By: Kate Price
Kate develops strategic intelligence guidance, including monitoring and curating forecasted and available funding opportunities, producing memos on federal grant programs, and assisting in other legislative and budget analysis.
Proposed CMS Site Neutral Reform May Impact Hospitals’ Ability to Provide High-Quality Services
Hospitals and health systems often rely on McAllister & Quinn for key policy insights related to federal-level reforms such as CMS site neutral payment, as far-reaching policy changes can impact their institutional bottom line and their ability to provide robust, high-quality services to patients within their continuum of care.
CMS issued a proposed rule, “Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems; Quality Reporting Programs; Overall Hospital Quality Star Ratings; and Hospital Price Transparency,” on July 17, 2025. The CMS Fact Sheet can be found here.
What is Site-Neutral Payment Reform?
The site-neutral payment rule is intended to ensure that Medicare and Medicare beneficiaries do not pay more for services rendered at hospital outpatient sites and ambulatory surgical centers (ASCs) than they do at private medical clinics, through mandating that Medicare pays the same price for the same procedure regardless of where the procedure takes place.
This policy has long been a topic of contention for hospitals and health systems, with the current framework stemming from a 2024 white paper written by Senators Bill Cassidy, M.D. (R-LA), and Maggie Hassan (D-NH) outlining proposed reforms that they claimed would lower health care costs for patients, while also saving taxpayer dollars.
Currently, Medicare patients and the federal government must pay integrated hospital facility fees within care costs, which compensate for the overhead costs of running a hospital, even for routine appointments.
“Inpatient-Only” Procedure Phase-Out: Moving From Hospitals to Other Sites of Care
Two other relevant provisions would phase out an “inpatient-only” list of surgical procedures that have been deemed necessary to take place in a hospital as opposed to an outpatient location. Allowing these procedures to take place outside of hospital environments has been touted as being less costly for the patient. CMS has floated phasing out this list over a three-year period, beginning with the removal of 285 procedures (mostly musculoskeletal in nature) for 2026.
Reimbursement Changes: How They Can Impact Hospitals’ Bottom Lines
The CMS rule also expands a 2019 policy that reduced reimbursement to off-campus provider-based departments (PBDs) for clinic visit services in order to better align reimbursement rates with those of private clinics and physician offices. Even while not on a hospital campus, PBDs are considered outpatient hospital departments and are billed at a higher rate than a standalone clinic or doctor’s office. If finalized, off-hospital campus provider-based departments would be reimbursed at physician-level rates for drug administration services, not at hospital outpatient rates, in addition to the lower reimbursement initially set forth in the 2019 rule.
This specific site-neutral provision regarding drug administration services outlined in this proposed rule is projected to save the government and consumers $280 million in 2026, with $210 million in savings to Medicare itself, and the other $70 million in savings to Medicare beneficiaries in the form of reduced coinsurance rates.
Industry Reactions
United States of Care, a nonpartisan nonprofit organization committed to ensuring access to quality, affordable health care, has long endorsed site neutral reform. CEO and Co-Founder Natalie Davis said in a November 1, 2024 statement, “Enacting site-neutral payment policy that establishes fairness and promotes transparency in hospital pricing is a critical step towards making premiums more affordable and addressing the high out-of-pocket costs that people are facing.”
In contrast, Ashley Thompson, Senior Vice President of the American Hospital Association (AHA), which represents nearly 5,000 hospitals and care providers nationwide, decried these proposed policies as harmful to hospitals and health systems, asserting in a July 2025 statement that, in regard to expansion of site-neutral cuts and elimination of inpatient only lists, “both policies fail to account for the real and crucial differences between hospital outpatient departments and other sites of care.”
What Can Hospitals & Health Systems Do?
Advocate: Submit a formal comment to have your voice heard. These policies are currently proposed and open to public input and comments. Comments must be submitted by September 15, 2025 in order to be considered.
Meet with your local delegation and congressional representatives. McAllister & Quinn provides tailored support to our hospitals and health systems when interfacing with their congressional leadership, from advocacy work to Congressionally Directed Spending/Community Project Funding requests.
Learn more about proposed changes that impact patient care: These are only some of the proposed changes put forth in the new CMS rule, many of which could impact health systems and their patients. For further policy insights, analysis, and actionable strategies, please contact McAllister & Quinn to discuss how we can help.