPPS. Based on our policy to calculate CMHC PHP and IOP costs based on 40 percent of the corresponding proposed hospital-based PHP and IOP costs, we estimate a 2.2 percent increase in CY 2026 payments to CMHCs relative to their CY 2025 payments. b. Impacts of the Updated Wage Indexes

We estimate that our update of the wage indexes based on the fiscal year (FY) 2026 IPPS final rule wage indexes will result in a 0.1 percent increase for urban hospitals under the OPPS and a 0.2 percent increase for rural hospitals. These wage indexes include continued implementation of the Office of Management and Budget (OMB) labor market area delineations based on 2020 Decennial Census data, with updates, as discussed in section II.C. of this final rule with comment period. c. Impacts of the Rural Adjustment and the Cancer Hospital Payment Adjustment

For CY 2026, we are continuing 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 using the most recently submitted or settled cost report data. Section 16002(b) of the 21st Century Cures Act requires that this weighted average PCR be reduced by 1.0 percentage point. In light of the COVID-19 PHE impact on claims and cost data used to calculate the target PCR, we maintained the CY 2021 target PCR of 0.89 through CYs 2022 and 2023. However, in CY 2024, we finalized a policy to reduce the target PCR by 1.0 percentage point each calendar year

until the target PCR equals the PCR of non-cancer hospitals using the most recently submitted or settled cost report data. For CY 2025, we finalized a target PCR of 0.87. For CY 2026, we are finalizing a target PCR of 0.87, the same PCR of 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. d. Impacts of the OPD Fee Schedule Increase Factor

For the CY 2026 OPPS/ASC, we are establishing an OPD fee schedule increase factor of 2.6 percent and applying that increase factor to the conversion factor for CY 2025. As a result of the OPD fee schedule increase factor and other budget neutrality adjustments, we estimate that urban hospitals will experience an increase in payments of approximately 2.8 percent and that rural hospitals will experience an increase in payments of 2.4 percent. Classifying hospitals by teaching status, we estimate non-teaching hospitals will experience an increase in payments of 2.7 percent, minor teaching hospitals will experience an increase in payments of 2.9 percent, and major teaching hospitals will experience an increase in payments of 2.6 percent. We also classified hospitals by the type of ownership. We estimate that hospitals with voluntary ownership will experience an increase of 2.8 percent in payments, while hospitals with government ownership will experience an increase of 2.3 percent in payments. We estimate that hospitals with proprietary ownership will experience an increase of 3.4 percent in payments. e. Impacts of the ASC Payment Update

For impact purposes, the surgical procedures on the ASC covered surgical procedure list are aggregated into surgical specialty groups using CPT and HCPCS code range definitions. The percentage change in estimated total payments by specialty groups under the final CY 2026 payment rates, compared to estimated CY 2025 payment rates, ranges between an increase of 2 percent and an increase of 12 percent. f. Impacts of the Market-Based MS-DRG Relative Weight Data Collection and Change in Methodology for Calculating MS-DRG Relative Weights Under the Inpatient Prospective Payment System

In section XX. of this final rule, we are finalizing a methodology for estimating the MS-DRG relative weights beginning in FY 2029 based on the median payer-specific negotiated charge information we are finalizing to collect on the cost report. We note that the estimated total annual burden hours for this data collection are as follows: 3,038 hospitals times 20 hours per hospital equals 60,760 annual burden hours and $4,857,458.20. We refer readers to section XXIII.E. of this final rule with comment period for further analysis of this assessment. g. Impacts of Hospital Price Transparency

We finalizing a policy to require hospitals to report four new data elements when the payer-specific negotiated charge is based on a percentage or algorithm--the median allowed amount (which would replace the estimated allowed amount data element), the 10th percentile allowed amount, the 90th percentile allowed amount, and the count of allowed amounts. We are also finalizing new attestation language that hospitals must include in the machine-readable file (MRF) and requiring hospitals to encode the name of the chief executive officer, president or senior official designated to oversee the encoding of true, accurate and complete data in the MRF. Additionally, we are finalizing our proposal to require hospitals to add their National Provider Identifiers (NPIs) to the MRF. The policy will advance the comparability of standard charge information across hospitals and of the hospital price transparency (HPT) data with other healthcare data, including health plan transparency data from the Transparency in Coverage (TiC) MRFs. These new policies include a one-time burden of $1,461.80 per hospital, and a total national cost of $10,840,708.80 ($1,461.80 x 7,416 hospitals). As discussed in detail in sections XIX. and XXIII. of this final rule with comment period, we believe that the benefits to the public (and to hospitals themselves) outweigh the burden imposed on hospitals.

