Weekly Health Care Policy Update – July 18, 2025

July 25, 2025

In this update: 

  • Federal Agencies
    • CMS Limits Medicaid and CHIP Demonstration Authority
    • CMS Proposes Ambulatory Specialty Model
    • CMS Releases 2026 Medicare Physician Fee Schedule Proposed Rule
    • CMS Releases 2026 OPPS and ASC Proposed Rule 
    • CMS Announces 33 States Will Participate in Cell and Gene Therapy Model
    • CMS Releases Final 2025 Call Letter for the QRS and QHP Enrollee Experience Survey
  • Other Federal Updates
    • Federal Judge Reverses Biden-Era Rule on Credit Reports
  • New York State Updates
    • Q1 Tax Receipts Exceed Projections, Better Positioning the State for Federal Cuts

Federal Agencies

CMS Limits Medicaid and CHIP Demonstration Authority 
On July 17th, the Centers for Medicare and Medicaid Services (CMS) sent letters to states detailing new policies on continuous eligibility and workforce initiatives in both Medicaid and the Children’s Health Insurance Program (CHIP). In the interest of improving “the stewardship of federal funds,” CMS specifies that the agency will no longer approve new, or extend existing, section 1115 demonstration authorities with continuous eligibility – now referred to as “enrollment integrity” – provisions. According to the letter, such waivers have “allowed some individuals to remain enrolled in Medicaid or CHIP for extended periods of time, even if they may not have otherwise been eligible.”

CMS also specifies in the letter that the agency will no longer approve new, or extend existing, section 1115 demonstration authorities for programs that fund job training or employment-related activities, including those in California, Massachusetts, New York, North Carolina, and Vermont. Currently approved initiatives will be allowed to run until their current expiration.

More information is available here.

CMMI Proposes Ambulatory Specialty Model 
On July 14th, the Centers for Medicare and Medicaid Services (CMS) proposed a new Ambulatory Specialty Model (ASM). The model is intended to improve upstream chronic disease management by improving preventative care and increasing financial accountability by specialists. Beginning with specialty care for heart failure and low back pain, ASM will reward specialists that detect worsening conditions early, enhance patients’ functionality, reduce avoidable hospitalizations, and leverage technology to streamline communication. Participation will be mandatory for specialists in roughly one-quarter of core-based statistical areas (CBSAs) and metropolitan divisions that treat original Medicare patients in an outpatient setting. ASM will leverage the CMS Merit-based Incentive Payment System (MIPS) Value Pathways (MVP) framework, assessing providers across quality, cost, improvement activities, and interoperability. The model will use a two-sided risk arrangement. If finalized, the model will begin in January 2027 and run for five performance years through December 2031.

The announcement is available here; the fact sheet is available here; and the notice is available here.

CMS Releases 2026 Medicare Physician Fee Schedule Proposed Rule
On July 14th, the Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2026 Medicare Physician Fee Schedule (PFS) proposed rule. Overall, CMS proposes to increase average payment rates by 3.6% relative to CY 2025. This increase is largely driven by the one-year 2.5% update in the reconciliation bill.

Key policies in the proposed rule include: 

