Calendar Year 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Final Rule (CMS-1834-FC)
On November 21, 2025, the Centers for Medicare & Medicaid Services (CMS) issued updates to Medicare payment policies and rates for hospital outpatient and Ambulatory Surgical Center (ASC) services under the Hospital Outpatient Prospective Payment System (OPPS) and ASC Payment System Final Rule with comment period for calendar year (CY) 2026. CMS published this final rule consistent with the legal requirements to update Medicare payment policies for hospital outpatient and ASCs annually. This fact sheet discusses the major provisions of the final rule.
These payment policies affect approximately 4,000 hospitals and approximately 6,000 ASCs. In addition to finalizing the payment rates, this year’s rule includes an update to the methodology used to calculate the Overall Hospital Quality Star Rating to emphasize the Safety of Care measure group in hospitals’ star ratings. CMS also is finalizing changes to the Hospital Outpatient Quality Reporting (OQR), Rural Emergency Hospital Quality Reporting (REHQR), and Ambulatory Surgical Center Quality Reporting (ASCQR) Programs to further meaningful measurement and reporting for quality of care in the outpatient setting. CMS also discusses comments received in response to a Request for Information (RFI) on future measure concepts related to well-being and nutrition.
Updates to OPPS and ASC payment rates
In accordance with statutory requirements, CMS is finalizing an update to the OPPS payment rates for hospitals that meet applicable quality reporting requirements by 2.6%. This update is based on the hospital market basket percentage increase of 3.3%, reduced by a 0.7 percentage point productivity adjustment.
For CY 2026, using the hospital market basket update, CMS finalized an update factor to the ASC rates of 2.6%. The update applies to ASCs meeting relevant quality reporting requirements. This update is based on the finalized IPPS market basket percentage increase of 3.3%, reduced by 0.7 percentage point for the productivity adjustment.
Expanding the Method to Control Unnecessary Increases in the Volume of Outpatient Services
In the CY 2019 OPPS/ASC final rule with comment period, CMS adopted a method to control unnecessary increases in the volume of the clinic visit service furnished in excepted off-campus provider-based departments (PBDs). This method prevents Medicare and beneficiaries from paying significantly more in the excepted off-campus PBD setting than in the physician office setting for some services. For CY 2026, CMS finalized its proposal to expand this policy to include drug administration services furnished in excepted off-campus PBDs. Specifically, CMS finalized its proposal to use the agency’s authority under section 1833(t)(2)(F) of the Social Security Act (“the Act”) to apply the Physician Fee Schedule equivalent payment rate for any codes assigned to the drug administration ambulatory payment classifications (APCs) when provided at an off-campus PBD excepted from section 603 of the Bipartisan Budget Act of 2015.
For CY 2026, we estimate this provision will reduce OPPS spending by $290 million, with $220 million of the savings accruing to Medicare, and $70 million saved by Medicare beneficiaries in the form of reduced beneficiary coinsurance.
Eliminating the Inpatient Only (IPO) List
In order to give beneficiaries more choices on where to obtain care with the potential for lower out-of-pocket expenses, CMS is finalizing its proposal to phase out the IPO list over a 3-year period, beginning with the removal of 285 mostly musculoskeletal procedures for CY 2026. CMS 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 policy allows 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.
Two-Midnight Rule Medical Review Activities Exemptions
In the CY 2021 OPPS/ASC final rule with comment period, in conjunction with the elimination of the IPO list, CMS established a policy in which procedures removed from the IPO list beginning January 1, 2021 would be exempted from certain medical review activities related to the two-midnight policy. CMS is finalizing its proposal to continue this existing exemption for CY 2026 and subsequent years until the Secretary determines that the service or procedure is more commonly performed for the Medicare population in the outpatient setting than the inpatient setting.
