CMS Expands Site-Neutral Medicare Payments for Outpatient Care
Key Takeaways
- The Centers for Medicare & Medicaid Services (CMS) is proposing to expand site-neutral payment policy in calendar year (CY) 2027 by paying certain imaging services delivered at excepted off-campus hospital outpatient departments at rates equivalent to the Medicare Physician Fee Schedule.¹
- CMS estimates the proposal would reduce Medicare Part B expenditures by approximately $260 million in its first year, including $70 million in lower beneficiary premiums, while also reducing beneficiary cost-sharing by approximately $70 million.¹
- The Medicare Payment Advisory Commission (MedPAC) has supported aligning payments for comparable services across ambulatory settings as a way to reduce financial incentives to shift services toward higher-cost settings, while hospital groups argue broader site-neutral policies do not account for hospitals' higher operating costs and could threaten access to care.²,³
Where a Medicare beneficiary receives outpatient care can significantly affect how much Medicare—and the beneficiary—pays for the same or similar service.
CMS is proposing to narrow some of those payment differences as part of its CY 2027 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Payment System proposed rule.¹
The proposal would expand an existing policy designed to control unnecessary increases in outpatient service volume by applying Medicare Physician Fee Schedule-equivalent payments to certain imaging services performed at excepted off-campus provider-based departments.¹
CMS estimates the change would reduce Medicare Part B expenditures by approximately $260 million during its first year, including about $190 million in Part B savings and $70 million in reduced beneficiary premiums. Beneficiary cost-sharing would decrease by another estimated $70 million.¹
The proposal represents the latest development in a broader federal policy debate over "site-neutral" payments: whether Medicare should pay different amounts for comparable outpatient services depending on where those services are delivered.
What Is Site-Neutral Payment?
Medicare traditionally reimburses services delivered in hospital outpatient departments under the OPPS, while services furnished in physician offices are generally paid under the Medicare Physician Fee Schedule.
Those payment systems can produce different reimbursement—and beneficiary cost-sharing—for comparable services.
Site-neutral payment policies seek to narrow or eliminate those differences for services that policymakers determine can be safely and appropriately delivered in multiple settings.
The policy is not entirely new. CMS implemented a payment adjustment for clinic visits furnished at certain excepted off-campus hospital departments beginning in 2019 and expanded the policy to drug administration services for CY 2026.¹
For 2027, CMS proposes another expansion by applying Physician Fee Schedule-equivalent payments to imaging without contrast services furnished in excepted off-campus provider-based departments. Rural sole community hospitals would be exempt.¹
Why CMS Is Expanding the Policy
CMS frames site-neutral payment as both a Medicare spending and beneficiary affordability issue.
According to the agency, the existing policy is intended to prevent Medicare and beneficiaries from paying substantially more for certain services simply because they are delivered at an off-campus hospital department instead of a physician office.¹
CMS maintains that expanding the policy to certain imaging services would further reduce payment differences based on site of care while lowering Medicare spending, premiums, and beneficiary cost-sharing.¹
The proposal also comes as CMS continues to expand the range of procedures that can potentially be performed outside inpatient settings. For CY 2027, the agency separately proposes removing another 638 services from Medicare's inpatient-only list, citing changes in medical practice that allow more procedures to be performed safely on an outpatient basis when clinically appropriate.¹
Together, the policies signal continued federal interest in directing care toward clinically appropriate, lower-cost settings when possible.
The MedPAC Perspective: Paying Similar Rates for Similar Services
The Medicare Payment Advisory Commission has long examined payment differences across ambulatory care settings as part of its responsibility to advise Congress on Medicare payment policy.
MedPAC evaluates Medicare payment rates with the goals of maintaining beneficiary access to high-value care while supporting the fiscal sustainability of the Medicare program.²
Site-neutral payment aligns with a broader principle advanced by the commission: Medicare payment differences should reflect meaningful differences in the resources required to provide care rather than simply the organizational setting in which a service is delivered.
From that perspective, large payment differences can create incentives for services to migrate from lower-cost physician offices into higher-paid hospital outpatient departments, increasing Medicare spending and beneficiary cost-sharing without necessarily reflecting a change in the underlying service.
The CY 2027 CMS proposal represents a narrower application of that concept, targeting a specific category of imaging services at off-campus hospital departments rather than imposing uniform reimbursement across all hospital outpatient care.¹,²
The Hospital Perspective: Different Settings Carry Different Costs
Hospitals argue that payment comparisons based primarily on the service being delivered overlook important differences between hospital outpatient departments and independent physician practices.