  • Conversion Factor: As required by statute, in CY 2026, there will be two separate conversion factors: one for qualifying alternative payment model (APM) participants (QPs) and one for physicians and practitioners who are not QPs. The proposed CY26 resource-based relative value scale conversion factor (CF) is $33.59 for physicians who meet certain participation thresholds in advanced APMs, and $33.42 for other clinicians. These amounts represent increases of 3.8% and 3.3%, respectively, from the final CY25 CF of $32.35.
  • Efficiency Adjustment: CMS is proposing to apply an efficiency adjustment to the work relative value units (RVU) to all codes except time-based codes and corresponding intraservice portion of physician time for non-time-based services, as expected over time. The sum of the past five years’ Medicare Economic Index (MEI) productivity adjustment percentage would be used to calculate this efficiency adjustment, making it -2.5% for CY26.
  • Practice Expense: CMS is proposing to not incorporate the American Medical Association’s (AMA) Physician Practice Information (PPI) and Clinician Practice Information (CPI) into PFS rate setting for CY26. Rather, CMS is proposing an update to its own practice expense (PE) methodology, including more attention to indirect costs for practitioners in office-based settings and the use of data from Medicare Outpatient Prospective Payment System (OPPS), among other sources.
  • Telehealth Services under the PFS: CMS is proposing policies to streamline the process for adding services to the Medicare Telehealth Services List, including removing the distinction between provisional and permanent services and limiting the review of what technological mode in which service is furnished. This will have the effect of reclassifying ‘temporary’ services as ‘permanent’. CMS is also proposing to permanently remove frequency limitations for subsequent inpatient visits, subsequent nursing facility visits, and critical care consultations. Additionally, CMS is proposing to adopt a new definition of direct supervision via real-time audio and visual interactive telecommunications. CMS is proposing some changes to its virtual presence policy for residents.
  • Merit-based Incentive Payment System: CMS proposes creating stability in quality reporting by maintaining the Merit-based Incentive Payment System (MIPS) performance threshold at 75 points through the CY28 performance period, which affects MIPS payment adjustments in 2030.
  • Comments on Improving Global Surgery Payment: CMS is seeking comment on ways to improve accuracy of payment in global surgical packages. 
  • Chronic Illness and Behavioral Health: CMS is broadly soliciting feedback on policies to enhance chronic disease management. Additionally, CMS is proposing to create three optional add-on codes for Advanced Primary Care Management (APCM) services that would facilitate providing complementary behavioral health integration (BHI) or psychiatric Collaborative Care Model (CoCM) services. CMS is also proposing to expand digital mental health treatment (DMHT) device payment policies to apply to Attention Deficit Hyperactivity Disorder (ADHD), in addition to broadly seeking comments on this modality of care.
  • Drugs and Biologics in Part B: To calculate the manufacturer’s average sales price (ASP), CMS is proposing new guidance regarding pricing concessions, including definitions of bona fide service fees (BFSFs).
  • Rural Health Clinics and Federally Qualified Health Centers: CMS is proposing to adopt the optional add-on codes proposed under the PFS for APCM that would facilitate billing for BHI and Psychiatric Collaborative Care Model (CoCM) services (mentioned above) when rural health clinics (RHCs) and federally qualified health centers (FQHCs) are providing advanced primary care.
  • Medicare Prescription Drug Inflation Rebate Program: CMS is proposing to establish a claims-based methodology to remove 340B units from Part D rebate calculations starting on January 1st and creating a Medicare Part D Claims Data 340B Repository.

 The PFS proposed rule also included policy changes to the Medicare Shared Savings Program (MSSP), including: 

  • BASIC Track: CMS is proposing to reduce the length of time an ACO can participate in a one-sided model of the BASIC track to a maximum of 5 performance years.
  • Quality Reporting: CMS is proposing to remove the health equity adjustment applied to an accountable care organization’s (ACO) quality score beginning in performance year 2025, and to update the Alternative Payment Model (APM) Performance Pathway (APP) Plus quality measure set to omit social determinants of health (SDOH) measures and expand types of surveying.
  • Beneficiary Definitions: CMS is proposing to revise the definition of a beneficiary eligible for Medicare Clinical Quality Measures (Medicare CQMs) to increase the overlap with beneficiaries that are assignable to an ACO.
  • Extreme and Uncontrollable Circumstances: CMS is proposing to expand the application of the MSSP quality and finance extreme and uncontrollable circumstances (EUC) policies to cyberattacks.
  • Change in Ownership: CMS is proposing some reporting requirements for ACO participants and skilled nursing facilities that undergo a change of ownership.

 The rules will remain open for comment until September 12, 2025. The proposed rule is available here, and the PFS fact sheet is available here. The proposed MSSP rule fact sheet is available here.

CMS Releases Proposed CY 2026 OPPS and ASC Payment Rule 
On July 15th, the Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2026 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgery Center (ASC) Payment System Proposed Rule. Overall, CMS proposes updating OPPS and ASC payment rates for hospitals by 2.4%. This proposed update reflects a projected hospital market basket percentage increase of 3.2%, reduced by 0.8 percentage points for the productivity adjustment.