ASC Covered Procedures List (ASC CPL)
For CY 2026, CMS finalized its proposal to revise the ASC CPL criteria 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. As a result of these criteria changes, CMS added 289 procedures to the ASC CPL. Additionally, CMS added 271 codes to the ASC CPL that were removed from the IPO list for CY 2026. These policies will maintain safety for Medicare beneficiaries through the physician considerations for patient safety, while allowing physicians to exercise their medical judgment and increasing flexibility for patients to choose from more settings of care for surgical procedures.
CY 2026 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
The 340B Final Remedy rule finalized changes to the calculation of the OPPS conversion factor applicable to non-drug items and services beginning in CY 2026. Specifically, the rule 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. This 0.5 percent reduction would remain in effect until the estimated aggregate payment reduction reached the $7.8 billion of increased non-drug item and services payments made from CY 2018 through CY 2022, which at the time CMS estimated would occur in CY 2041. This prospective offset aimed to balance the goal of restoring hospitals to their financial position had the original 340B policy never existed, while avoiding burdening them with an immediate single year recovery. After subsequent reconsideration of balancing these two goals, CMS proposed to revise the annual offset percentage for non-drug items and services from 0.5 percent to 2 percent effective CY 2026, excluding hospitals that enrolled in Medicare after January 1, 2018. Based on commenter feedback, we are not finalizing our proposal at this time. While we anticipate finalizing a larger reduction (such as 2 percent or other reduction greater than 0.5 percent) beginning in CY 2027, we will instead implement the previously finalized 0.5 percent reduction for CY 2026.
Skin Substitutes
Since CY 2014, CMS has unconditionally packaged skin substitute products furnished in the outpatient hospital setting into their associated application procedures as part of a broader policy to package all drugs and biologicals that function as supplies when used in a surgical procedure. The agency currently divides the skin substitutes into a high-cost group and a low-cost group, to ensure adequate resource homogeneity among APC assignments for the skin substitute application procedures. This payment approach differs from the payment policy for skin substitutes furnished in the non-facility setting, where skin substitute products are paid under the ASP plus 6 percent payment methodology.
For CY 2026, CMS finalized the proposal to unpackage skin substitute products from the application services and establish several APCs based on relevant product characteristics, rather than based on stated prices for provision of these products when they are used during a covered application procedure paid under the OPPS (described by CPT codes 15271-15278). Secondly, CMS finalized the proposal to align skin substitute categorization for payment purposes consistent with their FDA regulatory status for 361 Human Cells, Tissues, and Cellular and Tissue-Based Products (HCT/P) and the device types: Pre-Market Approvals (PMAs) and 510(k)s. CMS believes grouping and paying for skin substitute products based on relevant product characteristics, consistent with their FDA regulatory status, recognizes the clinical and resource differences in product types and would incentivize competition to create more innovative products, while also resulting in significant savings to the Medicare Trust Fund. We note that, for CY 2026, CMS will use a single payment rate for these three categories of skin substitute products to ensure we are not underestimating the resources involved with furnishing these services. In future years, we intend to propose payment rates that differentiate between the three FDA regulatory categories. CMS finalized proposals to implement these policy changes in both the hospital outpatient department and physician office settings to remain consistent across different settings of care. The finalized payment policy for skin substitutes in the physician office setting is provided in the CY 2026 Physician Fee Schedule (PFS) final rule.
Software as a Service (SaaS)
In recent years, there have been rapid developments in the use of software-based technologies to support clinical decision-making in the outpatient and physician office settings. Medicare refers to these software-based technologies as software as a service (SaaS). CMS currently does not have a comprehensive Medicare payment policy specific to SaaS that accounts for the unique challenges of paying for these services. For CY 2026, CMS solicited comments from the public on payment policies for these services under the OPPS, including applicable lessons learned from risk-bearing payment arrangements and input that helps incorporate the underlying value of technologies within medical practice into payment policy. CMS notes the agency similarly sought out comment on this issue under the CY 2026 PFS proposed rule. We received many comments on future payment methodologies for SaaS. We thank the commenters for their input and note that we will consider the comments received for future rulemaking.