When Title XVIII of the Act was enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs. In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system (PPS). The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 1833(t) to the Act, authorizing implementation of a PPS for hospital outpatient services. The OPPS was first implemented for services furnished on or after August 1, 2000. Implementing regulations for the OPPS are located at 42 CFR parts 410 and 419.

The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. The following Acts made additional changes to the OPPS: the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 2006; the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 109-432), enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enacted on December 29, 2007; the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111- 148), enacted on March 23, 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (HCERA, Pub. L. 111-152), enacted on March 30, 2010 (these two public laws are collectively known as the Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012; the American Taxpayer Relief Act of 2012 (Pub. L. 112-240), enacted January 2, 2013; the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) enacted on December 26, 2013; the Protecting Access to Medicare Act of 2014 (PAMA, Pub. L. 113-93), enacted on March 27, 2014; the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16, 2015; the Bipartisan Budget Act of 2015 (Pub. L. 114-74), enacted November 2, 2015; the Consolidated Appropriations Act, 2016 (Pub. L. 114-113), enacted on December 18, 2015, the 21st Century Cures Act (Pub. L. 114- 255), enacted on December 13, 2016; the Consolidated Appropriations Act, 2018 (Pub. L. 115-

141), enacted on March 23, 2018; the Substance Use Disorder- Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (Pub. L. 115-271), enacted on October 24, 2018; the Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94), enacted on December 20, 2019; the Coronavirus Aid, Relief, and Economic Security Act (Pub. L. 116-136), enacted on March 27, 2020; the Consolidated Appropriations Act, 2021 (Pub. L. 116-260), enacted on December 27, 2020; the Inflation Reduction Act, 2022 (Pub. L. 117-169), enacted on August 16, 2022; and the Consolidated Appropriations Act (CAA), 2023 (Pub. L. 117-238), enacted December 29, 2022.

Under the OPPS, we generally pay for hospital Part B services on a rate-per-service basis that varies according to the APC group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) (which includes certain Current Procedural Terminology (CPT) codes) to identify and group the services within each APC. The OPPS includes payment for most hospital outpatient services, except those identified in section I.C of this final rule. Section 1833(t)(1)(B) of the Act provides for payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by CMHCs), and certain inpatient hospital services that are paid under Medicare Part B.

The OPPS rate is an unadjusted national payment amount that includes the Medicare payment and the beneficiary copayment. This rate is divided into a labor-related amount and a nonlabor-related amount. The labor-related amount is adjusted for area wage differences using the hospital inpatient wage index value for the locality in which the hospital or CMHC is located.

All services and items within an APC group are comparable clinically and with respect to resource use, as required by section 1833(t)(2)(B) of the Act. In accordance with section 1833(t)(2)(B) of the Act, subject to certain exceptions, items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service in the APC group is more than 2 times greater than the lowest median cost (or mean cost, if elected by the Secretary) for an item or service within the same APC group (referred to as the “2 times rule”). In implementing this provision, we generally use the cost of the item or service assigned to an APC group.

For new technology items and services, special payments under the OPPS may be made in one of two ways. section 1833(t)(6) of the Act provides for temporary additional payments, which we refer to as “transitional pass-through payments”, for at least 2 but not more than 3 years for certain drugs, biological agents, brachytherapy devices used for the treatment of cancer, and categories of other medical devices. For new technology services that are not eligible for transitional pass-through payments, and for which we lack sufficient clinical information and cost data to appropriately assign them to a clinical APC group, we have established special APC groups based on costs, which we refer to as New Technology APCs. These New Technology APCs are designated by cost bands which allow us to provide appropriate and consistent payment for designated new procedures that are not yet reflected in our claims data. Similar to pass-through payments, an assignment to a New Technology APC is temporary; that is, we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinically appropriate APC group.

Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the hospital outpatient services that are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. It also excludes screening mammography, diagnostic mammography, and effective January 1, 2011, an annual wellness visit providing personalized prevention plan services. The Secretary exercises the authority granted under the statute to also exclude from the OPPS certain services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the Medicare Physician Fee Schedule (MPFS); certain laboratory services paid under the Clinical Laboratory Fee Schedule (CLFS); services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD prospective payment system; and services and procedures that require an inpatient stay that are paid under the hospital IPPS. In addition, section 1833(t)(1)(B)(v) of the Act does not include applicable items and services (as defined in subparagraph (A) of paragraph (21)) that are furnished on or after January 1, 2017, by an off-campus outpatient department of a provider (as defined in subparagraph (B) of paragraph (21)). We set forth the services that are excluded from payment under the OPPS in regulations at 42 CFR 419.22.