Additional key policies in the proposed rule include: 

  • Off-Campus Provider-Based Departments: CMS is proposing to apply the Physician Fee Schedule (PFS) equivalent payment rate for any HCPCS codes assigned to the drug administration ambulatory payment classifications (APCs) when provided at an off-campus provider-based departments (PBDs). CMS estimates that the provision will reduce OPPS spending by $280 million.
  • Inpatient Only List: CMS is proposing to phase out the Inpatient Only (IPO) list over a 3-year period; exemptions included in the CY21 OPPS/ASC will continue.
  • ASC Covered Procedures List: By changing the general standard criteria, CMS is proposing to add 276 procedures to ASC Covered Procedures List (CPL) and 271 codes to the ASC CPL that are proposed for removal from the IPO list.
  • 340B: CMS is proposing to revise the annual offset percentage for non-drug items and services from 0.5% to 2%. Hospitals that enrolled in Medicare after January 2018 will be exempt.
  • Software as a Service: CMS is soliciting comments on payment policies for software as a service (SaaS) under the OPPS.
  • Drug Acquisition Cost: CMS will conduct a survey by early CY26 on the acquisition costs for each payable drug acquired by all hospitals under the OPPS.
  • Market-Based Medicare Severity Diagnosis Related Groups: CMS is proposing to collect median payer-specific charges negotiated with Medicare Advantage organizations from hospitals to determine relative Medicare payment rates for inpatient services.
  • Graduate Medical Education Accreditation: CMS is proposing that Graduate Medical Education (GME) accreditors not require inclusion of diversity, equity, and inclusion programs as part of accreditation standards.
  • ASC Market Basket Update: CMS is proposing to extend the use of the hospital market basket update as the update factor for the ASC payment system for one additional year.
  • Access to Non-Opioid Treatments for Pain Relief: CMS is proposing to continue temporary additional payments for certain non-opioid treatments for pain relief in outpatient settings and proposing the addition of five drugs and six devices to qualify in this category.
  • Hospital Price Transparency Rider: CMS is proposing several modifications to current hospital price transparency (HPT) regulations, including:
    • Requiring hospitals to disclose the tenth, median and ninetieth percentile allowed amounts in machine-readable files (MRFs) when payer-specific negotiated charges are based on percentages or algorithms;
    • Requiring hospitals to use electronic data interchange (EDI) 835 electronic remittance advice (ERA) transaction data to calculate and encode allowed amounts when a payer-specific negotiated charge is based on a percentage or algorithm;
    • Requiring new attestations for including all applicable payer-specific negotiated charges in dollars when possible;
    • Requiring hospitals to encode their national provider identifiers (Type 2 NPIs) in their MRF; and
    • Reducing the amount of civil monetary penalty for noncompliance with the HPT requirements by 35 percent when a hospital agrees with the determination and waives the right to a hearing by an Administrative Law Judge.
  • Intensive Outpatient Program (IOP): CMS is proposing to maintain the existing rate structure, with two IOP APCs for each provider type, using CY24 claims data, though CMS is proposing to change the methodology for Community Mental Health Centers (CMHC).
  • Partial Hospitalization Program: CMS is proposing to maintain the existing rate structure, with two PHP APCs for each provider type; one for days with three services per day and one for days with four or more services per day, using CY24 claims data, though CMS is proposing to change the methodology for Community Mental Health Centers (CMHC).
  • Rural Emergency Hospital and Hospital Outpatient Quality Reporting Program: CMS is proposing to adopt the Emergency Care Access & Timeliness electronic clinical quality measure (eCQM) beginning with voluntary reporting beginning with CY27. CMS is proposing to remove a number of Biden-era measures from both programs.
  • Ambulatory Surgical Center Quality Reporting (ASCQR) Program: CMS is proposing to adopt the Patient Understanding of Key Information Related to Recovery After a Facility-Based Outpatient Procedure or Surgery, Patient Reported Outcome-Based Performance Measure (PRO-PM) with voluntary reporting beginning with CY27. CMS is also proposing requiring ASCs to use the Hospital Quality Reporting (HQR) system for data submission of PRO–PMs and removing a number of Biden-era measures.
  • Quality Reporting Program Improvements: CMS is seeking input on ways to further the measurement of care quality in outpatient settings, including measures related to well-being and nutrition.
  • Overall Hospital Quality Star Rating Proposed Modification: CMS is proposing to make a 2-stage methodological update to the rating system, including: 1) implementing a 4-star cap for hospitals in the lowest quartile of the Safety of Care measure group performance in CY26, and 2) implementing a blanket 1-Star reduction for hospitals in the lowest quartile of Safety of Care measure group performance beginning in CY27. These changes are meant to address concerns of hospitals receiving 5-star ratings despite poor performance in the Safety of Care measure group.