Notice of Intent to Conduct 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. Accordingly, CMS will be conducting a required survey by early CY 2026 on the acquisition costs for each separately payable drug acquired by all hospitals paid under the OPPS. CMS intends 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.
For more information about the OPPS Drug Acquisition Cost Survey, please visit: https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient-pps/outpatient-prospective-payment-system-opps-drug-acquisition-cost-survey
Market-Based MS-DRG Relative Weight Data Collection and Methodology
CMS finalized its proposal to collect from hospitals the median payer-specific charges that they negotiated with Medicare Advantage organizations using data disclosed under CMS’ hospital price transparency rules, and then use the data to help determine relative Medicare payment rates for inpatient hospital services. CMS will continue to consider ways for market-based approaches such as this one to be utilized to improve other Medicare FFS payment systems.
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.
ASC Market Basket Update
In the CY 2019 OPPS/ASC final rule with comment period, CMS finalized a proposal to apply the hospital market basket update to ASC payment system rates for an interim period of five years (CY 2019 through CY 2023) while CMS determined the impact of the higher update factor on the migration of services from the hospital outpatient setting to the ASC setting. In light of the disruption of health care utilization of elective outpatient surgeries from the COVID-19 public health emergency (PHE), CMS extended the application of the hospital market basket update an additional two years in the CY 2024 OPPS/ASC final rule with comment period, that is, through CY 2024 and CY 2025 so that CMS could analyze claims data further removed from the effects of the COVID-19 PHE. For this CY 2026 OPPS/ASC final rule, CMS finalized its proposal to extend our utilization of the hospital market basket update as the update factor for the ASC payment system one additional year, through CY 2026, while CMS continues to study the migration of outpatient surgical procedures.
Access to Non-Opioid Treatments for Pain Relief
CMS finalized its proposal to continue policies to provide temporary additional payments for certain non-opioid treatments for pain relief in the hospital outpatient department (HOPD) and ASC settings from January 1, 2025, through December 31, 2027, consistent with statute.
CMS finalized five drugs and 11 devices which qualified as non-opioid treatments for pain relief, and CMS determined that these products will be paid separately in both the HOPD and ASC settings, starting in CY 2026. Ensuring non-opioid treatments for pain relief are available can help reduce use of opioids and incidence of opioid use disorder, helping to prevent this chronic disease from occurring in more Americans.
Based on the comments received, CMS believes it may be reasonable to consider a pathway to approve new products, or products newly meeting the established criteria, on a more frequent basis than annually. CMS welcomes engagement from the public, including on topics relating to products that newly meet the qualifying criteria for this policy. CMS will consider adding new non-opioid treatments for pain relief to the Section 4135 Qualifying Products list as soon as it is operationally feasible.
Add-on Payment for Technetium-99m (Tc-99m) Derived from Domestically Produced Molybdenum-99 (Mo-99)
In the CY 2025 OPPS/ASC final rule with comment period, CMS finalized a proposal to incentivize domestic production of Mo-99 by establishing a new add-on payment of $10 per dose of Tc-99m derived from domestically produced Mo-99 starting on January 1, 2026. In this CY 2026 OPPS/ASC final rule with comment period, CMS is codifying the definition for domestically produced Mo-99 and establishing 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). CMS also finalized that at least fifty percent of the Mo-99 used in the Tc-99m generator that produced a dose of Tc-99m must have been domestically produced for the dose to qualify for the add-on payment. CMS believes the $10 add-on payment for domestically produced Tc-99m will ensure equitable payments by paying providers who use domestically produced Tc-99m radiopharmaceuticals when available, an amount that reflects the anticipated higher cost of these products. The $10 add-on payment will help to provide access to domestically produced Tc-99m radiopharmaceuticals by addressing the additional cost of domestically produced Tc-99m radiopharmaceuticals. CMS believes the new HCPCS C-code will help facilitate reimbursement with minimum administrative burden.
