FY26 appropriations bill includes new administrative mandate for hospitals

Hospitals soon will face new administrative requirements around billing for services provided at off-campus outpatient departments (OPDs), based on text in an appropriations bill agreed to in bipartisan negotiations.

The primary purpose of the bicameral bill is to fund the Departments of Labor, HHS and Education for the remainder of FY26. Without passage, funding for those departments will expire Jan. 30, and Congress will need to pass a continuing resolution or risk the expiration of funding less than three months after a record-setting 43-day government shutdown ended in November.

Completion of the Labor-HHS-Education bill means Congress has agreed on FY26 bills for all federal agencies. Legislators in both parties are touting the bill, although a possible stumbling block to final passage is that for purposes of voting, the Labor-HHS-Education text is being folded into a larger bill that also includes funding for the Department of Homeland Security (DHS). The DHS allocation may be a source of contention due to concerns of some Democrats over the funding for Immigration and Customs Enforcement operations.

Notable omissions from the HHS bill include an extension of the enhanced subsidies for buying Affordable Care Act (ACA) marketplace insurance, along with Republican-favored healthcare reforms such as an expansion of health savings accounts. The status quo means ACA enrollees will continue to face premium payments that have been projected to more than double the 2025 out-of-pocket premium, on average.

Healthcare policies recently proposed by President Donald Trump are set to be considered later this year, possibly as part of a reconciliation bill.

Hospital OPD requirements

As part of a push by policymakers to curb site-based payment differentials, hospitals would have to ensure each off-campus OPD has a unique National Provider Identifier (NPI) distinct from the main hospital. Noncompliance would render the OPD ineligible for Medicare payment starting in 2028.

Hospitals also would have to submit initial and subsequent attestation that the off-campus OPD meets Medicare’s definition of provider-based, which entails standards regarding proximity to and clinical and administrative integration with the main facility.

Similar requirements were on the verge of becoming law in a continuing resolution to fund the government for the final nine months of FY25 before Republicans decided to settle for a narrower package heading into the start of Trump’s second term.

If the OPD clause is passed into law for 2028, hospitals could face a substantial burden, said Shawn Stack, director of perspectives and analysis with HFMA.

“It significantly increases administrative oversight, compliance risk and operational complexity for off-campus hospital departments,” Stack said.

When the provision nearly passed in December 2024, America’s Essential Hospitals issued a statement saying it would be “costly, burdensome and resource-intensive, and it will affect staff workflows. Imposing this new requirement will force hospitals to invest significant time and money updating billing and IT systems and pull an already stretched workforce away from providing care.”

Beyond the administrative concerns, the increased transparency is seen as a precursor to expanded site-neutral payment policies from both CMS and health plans, stemming from billing patterns that potentially would be seen at off-campus OPDs.

Site-neutral payment already has gained more of a foothold in 2026, with CMS expanding the policy to apply to drug administration services and beginning a three-year phase-out of the inpatient-only list.

Medicaid provisions a mixed bag

The legislation postpones and slashes the Medicaid disproportionate share hospital (DSH) payment cut that repeatedly has been pushed back since its originally scheduled effective date in 2014. A three-year, $24 billion cut would be reduced to $8 billion over one year, FY28.

Another provision in the appropriations bill appears as though it would reduce Medicaid DSH payments for many facilities, however. In determining a hospital’s amount of uncompensated care for the purposes of calculating the facility’s DSH limit, Medicare payments would be subtracted, as would payments from Medicare Advantage (MA) and other primary plans.

The impact likely would be most felt at hospitals that treat large numbers of patients who are dually eligible for Medicare and Medicaid. Dual-eligibles would count toward uncompensated care only when a hospital has residual unpaid costs after factoring in Medicare and other payments. These changes would take effect with the start of a state’s next Medicaid plan year (typically Oct. 1) following passage of the legislation.

In a potential boost for hospitals, states that have not spent their full DSH allotment dating back to FY22 could retroactively increase DSH payments but would need to use the new methodology for hospital-specific limits. The legislation protects hospitals from claw-backs of payments made under the old methodology.

Key healthcare programs get extended

A number of healthcare provisions in the appropriations bill are favorable for providers.

For example, the bill extends pandemic-era Medicare telehealth waivers through 2027 and the acute-care hospital-at-home program through FY30, thus removing the uncertainty that has surrounded those programs in recent months.

Among other healthcare programs getting extended or renewed in the appropriations bill are supplemental payments for low-volume hospitals and Medicare-dependent hospitals (through 2026), add-on payments for ambulance services (through 2027), the floor for the work geographic practice cost index (through 2026), a 3.1% bonus for physicians who participate in advanced alternative payment models (through 2026), and payment for in-home cardiopulmonary rehabilitation (through 2027).

The bill also implements stricter requirements for MA plans to maintain accurate provider directories. Slated for 2028, those provisions add to 2026 regulatory updates designed to improve the accessibility and accuracy of the directories.

Multicancer early-detection screening would be payable by Medicare starting in 2029. Home infusion drugs that cannot be self-administered would be reimbursable starting in 2027, as would external infusion pumps.

HHS agencies avoid steep funding reduction

In addition to the stakeholder-facing provisions, the bill funds HHS operations for the remainder of FY26. The department would receive $116.8 billion, a decrease of $11 billion relative to FY25 but an increase of $21 billion from Trump’s proposed budget and $7 billion more than House Republicans had recommended.

The bill bypasses the dramatic HHS restructuring proposed last year by the administration, ensuring continued stand-alone funding for agencies such as the Health Resources and Services Administration that would have been folded into newly created or existing agencies.