Medicare Payment Policy Final Rule for Outpatient Setting Addresses Radiopharmaceuticals, Skin Substitutes, and 340B Program Key Topics

On Friday, November 21, the U.S. Centers for Medicare & Medicaid Services (CMS) released a display copy of the Calendar Year (CY) 2026 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Final Rule (OPPS-ASC Final Rule). CMS finalized several notable proposals from the CY 2026 OPPS-ASC Proposed Rule, including provisions with significant effects on Medicare reimbursement methodologies for radiopharmaceuticals and skin substitutes. CMS also notably declined to finalize its proposed updates to the 340B “offset” remedy but moved forward with a plan to survey hospitals regarding their acquisition costs, which is likely to result in lower reimbursement for 340B drugs in future rulemaking.

The OPPS-ASC Final Rule is effective January 1, 2026. Below we address key provisions of the OPPS-ASC Final Rule. CMS’s original proposals are described in more detail in our Sidley Update on the CY 2026 OPPS-ASC Proposed Rule, available here.

I. Radiopharmaceuticals

1. MUC-Based Reimbursement. CMS finalized its proposal to continue reimbursing diagnostic radiopharmaceuticals with a per-day cost exceeding a threshold — set at $655 for 2026 — by using such products’ Mean Unit Cost (MUC), which is derived from hospital claims. Payments for diagnostic radiopharmaceuticals at or below this threshold will continue to be paid as packaged costs consistent with existing regulations. For CY 2026, CMS identified 31 products (at Table 7 of the OPPS-ASC Final Rule) that exceed the per-day threshold and will be reimbursed using the MUC methodology in CY 2026.
   
   CMS continues to state it believes that MUC-based reimbursement “is an appropriate proxy for the average price for a diagnostic radiopharmaceutical” because it is “calculated based on the average costs for a particular year and is directly reflective of the actual cost data that hospitals submit to CMS.” CMS notes that there “must be more consistent, validated, and universal reporting in order for Average Sales Price (ASP) to be a viable payment methodology” and that “the absence of appropriate ASP reporting could result in payment for a separately payable diagnostic radiopharmaceutical based on WAC or AWP indefinitely,” which CMS believes “would be inappropriate, as these pricing metrics do not capture all of the pricing discounts that may be reflected in the ASP.”
2. ASP Reporting. ASP reporting for diagnostic radiopharmaceuticals continues to be voluntary for CY 2026, but CMS notes that it “intends to explore” updates to subregulatory guidance for ASP reporting for diagnostic radiopharmaceuticals. While CMS finalized its proposal to continue using MUC-based reimbursement for certain diagnostic radiopharmaceuticals, CMS indicates an openness to using ASP for reimbursement in future years, noting that it “continue[s] to believe” that using ASP could be “an opportunity to improve payment accuracy” as implemented for therapeutic radiopharmaceuticals and other drugs.
3. Diagnostic Radiopharmaceuticals Without Claims Data. CMS finalized a policy to reimburse new diagnostic radiopharmaceuticals that (1) exceed the per-day threshold, (2) have a HCPCS code, and (3) do not have pass-through status based on ASP until a MUC can be calculated based on hospital claims data from two years prior. If ASP data is not available, reimbursement for such diagnostic radiopharmaceuticals is based on WAC plus 3% during the product’s initial sales period, which is the first quarter of sales before ASP can be calculated, and WAC plus 6% following such initial sales period. If WAC is also unavailable, reimbursement for such diagnostic radiopharmaceuticals will be 95% of AWP.
4. Tc-99m Add-On. CMS finalized without modification its proposed definitions for “domestically produced” Tc-99m radiopharmaceutical doses that are eligible for a $10 add-on payment beginning January 1, 2026. The agency finalized its definition of “domestically produced dose of Tc-99m” as “a dose of Tc-99m generated from domestically produced Mo-99,” with “domestically produced Mo-99” further defined as “Mo-99 that was both irradiated and processed in the United States.”