Hospital Price Transparency (HPT)
Consistent with the President’s Executive Order 14221, “Making America Healthy Again by Empowering Patients with Clear, Accurate, and Actionable Healthcare Pricing Information,” CMS is finalizing several modifications to the HPT regulations to ensure that hospitals provide meaningful, accurate information about the amount they charge for health care items and services. Beginning January 1, 2026, hospitals will be required to calculate and encode the median, 10th and 90th percentile allowed amounts as well as the count of allowed amounts in their machine-readable file (MRF) when payer-specific negotiated charges are based on percentages or algorithms. In addition, CMS is finalizing its proposal, with modification, to require hospitals to attest in the MRF that, to the best of its knowledge and belief, the hospital has included all applicable standard charge information and that the information encoded is true, accurate, and complete as of the date in the file. The attestation also states that the hospital has provided in the MRF all applicable payer-specific negotiated charges in dollars that can be expressed as a dollar amount, and for payer-specific negotiated charges that cannot be expressed as a dollar amount or are not knowable in advance, the hospital has provided in the MRF all necessary information available to the hospital for the public to be able to derive the dollar amount. Hospitals will be required to encode the name of the hospital’s chief executive officer, president or senior official designated to oversee the encoding of true, accurate, and complete data. To advance the comparability of HPT information with other healthcare data, CMS is finalizing a requirement for hospitals to encode their national provider identifiers (Type 2 NPIs) in the MRFs. Lastly, to encourage faster resolution and payment of civil monetary penalties (CMPs) and in exchange for the hospital’s acceptance of CMS’s determination that the hospital violated HPT requirements, CMS is finalizing the proposal that offers a reduction to the amount of a hospital’s CMP by 35 percent, under certain circumstances, when the hospital waives its right to an Administrative Law Judge (ALJ) hearing in certain situations.
The effective date for the new data elements required in the MRF is January 1, 2026, but CMS will delay enforcement of those requirements until April 1, 2026.
These finalized policies will further advance the agency’s commitment to increasing price transparency and will ensure that patients have complete and accurate information about actual prices rather than estimates or algorithms. A separate fact sheet discusses the hospital price transparency provisions in the CY 2026 OPPS/ASC final rule.
Intensive Outpatient Program
Intensive Outpatient Program (IOP) Rate Setting
The CY 2026 OPPS/ASC final rule with comment period updates Medicare payment rates for intensive outpatient program services furnished in hospital outpatient departments and Community Mental Health Centers (CMHCs). The IOP is a distinct and organized outpatient program of psychiatric services provided for individuals who have an acute mental illness or substance use disorder, consisting of a specified group of behavioral health services paid on a per diem basis for a minimum of 9 hours of IOP services per week under the OPPS, or other applicable payment system, when furnished in hospital outpatient departments, CMHCs, Federally Qualified Health Centers (FQHCs), and Rural Health Clinics (RHCs). IOP services may also be furnished in Opioid Treatment Programs (OTPs) for the treatment of opioid use disorder (OUD).
Update to IOP Payment Rates in Hospital Outpatient Departments and CMHCs
CMS is finalizing our proposal to maintain the existing rate structure, with two IOP APCs for each provider type; one for days with three services per day and one for days with four or more services per day. CMS is using the CY 2024 claims data and the latest available cost information, from cost reports beginning three fiscal years prior to the year that is the subject of the rulemaking.
For CY 2026, CMS is calculating hospital-based IOP payment rates for three services per day and four or more services per day based on cost per day using OPPS data that includes IOP or PHP and non-IOP or PHP days. CMS believes continuing to use the OPPS data set will allow CMS to capture data from hospital claims that are not identified as IOP or PHP but that include the service codes and intensity required for an IOP or PHP day.
