The Centers for Medicare & Medicaid Services (CMS) said the proposed changes are designed to reduce out-of-pocket costs for Medicare recipients, expand choices for where patients can receive care, and increase hospital accountability and transparency.
CMS on Tuesday issued the 913-page 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System proposed rule, which affects approximately 3,500 hospitals and 6,100 ASCs. The rule is scheduled to be published in the Federal Register on Thursday.
In addition to proposed payment rates, CMS has pitched proposals to improve hospital transparency rules and establish a new method to calculate hospital quality Star ratings, which would focus on safety of care measures. The plans are meant to modernize Medicare payments by advancing site neutrality, simplifying hospital billing, and ensuring that actual prices—not estimates—are available to patients,” said Chris Klomp, deputy administrator and director of the Center for Medicare at CMS in an announcement. “These changes help make hospital care more predictable, accountable, and affordable.”
The proposals will save nearly $11 billion over the next 10 years, according to the agency.
Here are five of the proposed changes listed in the rule:
Price transparency
CMS wants to require 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. Hospitals that fail to comply could face civil monetary penalties.
The agency proposes that beginning January 1, 2026, hospitals must disclose the 10th, median, and 90th percentile allowed amounts in machine-readable files (MRFs) when payer-specific negotiated charges are based on percentages or algorithms, as well as the count of allowed amounts used to determine these percentiles. This information will more accurately reflect the distribution of actual prices that the hospital has received for an item or service, CMS explained in a fact sheet.
In addition, CMS wants to improve the comparability of hospital standard charges by requiring hospitals to use electronic data interchange (EDI) 835 electronic remittance advice (ERA) transaction data to calculate and encode allowed amounts when a payer-specific negotiated charge is based on a percentage or algorithm. CMS proposes to require that hospitals comply with specific instructions regarding the methodology, including the lookback period, that must be used to calculate the 10th, median, and 90th percentile allowed amounts.
Hospitals would also have to attest that they have included all applicable payer-specific negotiated charges in dollars that can be expressed as a dollar amount. If there are payer-specific negotiated charges that the hospital doesn’t know in advance or can’t express in a dollar amount, it must provide all the necessary information available for people to derive the dollar amount. Hospitals must also include the name of their chief executive officer, president, or senior official designated to oversee the encoding of true, accurate, and complete data.
CMS also plans to reduce the amount of the civil monetary penalty for noncompliance with the hospital price transparency requirements by 35 percent when a hospital agrees with the agency’s determination of their noncompliance and waives the right to a hearing by an administrative law judge. CMS said the changes will ensure that patients have more accurate information about actual prices rather than estimates or algorithms.
Star ratings
CMS plans to update the Hospital Star rating system so hospitals that perform in the lowest quartile for safety can no longer receive a 5-Star rating. In future years, those hospitals would face an automatic 1-Star downgrade.
CMS explained in the fact sheet that the new methodology will involve two stages:
Stage 1 would implement a 4-Star cap for hospitals in the lowest quartile of the Safety of Care measure group performance in Calendar Year 2026. CMS proposes limiting hospitals in the lowest quartile (lowest-performing 25 percent, indicating poor performance relative to other hospitals) of the Safety of Care measure group (based on at least three measure scores) to a maximum of 4 Stars out of 5. This methodology update will apply a cap to any hospital that is initially assigned 5 Stars in step 8 of the methodology (K-means clustering) but has a Safety of Care score in the lowest-performing quartile (based on at least three Safety of Care measures) to 4 Stars.
Stage 2 would implement a blanket 1-Star reduction for hospitals in the lowest quartile of the Safety of Care measure group performance beginning in Calendar Year 2027. It plans to reduce the Overall Hospital Quality Star Rating of any hospital in the lowest quartile of the Safety of Care measure group (based on at least three measure scores) by 1 Star, to a minimum 1-Star rating. This methodology update will apply a blanket reduction of Stars to any hospital initially assigned a 2-, 3-, 4-, or 5-Star rating in step 8 of the methodology (K-means clustering) but that has a safety of care score in the lowest-performing quartile (based on at least three safety of care measures). These hospitals would have their Star ratings reduced to 1, 2, 3, or 4 Stars, respectively.
CMS intends to use Stage 1 to calculate the Overall Hospital Star Rating in 2026, and the Stage 2 methodology update will be used to permanently calculate the Overall Hospital Star Rating beginning in 2027. Essentially, the Stage 2 methodology update will replace the Stage 1 methodology update, not supplement it. Therefore, no 5-Star hospital will be capped at 4 Stars and then further reduced to 3 Stars; in both stages, 5-star hospitals could only be reduced to 4 Stars.
Quality reporting
CMS said it wants to remove what it describes as “burdensome” health equity and COVID vaccine reporting requirements and adopt a measure to evaluate long wait times in emergency departments. CMS also seeks feedback on potential quality measures focused on nutrition, wellness, and preventive health.
OPPS and ASC payment rates
CMS proposes a 2.4 percent increase to OPPS payment rates for hospitals that meet applicable quality reporting requirements. The agency said the update is based on the projected hospital market basket percentage increase of 3.2 percent, reduced by a 0.8 percentage point productivity adjustment.
For CY 2026, using the hospital market basket update, CMS will also increase ASC rates by 2.4 percent for organizations that meet relevant quality reporting requirements. This update is based on the proposed IPPS market basket percentage increase of 3.2 percent, reduced by 0.8 percentage points for the productivity adjustment.
Inpatient-only list
CMS plans to eliminate the inpatient-only list, which includes services that Medicare will only pay for when performed in an inpatient setting, to give Medicare beneficiaries more choices for where they can obtain care and lower out-of-pocket expenses.
The agency plans to phase out the inpatient-only list over a three-year period, beginning with removing 285 mostly musculoskeletal procedures for CY 2026. CMS said it believes that the evolving nature of the practice of medicine allows more procedures to be performed on an outpatient basis with a shorter recovery time.
This proposal would allow for these services to be paid by Medicare in the hospital outpatient setting when determined to be clinically appropriate, giving physicians greater flexibility in determining the most appropriate site of service.