WASHINGTON, D.C. — The federal government is rolling out one of the most sweeping Medicare overhauls in years, reshaping how the program pays for kidney dialysis, hospital outpatient services, surgeries, mental health care and even nuclear medicine — while tightening hospital price transparency rules and putting new pressure on facilities with poor patient-safety records.
In a pair of major final rules issued this past week, the Centers for Medicare & Medicaid Services set payment and policy changes for 2026 that will touch nearly every corner of the system, from the 7,600 dialysis facilities treating end-stage renal disease to roughly 4,000 hospitals and 6,000 ambulatory surgical centers that rely on Medicare outpatient dollars. Officials say the package is designed to modernize care, push more services out of inpatient beds and into outpatient settings, and give patients clearer, more usable information about what their care actually costs.
“This final rule from CMS closes the loopholes hospitals exploit to hide real prices and advances President Trump’s demand for radical hospital price transparency,” Health and Human Services Secretary Robert F. Kennedy Jr. said, framing the effort as part of the administration’s “Make America Healthy Again” agenda. CMS Administrator Dr. Mehmet Oz called the reforms “comprehensive changes” that strengthen Medicare’s foundation “while maintaining strict provider accountability and responsible use of taxpayer funds.”
CMS projects that its outpatient and surgical-center changes alone will deliver $11 billion in savings for Medicare and its beneficiaries over the next decade. But the hundreds of pages of regulatory text also reflect a quieter, deeper shift: away from some health equity and COVID-era reporting requirements and toward a stronger emphasis on safety, access, cost control and consumer-facing pricing.
Dialysis providers see modest boost, new remote-area adjustment
For patients living with end-stage renal disease, the 2026 rule brings a modest boost in Medicare payments and a new recognition of the unique costs of providing care in remote states and territories.
Beginning Jan. 1, 2026, the base payment under the End-Stage Renal Disease Prospective Payment System will rise to $281.71 per treatment, up from $273.82 in 2025. That translates into an estimated 2.2% increase in total payments to dialysis facilities nationwide, or roughly $6 billion to about 7,600 freestanding and hospital-based units.
The ESRD payment system uses a bundled, per-treatment rate that covers all renal dialysis services for outpatient maintenance dialysis, including drugs and biological products, equipment and supplies. That base rate is then adjusted for patient characteristics, facility location, low-volume status, rural status and high-cost outlier cases, with extra add-ons available for certain drugs, training for home dialysis and pediatric care.
For 2026, CMS is also adjusting the wage index that accounts for geographic differences in labor costs, using updated data from the Bureau of Labor Statistics and maintaining a floor of 0.6000 and a 5% cap on year-over-year decreases. At the same time, the agency is recalibrating the outlier policy, significantly lowering the fixed-dollar loss threshold and Medicare allowable payment amounts used to trigger extra payments for unusually expensive cases — a move that will likely make outlier payments easier to obtain for both adult and pediatric patients.
In one of the most consequential changes for a small but vital group of providers, CMS is creating a new facility-level payment adjustment for ESRD facilities in Alaska, Hawaii and the U.S. Pacific territories. Agency analysis found that facilities in these non-contiguous areas face significantly higher non-labor costs than their counterparts in the continental United States. Under the final rule, those facilities will receive increases of up to 25% on the non-labor portion of the base rate, with Alaska and the Pacific territories receiving the full 25% and Hawaii receiving 21%. To pay for that change without increasing overall spending, CMS will shave about 0.1% — roughly 40 cents — off the base rate for all facilities.
CMS is also updating the separate payment rate for dialysis furnished to beneficiaries with acute kidney injury, setting the AKI rate equal to the ESRD base rate and applying the same wage index methodology.
Less survey fatigue, fewer equity metrics, and the end of a payment model
The 2026 ESRD rule also rewrites pieces of Medicare’s quality and patient-experience programs for dialysis, as the agency responds to complaints about survey burden and rethinks its approach to health equity metrics.
Beginning with the 2028 payment year, CMS will shorten the In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems survey to 39 questions, cutting 23 questions from the existing instrument. The goal, officials say, is to reduce survey fatigue and reverse declining response rates, which have raised questions about the reliability of facility-level patient-experience data.
At the same time, CMS is stripping three health equity-related reporting measures from the ESRD Quality Incentive Program starting in Payment Year 2027: the Facility Commitment to Health Equity, Screening for Social Drivers of Health, and Screen Positive Rate for Social Drivers of Health. The measures had been finalized only a year earlier, but CMS now says the costs and reporting burden outweigh their benefits. Any data submitted on those measures for PY 2027 will not be used for public reporting or payment adjustments.