CMS is finalizing our proposal to change the methodology for calculating the CMHC IOP costs for three services per day and four or more services per day. Specifically, CMS is finalizing our proposal to calculate the CMHC costs based on 40 percent of the final hospital-based IOP costs. This change will resolve a cost inversion in CMHC cost data that would have otherwise resulted in higher geometric mean costs for three-service days than for four-service days. It will also stabilize 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.
Partial Hospitalization Program
Partial Hospitalization Program (PHP) Rate Setting
The CY 2026 OPPS/ASC final rule updates Medicare payment rates for partial hospitalization program services furnished in hospital outpatient departments and CMHCs. The PHP is an intensive, structured outpatient program provided as an alternative to psychiatric hospitalization, consisting of a specified group of mental health services paid on a per diem basis for a minimum of 20 hours of PHP services per week under the OPPS, based on PHP per diem costs.
Update to PHP Per Diem Rates
CMS is finalizing our proposal to maintain the existing rate structure, with two PHP APCs for each provider type; one for days with three services per day and one for days with four or more services per day. Consistent with OPPS, for this CY 2026 ratesetting, CMS is using the CY 2024 claims data and the latest available cost information, from cost reports beginning three fiscal years prior to the year that is the subject of the rulemaking.
For CY 2026, CMS is calculating hospital-based PHP payment rates for three services per day and four or more services per day based on cost per day using OPPS data that includes IOP or PHP and non-IOP or PHP days. CMS believes continuing to use the OPPS data set will allow CMS to capture data from hospital claims that are not identified as IOP or PHP but that include the service codes and intensity required for an IOP or PHP day.
CMS is finalizing our proposal to change the methodology for calculating the CMHC PHP costs for three services per day and four or more services per day. Specifically, CMS is finalizing our proposal to calculate the CMHC costs based on 40 percent of the final hospital-based PHP costs. This change will resolve a cost inversion in CMHC cost data that would have otherwise resulted in higher geometric mean costs for three-service days than for four-service days. It will also stabilize 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.
Hospital Outpatient Quality Reporting (OQR) Program
The Hospital OQR Program is a pay-for-reporting program that requires hospital outpatient departments (HOPDs) to report data on certain quality measures specified by CMS. HOPDs that fail to submit the required quality data receive a 2-percentage point reduction to their annual payment update under the OPPS. CMS also makes data submitted by HOPDs for the Hospital OQR Program available to the public on Care Compare, permitting patients and their caregivers to review hospitals’ performance on quality measures.
CMS is finalizing the adoption of the Emergency Care Access & Timeliness electronic clinical quality measure (eCQM) beginning with voluntary reporting for the CY 2027 reporting period followed by mandatory reporting beginning with the CY 2028 reporting period/CY 2030 payment determination.
CMS is also finalizing the removal of: (1) the COVID–19 Vaccination Coverage Among Healthcare Personnel (HCP) measure beginning with the CY 2024 reporting period/CY 2026 payment determination; (2) the Hospital Commitment to Health Equity (HCHE) measure beginning with the CY 2025 reporting period/CY 2027 payment determination; (3) the Screening for Social Drivers of Health (SDOH) measure beginning with the CY 2025 reporting period; and (4) the Screen Positive Rate for SDOH measure beginning with the CY 2025 reporting period.
Furthermore, CMS is finalizing the removal of: (1) the Median Time from Emergency Department (ED) Arrival to ED Departure for Discharged ED Patients (Median Time for Discharged ED Patients) measure and (2) Left Without Being Seen measure, beginning with the CY 2028 reporting period/CY 2030 payment determination. These measures will be replaced by the Emergency Care Access & Timeliness eCQM, which is being finalized as proposed in this rule.
CMS is also finalizing the extension of voluntary reporting for the Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults (Excessive Radiation) eCQM, beginning with the CY 2027 reporting period. CMS remains committed to the Excessive Radiation eCQM as a patient safety issue for cancer prevention. Extending the voluntary reporting period will provide additional time for hospitals to gain experience with implementing the eCQM, as well as provide CMS with additional time to monitor implementation progress, including data collection burden and response rates.
