2026 Medicare Proposals and What They Mean for Surgical Access

An Analysis of Physician Reimbursement, Site-Neutrality, and Outpatient Facility Trends

Authored and reviewed by the DIN team, July 2025

Executive Summary

CMS’s proposed 2026 Medicare rules reflect growing momentum toward modernizing reimbursement, while also highlighting the tradeoffs of a budget-neutral system:

• Physician Fee Schedule (PFS) boost: Physicians would receive a 3.6% increase in Medicare payments under the PFS, a meaningful shift after years of stagnation (CMS 2025a). However, due to revaluation of certain procedures, not all specialties benefit equally—for example, cataract surgery (ophthalmology) is slated for an ~11% cut in its Medicare payment rate (ASCRS 2025).

• Outpatient facility payment cut: Hospitals would face a 2% annual cut in outpatient facility payments under the Hospital Outpatient Prospective Payment System (OPPS). This change is intended to help recoup $7.8 billion in past overpayments related to the former 340B drug policy (CMS 2025b).

• Expanded site-neutral payment: CMS proposes expanding site-neutral payment, beginning with drug administration services delivered in off-campus hospital clinics. These would be reimbursed at the same rate as services performed in physician offices, yielding an estimated $280 million in savings—including $70 million in reduced patient cost-sharing (CMS 2025b).

• More outpatient surgeries: CMS continues to shift procedures off the inpatient-only list, proposing to remove 285 procedures. These surgeries could then be performed in hospital outpatient departments or ambulatory surgery centers (ASCs) (CMS 2025b).

From DIN’s perspective, these updates move in the right direction. But a temporary physician pay increase will not resolve longstanding underfunding, and OPPS cuts may reduce hospital flexibility. Moreover, steep specialty cuts (such as in ophthalmology) could exacerbate access challenges. To protect equitable surgical access—especially in under-resourced areas—additional reforms are needed, including inflation-linked payment updates, broader site-neutral policies, and care models built around Rotating Surgeons.

Introduction

Medicare’s payment systems have not kept pace with the realities of delivering care. Physician practice expenses have increased, yet reimbursement under the Physician Fee Schedule (PFS) has remained flat or declined when adjusted for inflation. The result is a widening gap between what it costs to provide care and what Medicare pays for it.

The proposed 2026 rule offers partial progress. It increases physician pay, expands site-neutral reimbursement, and moves more procedures to outpatient care. At the same time, it reduces payments to hospitals and even proposes cuts to certain high-volume specialty services (notably in ophthalmology).

This paper outlines the major provisions in the 2026 rule, how they affect hospitals and surgeons, and where DIN believes further change is necessary to support sustainable access.

What’s in the Rule

• Physician Fee Schedule update: CMS proposes a 3.6% increase to the PFS conversion factor (CMS 2025a). This across-the-board adjustment would apply to many office-based services and procedures. Although the increase is enabled by a one-year statutory provision, it represents the first meaningful upward movement in the fee schedule in years. However, not all services would see increases: because of budget-neutral RVU adjustments, some procedures are slated for reductions. For example, Medicare’s proposed payment for a routine cataract removal with lens (phacoemulsification, CPT 66984) in 2026 is $466.87—an 11% decrease from the 2025 rate of $521.75 (ASCRS 2025). This cut is driven by reductions in both work and practice expense RVUs.

• OPPS payment reduction: CMS also proposes a 2% annual cut to hospital outpatient facility payment rates. This is part of a plan to recoup $7.8 billion in overpayments from 2018–2022, after a court ruling invalidated prior 340B drug payment cuts (CMS 2025b). In practical terms, Medicare would pay hospitals less for the same outpatient surgeries and services, year-over-year.

• Expansion of site-neutral payment: The push toward “equal pay for equal services” continues. Starting in 2026, Medicare would reimburse certain services at the same rate regardless of setting. Initially this applies to drug administration services in off-campus hospital outpatient clinics, which would be paid at the lower physician office rate (CMS 2025b). CMS estimates this change will save roughly $280 million, including $70 million in lower patient cost-sharing.

• More outpatient procedures eligible: CMS would remove 285 procedures from the inpatient-only list, expanding the roster of surgeries that can be performed in outpatient departments or ASCs (CMS 2025b). This continues the trend of migrating appropriate surgeries to less intensive (and often lower-cost) settings.

What this means for Physicians and Hospitals

• For physicians, the proposed increase in PFS payments provides some much-needed breathing room. It acknowledges the financial strain many practices face and temporarily blunts the impact of inflation on physician payments (CMS 2025a). However, not all physicians will benefit equally. Ophthalmologists, for instance, face a proposed 11% cut for CPT 66984, a high-volume, high-need service (ASCRS 2025). These reductions highlight the ongoing tension between budget neutrality and equitable specialty care.