With those changes, the ESRD QIP will still assess facility performance on a slate of clinical and process measures, but the early experiment with embedding social-risk screening and equity commitments directly into the dialysis pay-for-performance program will come to an end.
Another major policy experiment will wind down as well. CMS has finalized the early termination of the ESRD Treatment Choices Model, a payment demonstration aimed at boosting home dialysis and kidney transplant wait-listing. After reviewing multiple years of evaluations, the agency concluded that the model was not delivering the projected quality improvements or savings, and will end it as of Dec. 31, 2025.
For patient advocates and providers, the combined changes send a clear signal: CMS wants to refocus ESRD oversight on traditional clinical quality and safety metrics, while trimming newer, more controversial requirements that have proven costly and complex to implement.
Outpatient and surgery centers get updates, with an eye on site-neutrality
Beyond dialysis, the 2026 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center rule updates the payment rates and policies that govern a vast array of services, from imaging and chemotherapy to same-day surgeries and behavioral health programs.
Hospitals and ASCs that meet Medicare’s quality reporting requirements will see a 2.6% increase in payment rates, based on a 3.3% hospital market basket update minus a 0.7-percentage point productivity adjustment. The same 2.6% factor will apply to the ASC system, as CMS extends its use of the hospital market basket as the update factor for ASCs through 2026 while it continues studying the shift of procedures from hospital outpatient departments to surgery centers.
But the headline rate increases come with tighter controls on where and how certain services are paid.
CMS is expanding a site-neutral payment policy first adopted in 2019 to restrain growth in the volume of clinic visits billed in off-campus, provider-based departments. Beginning in 2026, the agency will apply the same approach to drug administration services delivered in excepted off-campus hospital departments, paying those services at the Physician Fee Schedule equivalent rate instead of the higher outpatient hospital rate. The change is expected to reduce outpatient spending by about $290 million next year, with roughly $220 million in savings accruing to Medicare and $70 million to beneficiaries in the form of lower copayments.
At the same time, CMS is beginning a three-year phase-out of the inpatient-only list — the long-standing catalog of procedures Medicare will pay for only when provided in the inpatient hospital setting. For 2026, 285 mostly musculoskeletal procedures will be removed, allowing them to be paid under the outpatient system when clinically appropriate. The move, paired with a major expansion of the ASC covered procedures list and the addition of 289 new procedures plus 271 codes removed from the inpatient-only list, will give physicians more flexibility in determining where surgeries are performed and could expose patients to lower cost-sharing if procedures safely migrate to outpatient settings.
To protect hospitals and surgeons from immediate audit pressure as these procedures move, CMS will continue an exemption from full “two-midnight rule” medical review for services removed from the inpatient-only list, extending that safe harbor in 2026 and future years until the agency determines that a given service is more commonly performed on an outpatient basis.
Skin substitutes, non-opioid pain treatments and nuclear medicine
The outpatient rule dives deeply into several highly technical but financially important niches, including skin substitutes used in wound care, non-opioid pain-management products and radiopharmaceuticals.
After years of packaging skin-substitute products into the payment for their application procedures, CMS will unbundle those products in 2026, establishing new ambulatory payment classifications based on core product characteristics and FDA regulatory status. Skin substitutes will be grouped according to whether they are regulated as human cells, tissues and cellular or tissue-based products, or as devices approved through the FDA’s premarket approval or 510(k) pathways. The same policy will apply both in hospital outpatient departments and physician offices, with detailed implementation of physician-office payment handled in the 2026 Physician Fee Schedule rule.
For the first year, CMS will use a single payment rate covering all three categories to avoid underpaying for higher-cost products, but it plans to propose differentiated rates in future years. Officials say the change will better recognize clinical and resource differences among products, encourage competition and innovation, and generate savings for the Medicare Trust Fund by restructuring how these high-cost products are paid.
In a separate set of provisions, CMS is continuing a temporary add-on payment policy for certain non-opioid pain treatments in both hospital outpatient departments and ASCs through 2027. Five drugs and 11 devices that qualify as non-opioid pain-relief treatments will be paid separately beginning in 2026, rather than being bundled into procedure payments. The aim, the agency says, is to expand access to non-opioid options, reduce reliance on opioids and help prevent new cases of opioid use disorder. CMS signaled it may move to a more flexible process for adding newly qualifying products to the list, based on public input and operational capacity.
The rule also codifies an earlier decision to create a $10 per-dose add-on payment for technetium-99m derived from domestically produced molybdenum-99, beginning in 2026. A new HCPCS code will identify doses that qualify, and at least half of the Mo-99 used in the generator must be domestically produced for providers to receive the add-on. CMS says the extra payment will help offset higher costs and encourage use of U.S.-produced radiopharmaceuticals, with an eye toward supply security and nonproliferation goals.
