Weekly Health Care Policy Update – July 3, 2026

July 10, 2026

In this update:  

  • Federal Agencies
    • CMS Issues CY 2027 OPPS and ASC Proposed Rule
    • CMS Issues CY 2027 Home Health Prospective Payment System Proposed Rule
    • CMS Launches Medicare GLP-1 Bridge
    • HHS Announces Additional TEFCA Oversight
    • Chris Klomp Nominated as Deputy Secretary of HHS
    • Keith Sonderling Nominated as Labor Secretary
    • HHS to Freeze Funds for New York Medicaid Fraud Unit
  • Other
    • 26 States Sue Trump Administration Over Medicaid Work Requirements
    • ACA Enrollment Drops by Three Million in First Month of 2026
    • Judge Partially Blocks Student Loan Cap Rule
    • AHA Names New CEO
    • Paragon Institute Paper Calls for Lower Federal Health Care Spending
  • New York State
    • DOH Issues Q&A for Rural Health Transformation Funding
    • OMH and OASAS Issue Revised Proposed CCBHC Certification Regulations

Federal Agencies

CMS Issues CY 2027 OPPS and ASC Proposed Rule
On July 2nd, CMS released the Calendar Year (CY) 2027 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) proposed rule. Overall, CMS proposes to increase OPPS and ASC payment rates by 2.4% for providers that meet quality reporting requirements. The update reflects a 3.2% market basket increase, reduced by a 0.8 percentage point productivity adjustment. In total, CMS estimates the proposed rule will increase OPPS payments by approximately $8.1 billion and ASC payments by $480 million in CY 2027.
 
Key policies in the proposed rule include: 

  • 340B Drug Payment Policy: CMS proposes to pay separately payable drugs acquired through the 340B Drug Pricing Program at average sales price (ASP) minus 33.4%, based on results from a recent hospital acquisition cost survey. The proposal is expected to reduce Medicare drug spending by $4.55 billion and beneficiary cost-sharing by $1.15 billion. Consistent with budget neutrality requirements, CMS proposes to redistribute these savings through higher payments for non-drug OPPS services.
  • 340B Remedy Offset: CMS proposes to increase the annual budget neutrality offset associated with the 340B remedy payments from 0.5% to 3.0% beginning in CY 2027. CMS estimates this change will complete recoupment of prior budget neutrality payments by CY 2029.
  • Site-Neutral Payments: CMS proposes to expand its site-neutral payment policy by applying Physician Fee Schedule-equivalent payment rates to imaging services performed without contrast in excepted off-campus provider-based departments. CMS estimates the proposal will reduce Medicare spending by approximately $260 million and beneficiary cost-sharing by $70 million in CY 2027. The proposal represents another step in the Administration’s broader effort to reduce payment differences between hospital outpatient departments and physician offices.
  • Inpatient-Only List: CMS proposes to continue its three-year phaseout of the inpatient-only list by removing an additional 638 procedures in CY 2027.
  • ASC Covered Procedures List: CMS proposes to add 276 procedures to the ASC Covered Procedures List, including numerous orthopedic and musculoskeletal procedures. The proposal continues CMS’ effort to shift appropriate surgical care into lower-cost outpatient settings.
  • Prior Authorization: CMS proposes adding eight botulinum toxin injection procedures to the hospital outpatient prior authorization process after identifying significant increases in utilization. CMS estimates the policy will generate approximately $17 million in annual Medicare savings.
  • Hospital Star Ratings: CMS proposes several methodological changes to the Hospital Overall Star Ratings beginning with the 2027 ratings, including updates to peer grouping, measure weighting, and statistical methods intended to improve the stability and comparability of ratings.
  • Quality Reporting: CMS proposes to remove one quality measure from the Hospital Outpatient Quality Reporting (OQR) and ASC Quality Reporting (ASCQR) Programs, revise validation requirements for digital quality measures, and seeks comment on a potential future Advance Care Planning measure.
  • Emergency Medical Treatment and Labor Act (EMTALA): CMS proposes allowing accrediting organizations with deeming authority to assess hospitals’ compliance with EMTALA administrative requirements during routine accreditation surveys while maintaining CMS and OIG oversight of substantive EMTALA enforcement.
  • Requests for Information: CMS seeks stakeholder feedback on several issues that may inform future rulemaking, including strengthening hospital price transparency requirements, expanding site-neutral payment policies, modernizing quality measurement, and identifying additional opportunities to reduce administrative burden while improving program integrity.

 The proposed rule will be open for comment through August 31st. The announcement is available here, a fact sheet is available here, and the proposed rule is available here.
 
CMS Issues CY 2027 Home Health Prospective Payment System Proposed Rule 
On July 1st, CMS issued the Calendar Year (CY) 2027 Home Health (HH) Prospective Payment System (PPS) proposed rule. Overall, CMS estimates that the proposed rule will increase Medicare payments to home health agencies (HHAs) by 2.4%, or approximately $420 million, compared to CY 2026. The increase reflects a 2.1% home health payment update, partially offset by a 0.3% reduction related to the fixed-dollar loss ratio for outlier payments.
 