Under Sec. 419.20(b) of the regulations, we specify the types of hospitals that are excluded from payment under the OPPS. These excluded hospitals are:

Critical access hospitals (CAHs);

Hospitals located in Maryland and paid under Maryland's All-Payer or Total Cost of Care Model;

Hospitals located outside of the 50 States, the District of Columbia, and Puerto Rico;

Indian Health Service (IHS) hospitals; and

Rural emergency hospitals (REHs).

Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 106-113, requires that we consult with an expert outside advisory panel composed of an appropriate selection of representatives of providers to annually review (and

advise the Secretary concerning) the clinical integrity of the payment groups and their weights under the OPPS. In CY 2000, based on section 1833(t)(9)(A) of the Act, the Secretary established the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) to fulfill this requirement. In CY 2011, based on section 222 of the Public Health Service Act (the PHS Act), which gives discretionary authority to the Secretary to convene advisory councils and committees, the Secretary expanded the panel's scope to include the supervision of hospital outpatient therapeutic services in addition to the APC groups and weights. To reflect this new role of the panel, the Secretary changed the panel's name to the Advisory Panel on Hospital Outpatient Payment (the HOP Panel). The HOP Panel is not restricted to using data compiled by CMS, and in conducting its review, it may use data collected or developed by organizations outside the Department. 2. Establishment of the Panel

On November 21, 2000, the Secretary signed the initial charter establishing the Panel, and, at that time, named the APC Panel. This expert panel is composed of appropriate representatives of providers (currently employed full-time, not as consultants, in their respective areas of expertise) who review clinical data and advise CMS about the clinical integrity of the APC groups and their payment weights. Since CY 2012, the Panel also is charged with advising the Secretary on the appropriate level of supervision for individual hospital outpatient therapeutic services. The Panel is technical in nature, and it is governed by the provisions of the Federal Advisory Committee Act (FACA). The current charter specifies, among other requirements, that the Panel--

May advise on the clinical integrity of Ambulatory Payment Classification (APC) groups and their associated weights;

May advise on the appropriate supervision level for hospital outpatient services;

May advise on OPPS APC rates for ASC covered surgical procedures;

Continues to be technical in nature;

Is governed by the provisions of the FACA;

Has a Designated Federal Official (DFO); and

Is chaired by a Federal Official designated by the Secretary.

The Panel's charter was amended on November 15, 2011, renaming the Panel and expanding the Panel's authority to include supervision of hospital outpatient therapeutic services and to add critical access hospital (CAH) representation to its membership. The Panel's charter was also amended on November 6, 2014 (80 FR 23009), and the number of members was revised from up to 19 to up to 15 members. The Panel's current charter was approved on November 21, 2024, for a 2-year period.

The current Panel membership and other information pertaining to the Panel, including its charter, Federal Register notices, membership, meeting dates, agenda topics, and meeting reports, can be viewed on the CMS website at https://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html. 3. Panel Meetings and Organizational Structure

The Panel has held many meetings, with the last meeting taking place on August 25, 2025. The recommendations of the Panel for the most recent meeting are available on the CMS website at https://www.cms.gov/medicare/regulations-guidance/advisory-committees/hospital-outpatient-payment. Prior to each meeting, we publish a notice in the Federal Register to announce the meeting, new members, and any other changes of which the public should be aware. Beginning in CY 2017, we have transitioned to one meeting per year (81 FR 31941). In CY 2022, we published a Federal Register notice requesting nominations to fill vacancies on the Panel (87 FR 68499). We are currently accepting nominations at: https://mearis.cms.gov.

In addition, the Panel has established an administrative structure that, in part, currently includes the use of two subcommittee workgroups to provide preparatory meeting and subject support to the larger panel. The two current subcommittees include the following:

APC Groups and Status Indicator Assignments Subcommittee, which advises and provides recommendations to the Panel on the appropriate status indicators to be assigned to HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid, as well as the appropriate APC assignment of HCPCS codes regarding services for which separate payment is made; and

Data Subcommittee, which is responsible for studying the data issues confronting the Panel and for recommending options for resolving them.

Each of these workgroup subcommittees was established by a majority vote from the full Panel during a scheduled Panel meeting, and the Panel recommended at the August 25, 2025, meeting that these subcommittees continue. We accepted this recommendation.

For discussions of earlier Panel meetings and recommendations, we refer readers to previously published OPPS/ASC proposed and final rules, the CMS website mentioned earlier in this section, and the FACA database at https://facadatabase.gov.