Lastly, CMS is finalizing an update to the Hospital OQR Program’s Extraordinary Circumstances Exception (ECE) Policy. This finalized update will explicitly include extensions, in addition to exceptions, as a type of extraordinary circumstances relief option, and change the length of time to submit an ECE request from 90 days to 60 days after a qualifying event.
Rural Emergency Hospital Quality Reporting (REHQR) Program
The REHQR Program is a quality reporting program that requires REHs to report data on certain quality measures specified by CMS.
CMS is finalizing the adoption of the Emergency Care Access & Timeliness eCQM beginning with the CY 2027 reporting period/CY 2029 program determination as an optional measure; specifically, as an alternative to reporting the Median Time from ED Arrival to ED Departure for Discharged ED Patients measure. CMS is also establishing related eCQM data submission and reporting requirements beginning with the CY 2027 reporting period/CY 2029 program determination.
CMS is finalizing the removal of: (1) HCHE measure beginning with the CY 2025 reporting period/CY 2027 program determination; (2) Screening for SDOH measure beginning with the CY 2025 reporting period; and (3) Screen Positive Rate for SDOH measure beginning with the CY 2025 reporting period.
Lastly, CMS is finalizing updates to the Hospital REHQR Program’s ECE Policy. This final update will explicitly include extensions, in addition to exceptions, as a type of extraordinary circumstances relief option, and change the length of time to submit an ECE request from 90 days to 60 days after a qualifying event.
Ambulatory Surgical Center Quality Reporting (ASCQR) Program
The ASCQR Program is a pay-for-reporting program that requires ASCs enrolled in the Medicare Program to report data on certain quality measures specified by CMS. Under the ASCQR Program, ASCs that fail to submit required data on quality measures as specified by CMS receive a 2-percentage point reduction to their annual payment rate update under the ASC Fee Schedule. CMS also makes data submitted by ASCs for the ASCQR Program available to the public on Care Compare, permitting patients and their caregivers to review ASCs’ performance on quality measures.
For the ASCQR Program, CMS is not finalizing 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). In addition, CMS is not finalizing a proposed requirement that ASCs use the Hospital Quality Reporting (HQR) system for data submission of PRO–PMs generally.
CMS is finalizing removal of the following measures from the ASCQR Program: (1) COVID–19 Vaccination Coverage Among HCP measure beginning with the CY 2024 reporting period/CY 2026 payment determination; (2) Facility Commitment to Health Equity (FCHE) measure beginning with the CY 2025 reporting period/CY 2027 payment determination; (3) Screening for SDOH measure beginning with the CY 2025 reporting period; and (4) Screen Positive Rate for SDOH measure beginning with the CY 2025 reporting period.
Lastly, CMS is finalizing updating the ASCQR Program’s ECE Policy. This update will explicitly include extensions, in addition to exceptions, as a type of extraordinary circumstances relief option, and change the length of time to submit an ECE request from 90 days to 60 days after a qualifying event.
Request for Information for the Hospital Outpatient, REH and ASC Quality Reporting Programs
In addition to the finalized changes to the Hospital Outpatient Quality Reporting (OQR), Rural Emergency Hospital Quality Reporting (REHQR), and Ambulatory Surgical Center Quality Reporting (ASCQR) Programs described above, CMS sought input to further meaningful measurement and reporting for quality of care in the outpatient setting. To align with current administrative priorities, CMS included a Request for Information (RFI) to seek public input on future measure concepts related to well-being and nutrition. The RFI requested information on tools and measures that assess overall health, happiness, and life satisfaction that could include aspects of emotional well-being, social connections, purpose, and fulfillment. The RFI also sought public input on tools and frameworks that promoted healthy eating habits, exercise, nutrition, or physical activity. CMS received several comments and will take them into consideration.