• For hospitals, especially those in rural or resource-constrained settings, the OPPS reduction could lead to difficult tradeoffs. A 2% cut in outpatient facility payments means tighter margins on surgeries and procedures performed on Medicare patients (CMS 2025b).

• For independent practices, the expansion of site-neutral payments is a welcome development. Equalizing reimbursement across settings removes financial incentives for hospital acquisition of physician practices (PAI 2024; KFF 2024).

• For patients, Medicare beneficiaries stand to gain through lower out-of-pocket costs and expanded service options. When services are paid at physician office rates rather than hospital rates, patients generally owe less coinsurance (KFF 2024). However, if specialists reduce Medicare volumes due to lower reimbursement or if hospitals restrict access to low-margin services, patients could face longer wait times or reduced access—especially in rural communities.

Why Many Physicians Support Site-Neutrality

Site-neutral payment continues to gain momentum—not as a punishment to hospitals, but as a step toward aligning payments with the actual resources used. From the perspective of physicians and patients, it offers several important benefits:

• Fair payment for equal work: Site-neutrality ensures consistent reimbursement for identical services, regardless of setting (PAI 2024).

• Lower out-of-pocket costs: By equalizing payment across sites, Medicare saves money and patients pay less (KFF 2024).

• Transparent pricing: Site-based payment differentials often confuse patients and payers alike. Neutral payment promotes transparency.

• Protecting independent practice: Site-neutrality can slow consolidation and support a diverse provider landscape (KFF 2024).

DIN supports thoughtful, phased implementation of these reforms. When done right, site-neutral payment is a win-win that bends the cost curve while preserving or even enhancing access to services.

What DIN Recommends

To build on the progress of the 2026 proposals and address remaining gaps, DIN recommends:

• Make inflation-indexed payment permanent. Physician updates should be tied to the Medicare Economic Index (CMS 2025a).

• Expand site-neutrality carefully. Broaden the scope beyond drug administration services (KFF 2024).

• Review specialty payment reductions. Significant cuts to essential services like cataract surgery (ASCRS 2025) must be monitored to prevent access issues.

• Track the downstream effects of OPPS cuts. CMS should monitor for shifts in elective surgical scheduling and service closures (CMS 2025b).

• Support flexible workforce models. Partnering with Rotating Surgeons allows hospitals to adapt while maintaining patient access.

Conclusion

The 2026 Medicare proposals represent meaningful progress. Physician reimbursement is finally receiving long-overdue attention, and site-neutral payment is beginning to reflect how care is actually delivered. These shifts offer a more grounded foundation for ongoing discussions about value, sustainability, and equitable access.

But the picture remains incomplete. Hospitals—especially those operating on tight margins—must now navigate outpatient payment reductions while still meeting rising demand. Meanwhile, specialty-specific cuts threaten to undermine that progress. The proposed 11% reduction in reimbursement for routine cataract surgery (CPT 66984) is a clear example. Ophthalmology, a field that delivers high-volume, high-value care to a rapidly aging population, risks being disincentivized at precisely the time when patient need is accelerating.

If left unaddressed, such cuts could discourage provider participation, shrink surgical capacity, and increase wait times—particularly in rural or under-resourced areas where access is already fragile. Policy shifts aimed at cost containment must be paired with rigorous impact monitoring and an operational strategy that ensures continued access to core services.

At DIN, we see payment reform and operational innovation as deeply interconnected. Financial sustainability alone isn't enough—care models must also be designed to absorb these changes without sacrificing delivery. Our Rotating Surgeons model enables hospitals to expand surgical access through consistent, relationship-based coverage, supported by streamlined logistics and infrastructure that adapts to variable demand.

As these new rules take effect, we remain committed to partnering with hospitals, clinicians, and policymakers to strengthen the link between reimbursement policy and real-world outcomes. Together, we can build a future where high-quality surgical care—including ophthalmology—remains accessible, responsive, and resilient in every community.

Works Cited

• CMS 2025a. CY 2026 Medicare Physician Fee Schedule Proposed Rule – Fact Sheet. Centers for Medicare & Medicaid Services. July 14, 2025.

• CMS 2025b. CY 2026 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Proposed Rule – Fact Sheet. CMS. July 15, 2025.

• PAI 2024. Physicians Advocacy Institute. Site-Neutral Payment and Its Impact on Independent Practice. May 2024.

• KFF 2024. Levinson Z, Neuman T, Hulver S. Five Things to Know About Medicare Site-Neutral Payment Reforms. Kaiser Family Foundation. June 2024.

• ASCRS 2025. American Society of Cataract and Refractive Surgery. Impact of CY 2026 PFS Proposed Rule on Ophthalmology. Member Communication. July 2025.