Price transparency rules get sharper teeth and more data
The 2026 outpatient rule is also the vehicle for a major escalation of hospital price transparency requirements, implementing President Trump’s Executive Order 14221 on “Making America Healthy Again by Empowering Patients with Clear, Accurate, and Actionable Healthcare Pricing Information.”
Hospitals have been required for several years to post machine-readable files with their standard charges and payer-specific negotiated rates, along with consumer-friendly tools for “shoppable” services. But compliance has been uneven, and critics say many files are incomprehensible, incomplete or rely heavily on percentages and formulas rather than actual dollar amounts.
Beginning Jan. 1, 2026, hospitals will have to replace estimated allowed amounts with a set of new data elements: the median allowed amount, and the 10th and 90th percentile allowed amounts, for each payer-specific negotiated charge that is based on a percentage or algorithm. They must also report the count of allowed amounts used to derive each figure. Those statistics must be calculated using electronic remittance data — such as standard 835 transactions — and based on a lookback period of 12 to 15 months. When a percentile falls between two observed values, hospitals will be required to round up to the next highest observed amount.
To tie the transparency files more clearly to real-world entities and leadership accountability, CMS will require hospitals to encode their organizational National Provider Identifiers (Type 2 NPIs) and to include an attestation statement in their files. That attestation, signed by the chief executive officer, president or a designated senior official, must affirm that the file is true, accurate and complete to the best of the hospital’s knowledge and that all applicable standard charge information has been included or described in a way that allows the public to derive dollar amounts.
On the enforcement side, hospitals that waive their right to an administrative hearing and accept CMS’s determination of noncompliance will be eligible for a 35% reduction in civil monetary penalties. But that leniency will not apply to facilities that fail to meet what CMS calls the “core” requirements: posting a machine-readable file at all, or providing any consumer-friendly display of shoppable services. Those violations will remain fully subject to the existing penalty structure.
The new data elements and attestation take effect at the start of 2026, but CMS will delay enforcement actions based on those specific requirements until April 1, giving hospitals a three-month window to retool systems, validate data and update their posted files.
“This final rule from CMS closes the loopholes hospitals exploit to hide real prices,” Kennedy said. Agency officials argue that the combination of more precise data, standardized formats and stronger accountability will make it far easier for patients, researchers and policymakers to compare prices across hospitals and insurers — and to spot outliers.
Behavioral health payments updated for intensive and partial hospitalization
As mental health and substance use concerns continue to strain the system, CMS is also fine-tuning payment for intensive outpatient programs and partial hospitalization programs, two structured forms of psychiatric and addiction care that serve as alternatives or step-down options from inpatient treatment.
For 2026, the agency will maintain its existing two-tier rate structure for both IOP and PHP services in hospital outpatient departments and community mental health centers, with separate payment levels for days with three services and days with four or more services. Using 2024 claims data and cost reports, CMS will calculate updated per-diem rates for hospital-based programs using the outpatient prospective payment data set, which captures both IOP/PHP-designated days and functionally similar days that may not be coded explicitly as such but include the required intensity of services.
For CMHCs, CMS is changing how it derives IOP and PHP costs to avoid anomalies in the data. Rather than relying on CMHC cost reports that have produced “cost inversions” — with lower-intensity days appearing more expensive than higher-intensity ones — the agency will set CMHC rates at 40% of the final hospital-based costs. Officials say that approach will stabilize CMHC payments by anchoring them to a larger pool of hospital data while still recognizing structural cost differences between community centers and hospitals.
Quality reporting programs stripped of some measures, gain new ED metric
The 2026 rule also reshapes Medicare’s outpatient quality reporting programs, paring back several measures and adding a new electronic measure focused on access and timeliness in emergency departments.
Under the Hospital Outpatient Quality Reporting Program, hospitals that fail to submit required data face a 2-percentage point reduction in their annual payment update. CMS will now adopt an Emergency Care Access & Timeliness electronic clinical quality measure, with voluntary reporting beginning in 2027 and mandatory reporting in 2028, replacing two existing measures: median time from ED arrival to departure for discharged patients, and the “left without being seen” rate. Officials say the new eCQM is designed to capture emergency care access in a more comprehensive, standardized way.
At the same time, CMS is removing several measures that became flashpoints in the broader debate over health equity and COVID-era policies. The Hospital Commitment to Health Equity measure will be dropped beginning with the 2025 reporting period, along with two measures tied to screening for social drivers of health and the rate of positive screens. The COVID-19 Vaccination Coverage among health-care personnel measure will also be removed starting with the 2024 reporting period for 2026 payment determinations.