Overall Hospital Quality Star Rating Finalized Modification
Patient safety constitutes a fundamental component of the CMS National Quality Strategy, representing a sustained commitment to fostering optimal health outcomes and ensuring the safest possible care for all patients. CMS is finalizing updates to the methodology used to calculate the Overall Hospital Quality Star Rating to emphasize the contribution of the Safety of Care measure group in hospitals’ ratings.
Measures that are publicly reported on the provider comparison tool on Medicare.gov (https://www.medicare.gov/care-compare/) are organized into five conceptually coherent measure groups under the Overall Star Rating: Safety of Care, Mortality, Readmission, Patient Experience, and Timely and Effective Care. For additional details regarding the current methodology, CMS refers readers to 42 CFR § 412.190(d) and the Overall Hospital Quality Star Rating Methodology Reports, available at https://qualitynet.cms.gov/inpatient/public-reporting/overall-ratings/resources.
After seeking interested party input on the potential modifications to the current methodology to increase the Safety of Care measure group’s contribution to the Overall Hospital Quality Star Rating in the CY 2025 OPPS/ASC final rule with comment period (89 FR 94514 through 94521), CMS is finalizing policies to make a 2-stage methodologic update in the CY 2026 OPPS/ASC final rule with comment period. This methodology update will retain all aspects of the current methodology (e.g., annual refresh, inclusion and exclusion criteria for measures, standardization of measure scores, calculation of measure group & summary scores, use of K-means clustering to assign a rating) and finalizes adding a new methodology step (which will become the final step of the methodology):
- Stage 1: Implement a 4-star cap for hospitals in the lowest quartile of the Safety of Care measure group performance in Calendar Year 2026.
CMS finalizes its policy 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: Implement a blanket 1-Star reduction for hospitals in the lowest quartile of Safety of Care measure group performance beginning in Calendar Year 2027.
CMS finalizes its policy reducing 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 will have their star ratings reduced to 1, 2, 3, or 4 stars, respectively. Since the minimum possible Overall Hospital Star Rating will remain 1 star, hospitals already receiving one star will not face further star reduction and, therefore, will effectively be exempt from this methodology update consistent with the established assignment of ratings between 1-5 whole stars.
The Stage 1 methodology update will be used to calculate the Overall Hospital Star Rating in 2026, while the Stage 2 methodology update will be used to calculate the Overall Hospital Star Rating beginning in 2027 and later years. The Stage 2 methodology update is intended to replace the Stage 1 methodology update, not to supplement it. That is, no 5-star hospital will be capped to 4 stars and then further reduced to 3 stars; in both stages, 5-star hospitals could only be reduced to 4 stars.
Only rated hospitals with at least 3 Safety of Care measures will be subject to either the 4-star cap or the 1-star reduction. This is to ensure that any reduction is based on reliable measurement across multiple elements of patient safety. Hospitals with 1 or 2 Safety of Care measures will still receive a Safety of Care group score and their star rating will reflect their performance on these measures, but they will not be subject to additional reduction based on limited information. Hospitals with 0 Safety of Care measures do not receive a Safety of Care group score, and their patient safety performance is not reflected positively or negatively in their Overall Hospital Quality Star Rating due to insufficient data for reliable measurement of patient safety outcomes.
The finalized methodological update reflects CMS' commitment to improving healthcare outcomes and advancing patient safety and aims 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.
- Emphasize the contributions of safety more broadly by applying a higher standard for patient safety to hospitals across a broad range of overall performance, rather than limiting it to the few 5-star hospitals in the lowest quartile of Safety of Care (with at least three Safety of Care measures).
For more information about Hospital Outpatient PPS, please visit: https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient
For more information about the OPPS Drug Acquisition Cost Survey, please visit: https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient-pps/outpatient-prospective-payment-system-opps-drug-acquisition-cost-survey
The final rule (CMS-1834-FC) can be downloaded at the Federal Register here: https://www.federalregister.gov/documents/current
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