 The proposed rule will be open for comment until September 15, 2025. The proposed rule is available here, and the fact sheet is available here.

CMS Announces 33 States to Participate in Cell and Gene Therapy Model 
On July 15th, the Centers for Medicare and Medicaid Services (CMS) announced that 33 states, plus the District of Columbia and Puerto Rico, will participate in the Cell and Gene Therapy (CGT) Access Model. The participants, including New York, represent approximately 84% of Medicaid beneficiaries with sickle cell disease, making this a considerable step towards expanding access. Under this model, CMS negotiated outcomes-based agreements, including guaranteed rebates should the therapies fail to deliver promised benefits, with CGT manufacturers (Vertex Pharmaceuticals and bluebird bio) on behalf of state Medicaid agencies. CMS is offering up to $10 million per participant to support implementation and data tracking. Participants have until January 2026 to begin.

The announcement is available here.

CMS Releases Final 2025 Call Letter for the QRS and QHP Enrollee Experience Survey
On July 14th, the Centers for Medicare & Medicaid Services (CMS) released the final 2025 call letter for the Quality Rating System (QRS) and Qualified Health Plan (QHP) Enrollee Experience Survey. CMS uses these two programs to assess QHP quality on a 1-to-5-star scale and displays these ratings on Exchange websites to inform consumer enrollment choices. In the final call letter, CMS finalized proposals made earlier this year, including: 

  • No longer requiring collection or submission of race and ethnicity stratified (RES) data for select QRS measures in the 2025 ratings year and for all QRS measures for the 2026 ratings year and beyond;
  • Removing three measures:
    • Annual Monitoring for Persons on Long-Term Opioid Therapy (AMO),
    • International Normalized Ratio Monitoring for Individuals on Warfarin (INR), and
    • Social Need Screening and Intervention (SNS-E);
  • Adding an Enrollee Experience with Cost measure;
  • Transitioning the Controlling High Blood Pressure (CBP) measure to the Blood Pressure Control for Patients with Hypertension (BPC-E) measure;
  • Refining the Breast Cancer Screening (BCS-E) and Adult Immunization Status (AID-E) measures;
  • Expanding the Electronic Clinical Data Systems (ECDS) reporting to include Cervical Cancer Screening (CCS-E), Immunization for Adolescents (IMA-E), and Childhood Immunization Status (CIS-E);
  • Adding three variables to the sample frame populated by QHP issuers to support response pattern analyses: Claim or Encounter with QHP Issuer, Primary Care Provider Status, and Visit with Specialty Care Doctor.

 The Call Letter is available here. In the fall, CMS will release technical guidance reflecting these changes.

Other Federal Updates

Federal Judge Reverses Biden-Era Rule on Credit Reports
On July 11th, a federal judge in Texas reversed a Biden-era rule that omitted medical debt from credit reports. The judge found that the Consumer Financial Protection Bureau’s (CFPB) rule exceeded its authority under the Fair Credit Reporting Act in making the rule. When the rule was issued, the Biden Administration estimated that nearly $50 billion in medical debt would be removed from roughly 15 million Americans’ credit reports. Last year, the three national credit reporting agencies — Experian, Equifax and TransUnion — announced that they would remove medical collections under $500 from credit reports. Since President Trump took office, the CFPB has been subject to mass layoffs.

New York State Updates

Q1 Tax Receipts Exceed Projections, Better Positioning the State for Federal Cuts
According to the New York State (NYS) Comptroller’s June monthly cash report, the State collected $33.2 billion during the first quarter of State Fiscal Year 2025-26 in tax receipts – $580.5 million above the Division of the Budget’s projections and $3.3 billion more than the same period in 2024. NYS Comptroller Thomas P. DiNapoli attributed the higher receipts primarily to strong personal income tax collections on 2024 income. While All Funds spending through June increased 10.8% compared to last year (largely due to rising Medicaid costs), overall spending remained $1.7 billion below projections. As a result, the State ended the quarter with a $4.98 billion operating surplus, $927 million higher than anticipated.

The General Fund closed June with a $53.6 billion balance, offering a fiscal buffer as the State braces for steep federal funding cuts. Budget Director Blake Washington has warned of a $750 million shortfall expected in early 2026, but the Comptroller’s report suggests the State may have some fiscal capacity to manage upcoming challenges amid ongoing economic and policy uncertainty.

The Comptroller’s press release is available here. The June cash report is available here.