II. Skin Substitutes

1. Separate Payment as “Incident-to Supplies.” CMS finalized its proposal to align the payment methodology for skin substitutes across the OPPS, ASC, and the Physician Fee Schedule (PFS) payment systems, as discussed in our previous update on the PFS here. Specifically, starting in CY 2026, CMS will now “pay separately for the provision of certain groups of skin substitutes” as “incident-to supplies.” Under the OPPS, this means that payment for skin substitute products for CY 2026 will be “unpackaged” from payment for the underlying skin substitute application procedure. As in the PFS, however, this policy does not apply to skin substitutes that are licensed under Section 351 of the Public Health Service Act as biologicals, which will be reimbursed based on ASP.
2. Payment Categories Based on FDA Regulatory Pathway. CMS finalized its proposal to create three payment groups for skin substitute products based on their Food and Drug Administration (FDA) regulatory categories: (1) products determined to be human cells, tissues, and cellular and tissue-based products (HCT/Ps) under Section 361 of the Public Health Service Act; (2) devices requiring 510(k) clearance; and (3) products subject to premarket approval (PMA) applications. CMS stated that this FDA-based classification methodology provides “an appropriate level of distinction for a heterogenous category of products that exhibit clinical and resource variability for purposes of setting payment rates.” To implement separate payment for skin substitute products under the OPPS, CMS also finalized its proposal to create three new ambulatory payment classifications (APCs) based on the three FDA regulatory categories: APC 6000 (PMA Skin Substitute Products), APC 6001 (510(k) Skin Substitute Products), and APC 6002 (361 HCT/P Skin Substitute Products). Additionally, CMS created new status indicator “S1” for HCPCS codes describing skin substitute products that are assigned to one of those three new APCs, with the “S1” indicating that the skin substitute product is paid separately from other procedure codes under the OPPS.
3. Calculation of Payment Rates. As in the PFS, CMS finalized the same per-cm² payment rate across all three payment categories / APCs for CY 2026. CMS states that for future years, it may establish different payment rates for different categories. For CY 2026, the final payment rate for skin substitute products is $127.14 per cm², which is slightly higher than the originally proposed rate for CY 2026 of $125.38 per cm². Importantly, CMS recently issued a Correction Notice to the CY 2026 PFS Final Rule, which “corrects” the final payment rate for skin substitute products under the CY 2026 PFS Final Rule to align with the final payment rate for skin substitute products under the CY 2026 OPPS-ASC Final Rule: $127.14 per cm².
   
   In addition to addressing CY 2026 payment rates under the CY 2026 OPPS-ASC Final Rule, CMS discusses considerations for determining payment rates in future years, suggesting that it may use ASP data to update payment rates instead of an inflation adjustment (as some commenters recommended) because CMS “believe[s] that, over time, the ASP data will more accurately reflect the market impacts of [its] policy to treat skin substitutes as incident-to supplies.” CMS further stated that “[b]y relying on ASP, payment updates will be responsive to changes in the actual cost of skin substitute products as a result of market pressures, whereas an index like the CPI-U is a general inflation measure that does not account for pricing dynamics.” Overall, CMS finalized its proposal to “update the rates for skin substitute categories annually through rulemaking using the most recently available calendar quarter of ASP data, when available, to set the rates,” and, in the event that ASP data is not available for a particular product, to use outpatient hospital MUC data or, if MUC data is not available, using the product’s WAC or 89.6% of AWP if WAC is also unavailable.
4. Skin Substitute Application Procedure Codes. Regarding the skin substitute application procedure codes — CPT codes 15721 – 15278 — CMS finalized its proposal to reassign certain application procedure codes to different APCs in light of the new policy that unpackages payment for the skin substitute product from payment for the underlying application procedure. Under the CY 2026 OPPS-ASC Final Rule, CPT codes 15271 and 15275 are assigned to APC 5053, and CPT codes 15273 and 15277 are assigned to APC 5054. CMS also “specif[ies] that CPT add-on administration codes 15272, 15274, 15276, and 15278 would still be packaged in the outpatient hospital setting” under the CY 2026 OPPS-ASC Final Rule.
5. Skin Substitutes in the ASC Setting. In the ASC setting, CMS finalized its proposals to create new ASC payment indicator “S2” (skin substitute supply group; paid separately when provided integral to a surgical procedure on ASC list; payment based on OPPS rate). Although CMS notes that it “do[es] not believe these products are commonly used in the ASC setting,” CMS further states its belief that “extending [its] uniform framework from the physician office and hospital outpatient setting to the ASC setting will help ensure equitable access to these products in the future across the different sites of outpatient care.”

