More care may move out of hospitals, creating new demand in lower-cost outpatient settings.
On average, Medicare pays two to four times more for procedures performed at a hospital outpatient department (HOPD) instead of a physician’s office. Policymakers are concerned about this discrepancy and have taken steps in recent years to equalize reimbursement across sites of care. When doing so, CMS generally aligns the reimbursement to the lower rate. As site-neutral payment policies expand, average reimbursements for the impacted outpatient procedures are likely to decline.
In March 2026, MedPAC reiterated its recommendation to expand site-neutral payment policies to 57 ambulatory payment classifications (APCs). These 57 APCs cover services such as drug administration, standard x-rays, and diagnostic ultrasounds. In the CY2026 Hospital Outpatient Prospective Payment System (OPPS) rule, CMS made drug administration codes equal to the Physician Fee Schedule codes. CMS estimated that this change would reduce HOPD spending by $290 million dollars.
For healthcare distributors, expanded site-neutral payment policies will likely accelerate the shift of care from HOPDs to lower-cost settings including ambulatory surgical centers and physician offices. The downward alignment may reduce operating margins for HOPDs as independent practices and ambulatory providers absorb a greater share of routine procedures.