Similar changes will flow through the Rural Emergency Hospital Quality Reporting Program and the Ambulatory Surgical Center Quality Reporting Program, where CMS will remove the Facility Commitment to Health Equity, SDOH screening and screen-positive measures and phase out COVID vaccination coverage reporting. For ASCs, the agency is also declining, at least for now, to adopt a proposed patient-reported outcome measure focused on patients’ understanding of key recovery information, and will not require ASCs to use the Hospital Quality Reporting system to submit such measures.
Across all three programs, CMS is updating its Extraordinary Circumstances Exception policies to explicitly allow “extensions” as well as “exceptions” and to shorten the timeframe for requesting relief after a qualifying event from 90 days to 60 days.
Star ratings system puts sharper spotlight on safety
In a move that could dramatically reshape how hospitals are perceived by the public, CMS is revising its Overall Hospital Quality Star Rating methodology to give more weight to patient safety and to penalize hospitals that perform poorly on safety measures.
The star rating system, published on the Medicare Care Compare website, condenses dozens of individual measures into a single 1-to-5-star score based on five measure groups: Safety of Care, Mortality, Readmission, Patient Experience and Timely and Effective Care. After seeking public input on potential changes last year, CMS will implement a two-stage update focused squarely on the Safety of Care group.
In 2026, hospitals whose Safety of Care performance falls in the lowest quartile — the bottom 25% among facilities with at least three safety measures — will be barred from receiving a 5-star overall rating. Any hospital that would otherwise have been assigned 5 stars but lands in that lowest safety quartile will be capped at 4 stars.
Beginning in 2027, the agency will replace the cap with a more sweeping penalty: a blanket one-star reduction in the overall rating for any hospital in the lowest safety quartile, again among those with at least three safety measures. A 5-star hospital would drop to 4, a 4-star hospital to 3, and so on, with 1 star remaining the minimum.
Hospitals with fewer than three Safety of Care measures will still receive group scores and overall star ratings, but will not be subject to the new penalties. Facilities with no safety measures will not have safety performance reflected in their star ratings at all.
CMS says the change is meant to address “the acute concern of hospitals receiving the highest possible 5-star rating despite performing in the lowest quartile of the Safety of Care measure group” and to emphasize safety more broadly across the full distribution of hospital performance.
Technical shifts in drugs, software, training and market-based data
In addition to the high-profile changes, the 2026 rules reach into several technical domains that could have long-term implications for Medicare payment.
CMS will conduct a new survey of hospital acquisition costs for separately payable outpatient drugs in early 2026, as required by law, and intends to use the results to inform drug payment policies beginning with the 2027 rulemaking cycle.
The agency is also moving forward with a market-based approach to relative payment weights under the inpatient prospective payment system, finalizing plans to collect median payer-specific negotiated charges with Medicare Advantage plans and use those data to help determine Medicare fee-for-service rates.
On the training front, CMS is tightening rules for graduate medical education accreditation. Accrediting organizations overseeing residency programs will be barred from using criteria that “promote or encourage discrimination” based on race, sex, religion and other protected characteristics, including the use of those traits or their proxies in selection, employment, resource allocation or similar decisions.
Recognizing the rapid rise of software-based tools in clinical care, CMS has again asked for public input on how to pay for “software as a service” technologies under the outpatient system, including lessons from risk-bearing payment models and ways to incorporate the value of digital tools into payment policy. The agency says it received substantial feedback and will consider it in future rulemaking.
Looking ahead: savings, choices and new fault lines
Taken together, the 2026 ESRD and outpatient rules mark an aggressive attempt to recalibrate Medicare around several core themes: pushing care into lower-intensity settings when safe, strengthening price transparency and patient safety, pruning back some equity and COVID-era reporting requirements, and nudging markets toward non-opioid pain treatments and domestically produced radiopharmaceuticals.
CMS estimates that the outpatient changes alone will generate $11 billion in savings over ten years for the program and beneficiaries, largely through site-neutral payment policies, packaging reforms, and new pricing structures for products like skin substitutes.
Supporters argue that seniors will see more choices for where to receive care, clearer information about what they will pay and a stronger focus on preventing harm in hospitals. Hospitals and dialysis providers, however, will have to digest a complex array of new incentives and penalties, while retooling systems to meet tougher transparency standards and adapt to shifting quality metrics.
“This is about giving patients real prices, safer care and more options — without wasting taxpayer dollars,” CMS Deputy Administrator Chris Klomp said, summarizing the agency’s push to “deliver greater predictability, accountability, and affordability.”
How those promises play out — and which providers end up as winners or losers — will become clearer in 2026, as the new rules take effect and hospitals, dialysis centers, surgery centers and clinicians adjust to a Medicare landscape that looks more demanding, more transparent and, for many, more unforgiving than ever before.
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