Medicare Site-Neutral Payment Issue

The Centers for Medicare & Medicaid Services (CMS) is continuing to expand site-neutral payment rules, particularly for services delivered at off-campus hospital outpatient departments. Today, Medicare often pays more for the same outpatient service depending on where it’s delivered. A clinic visit, imaging scan, or drug infusion provided in a hospital outpatient department can cost significantly more than when delivered in a physician’s office—even if the care itself is identical.

Current site-neutral policies come from CMS regulation (OPPS rules) and had not faced any major legislative overhaul since 2019. Starting January 1, 2026, CMS will apply site-neutral payment rates (approximately 40% of the outpatient prospective payment system (OPPS) rate, akin to the Medicare Physician Fee Schedule rate) to drug administration services — including chemotherapy — when furnished in off-campus provider-based departments(PBDs) that were previously “excepted.”

While CMS can make limited changes on its own, larger site-neutral reforms would require congressional action—and lawmakers are actively debating how far to go. Expect further changes. Proposals under discussion in Congress would further expand site-neutral payments, including all grandfathered off-campus services and potentially on-campus services, but those are not law yet.

The bottom line is, any changes to the rule as it exists now will impact hospitals and patients alike. For hospitals, changes to the rule could significantly impact outpatient revenue with potentially negative consequences. For patients, changes in site-neutral payments could mean lower out-of-pocket costs which would help reduce healthcare costs for consumers. 

For more information please contact: 

Richard T. (Terry) Lang, CPA, FHFMA