The American Hospital Association (AHA) opposes broader site-neutral payment reductions, arguing that hospitals operate under substantially different financial and regulatory requirements.³
Hospitals must maintain around-the-clock emergency capacity, comply with more extensive regulatory and accreditation requirements, provide care regardless of patients' ability to pay, and maintain infrastructure needed to respond to emergencies and disasters.³
The AHA also maintains that hospital outpatient departments frequently serve patients with greater clinical complexity and provide services that may not otherwise be readily available in their communities.³
From the hospital perspective, reducing reimbursement to physician-office levels without accounting for those responsibilities could weaken hospitals' ability to subsidize essential services, particularly in rural and underserved communities.³
The Policy Trade-Off
The debate ultimately centers on what Medicare should be paying for when it reimburses outpatient care.
Supporters of site-neutral payment emphasize the service itself: if the same service can be safely provided in multiple settings, Medicare and beneficiaries should not necessarily pay substantially more because one provider is owned by or affiliated with a hospital.
Hospitals emphasize the broader infrastructure supporting that service. They argue that reimbursement helps sustain emergency capacity, regulatory compliance, safety-net responsibilities, and access to complex care that physician offices may not provide.³
The CY 2027 proposal attempts to target the first concern without fully equalizing hospital and physician payments across the outpatient sector. It applies only to designated imaging without contrast services at certain off-campus hospital departments and exempts rural sole community hospitals.¹
Implications for Managed Care
Although CMS' proposal directly concerns fee-for-service Medicare reimbursement, continued movement toward site-neutral payment could carry broader implications for managed care organizations, health systems, and provider contracting.
Payers may increasingly evaluate whether services traditionally delivered in hospital outpatient departments can be redirected to physician offices, ambulatory surgical centers, or other lower-cost settings when clinically appropriate.
Health systems, meanwhile, could face greater pressure to evaluate the financial sustainability of off-campus outpatient facilities if Medicare continues narrowing the payment differential between those facilities and independent practices.
Site-neutral policies may also influence negotiations between commercial insurers and hospital systems as payers increasingly scrutinize differences in reimbursement by site of service.
For beneficiaries, the most direct impact could be lower out-of-pocket costs when Medicare reduces payment differences between settings. CMS estimates its proposed 2027 imaging policy alone would reduce beneficiary premiums and cost-sharing by a combined approximately $140 million during the first year.¹
What Happens Next?
The CY 2027 OPPS and Ambulatory Surgical Center proposed rule remains subject to public comment.
CMS is accepting comments through August 31, 2026, before determining whether to finalize the site-neutral imaging provision for January 1, 2027.¹
Hospitals and other stakeholders are expected to continue weighing in on how Medicare should balance lower spending and beneficiary costs against the financial requirements associated with maintaining hospital-based services.
The Bottom Line
CMS' latest site-neutral payment proposal represents another incremental step toward reducing Medicare reimbursement differences based solely on where outpatient care is delivered.
For CMS and proponents of site-neutral reimbursement, aligning payments for comparable services could reduce Medicare spending and beneficiary costs while limiting incentives to move care into higher-paid settings.¹,²
Hospitals counter that the settings are not interchangeable, arguing that hospital outpatient departments carry costs and responsibilities that physician offices and other ambulatory facilities do not.³
As CMS considers whether to finalize its latest expansion, the debate is likely to extend beyond imaging services. The larger question for policymakers is how Medicare can encourage care in lower-cost settings without undermining the hospital infrastructure needed to serve patients with complex needs and maintain access to essential services.
References
- Centers for Medicare & Medicaid Services. Calendar Year 2027 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Proposed Rule (CMS-1850-P). Published July 2, 2026. Accessed August 7, 2026. https://www.cms.gov/newsroom/fact-sheets/calendar-year-2027-hospital-outpatient-prospective-payment-system-opps-ambulatory-surgical-center
- Medicare Payment Advisory Commission. March 2026 Report to the Congress: Medicare Payment Policy. Published March 12, 2026. Accessed August 7, 2026. https://www.medpac.gov/document/march-2026-report-to-the-congress-medicare-payment-policy/
- American Hospital Association. Site-Neutral Payment. Accessed August 7, 2026. https://www.aha.org/advocacy/site-neutral-paymen