III. Addressing Outpatient Services Furnished in Off-Campus Provider-Based Departments

CMS finalized without modification its proposal to reduce outpatient hospital reimbursement for drug administration furnished by “non-excepted” off-campus providers to the site-specific PFS payment rate for such services. This policy affects ambulatory payment classification (APC) codes 5691–5694 for Drug Administration. CMS states its view that outpatient department service volume continues to grow based on the financial incentives created by the existing reimbursement policy, despite previous efforts to curb this trend by aligning clinic visit payments in excepted off-campus provider-based departments with PFS rates rather than the higher OPPS rates. CMS estimates that its new policy would save Medicare $220 million for CY 2026 and would reduce co-payments for Medicare beneficiaries by an additional $70 million. This reduction in payments is not a budget-neutral adjustment. Rural Sole Community Hospitals are exempt from this policy, as proposed, to “maintain access to care in rural areas.”

IV. Medicare OPPS Drugs Acquisition Cost Survey

CMS finalized its proposal to conduct a survey of hospitals to further analyze OPPS drug acquisition costs, pending Office of Management and Budget approval of the survey package. Under section 1833(t)(14)(A)(iii)(I) of the Social Security Act, Medicare Part B reimbursement for certain covered outpatient drugs may be set at the “average acquisition cost for the drug for the year” as determined by the Secretary of the Department of Health and Human Services (HHS) “taking into account the hospital acquisition cost survey data.” The statute requires the Secretary to conduct periodic surveys to determine hospital acquisition costs in setting payment rates under this authority. As discussed in our Sidley Update on the April 2025 drug pricing executive order, available here, the executive order directed the Secretary to publish a plan to conduct a survey of hospital outpatient drug acquisition costs, as required by statute. Additionally, as discussed in our Sidley Update on the CY 2026 OPPS-ASC Proposed Rule, available here, after CMS sought to cut OPPS reimbursement for drugs purchased at the 340B price, a lawsuit was brought, and a 2022 decision by the U.S. Supreme Court held that CMS could not vary payment rates for 340B drugs using the authority cited because it had not first conducted a survey of hospital acquisition costs. Accordingly, the survey appears intended to support future reductions in Medicare reimbursement for drugs purchased at the 340B price.

CMS states that the submission window will open by early CY 2026 and will collect NDC-level acquisition cost data for “each separately payable drug acquired by all hospitals paid under the OPPS” for the period July 1, 2024 through June 30, 2025. CMS emphasizes that “all hospitals paid under the OPPS are required to respond to the survey.” For those hospitals that do not respond, CMS states that it has made “no final decision on how, if at all, we will ‘tak[e] into account’ non-responses,” noting that the issue is “premature before we analyze the data we receive” and will be addressed only in future rulemaking, potentially beginning with CY 2027.

V. 340B Remedy Offset

In response to the 2022 U.S. Supreme Court decision referenced above, CMS previously made approximately $7.8 billion in repayments to account for the reimbursement cuts CMS made to 340B hospitals from 2018 to 2022. Then, in 2023, CMS finalized a plan — the “Final Remedy rule” — to “offset” these payments by reducing the conversion factor for nondrug items and services to all OPPS providers by 0.5% each year for 16 years, starting in 2025. In the CY 2026 OPPS-ASC Proposed Rule, CMS had proposed increasing the annual “offset” percentage for nondrug items and services from 0.5% to 2%, effective January 1, 2026.

In the CY 2026 OPPS-ASC Final Rule, CMS declined to finalize its proposed revision to the annual conversion factor from 0.5% to 2%. Instead, it will maintain the 0.5% reduction for CY 2026, which CMS had set in 2023 in the Final Remedy rule. CMS’s proposal would have reduced the estimated time for reaching the total offset of $7.8 billion from 16 years at 0.5% to six years at 2%, and CMS believes that the proposed “2 percent reduction for 6 years adequately balanced budget neutrality against hospital burden and reliance.” However, CMS agreed with public comments arguing that CMS could adequately account for hospitals’ reliance interests by maintaining the 0.5% reduction, as planned in the 2023 Final Remedy rule, for CY 2026. Although it declined to revise the conversion factor for CY 2026, CMS anticipates adopting a conversion factor greater than 0.5% (such as 2%) for CY 2027.