Additional key provisions of the proposed rule include: 

  • PDGM and Behavior Assumptions: CMS does not propose an additional permanent adjustment to the CY 2027 payment rate related to the Patient-Driven Groupings Model (PDGM). However, CMS proposes a 3.0% temporary reduction to the CY 2027 base payment rate to continue recouping retrospective overpayments associated with PDGM implementation. CMS also proposes to recalibrate the PDGM case-mix weights, functional impairment levels, comorbidity adjustment subgroups, and low utilization payment adjustment (LUPA) thresholds using CY 2025 data.
  • Home Health Benefit: CMS discusses the role of home health agencies in providing community-based palliative care and seeks comments on how to improve beneficiary access to these services through the existing Medicare home health benefit. CMS also requests feedback on developing a home health-specific wage index using alternative data sources.
  • Quality Reporting Program (QRP): CMS proposes changes to assessment data submission deadlines and reporting timeframes to align reporting with the calendar year. CMS also seeks input on a potential future Advanced Care Planning quality measure and additional approaches to align the QRP with the expanded Home Health Value-Based Purchasing (HHVBP) Model.
  • Provider Enrollment: CMS proposes expanding its authority to deny or revoke Medicare enrollment for noncompliant providers and suppliers, including making all revocations retroactive to the date of noncompliance and establishing new revocation authorities related to ownership changes and sanctions involving owners or managing employees. CMS estimates these changes would generate approximately $82 million in annual savings.
  • Durable Medical Equipment (DME): CMS proposes implementing statutory changes expanding Medicare coverage of certain external infusion pumps and associated home infusion drugs beginning April 1, 2027, clarifying documentation requirements for replacement DMEPOS items, and requiring suppliers participating in the DMEPOS Competitive Bidding Program to report the country of origin for covered equipment.

The proposed rule will be open for comment through August 31st. The announcement is available here, a fact sheet is available here, and the proposed rule is available here.
 
CMS Launches Medicare GLP-1 Bridge 
On July 1st, CMS launched the Medicare GLP-1 Bridge, which will give Medicare beneficiaries access to certain GLP-1 medications for $50 per month. Covered medications include Foundayo (tablet), Wegovy (injection or tablet) and Zepbound (KwikPen). Beneficiaries must be enrolled in a standalone Medicare drug plan, an MA coordinated care plan with drug coverage, a SNP, an employer or union group waiver plan, or a Limited Income Newly Eligible Transition program. Beneficiaries must also be clinically eligible, including a BMI of 35 or more, or a BMI between 27 and 35 with additional conditions such prediabetes, hypertension, a previous heart attack, or chronic kidney disease. Beneficiaries already receiving a GLP-1 through their Medicare Part D plan or those with type 2 diabetes, moderate-to-severe sleep apnea, or fatty liver whose plan might cover GLP-1s are not eligible.
 
The program will run through December 31, 2027. More information is available here.
 
HHS Announces Additional TEFCA Oversight
On June 26th, the Office of the National Coordinator for Health Information Technology (ONC) at HHS announced several steps to strengthen the Trusted Exchange Framework and Common Agreement (TEFCA), a set of rules that allow for secure health information exchange between networks and providers. TEFCA has grown rapidly over the past year – from roughly 10 million health records exchanged to over 1 billion – leading HHS to focus on seamless and secure operation.
 
Most notably, ONC announced the award of a new contract to “strengthen oversight of the network and verify that organizations participating in TEFCA follow required policies and protocols.” ONC also announced that it will conduct additional reviews of Qualified Health Information Networks (QHINs) – as well as reviews of their participants – to ensure operating requirement compliance. The new efforts are intended to ensure that the network is secure and that high data quality allows for improved clinical outcomes. ONC highlighted that it will refer any potentially civilly- or criminally-actionable behavior on the network to the HHS Office for Civil Rights, to HHS Office of Inspector General, and to DOJ.
 
The full announcement is available here.
 
Chris Klomp Nominated as Deputy Secretary of HHS 
On June 25th, President Trump announced that he would nominate Chris Klomp to serve as the deputy secretary of HHS. Klomp currently serves as chief counselor of HHS – through which he oversees all department operations – and as deputy administrator and director of the Center of Medicare at CMS. He took over the chief counselor role in February, during a significant shake-up of the department’s leadership team that saw the reassignment of the previous deputy secretary, Jim O’Neill, and the general counsel, Mike Stuart. Klomp has notably led the administration’s work on “most favored nation” drug pricing deals with pharmaceutical companies, and has been instrumental in many key personnel decisions within the department. The nomination now heads to the Senate Finance Committee, which previously approved O’Neill in May 2025.
 
Keith Sonderling Nominated as Labor Secretary
On June 29th, President Trump announced that he would nominate Keith Sonderling to serve as Secretary of the Department of Labor. Sonderling currently serves as the Acting Secretary of the Department, following the resignation of former Secretary Lori Chavez-DeRemer amid misconduct allegations. He previously served as Chavez DeRemer’s deputy, and as the acting administrator of the Labor Department’s Wage and Hour Division during the first Trump administration. Sonderling also served as a member of the Equal Employment Opportunity Commission during the first Trump and Biden administrations. His nomination heads to the HELP Committee and then to the full Senate for a confirmation vote.
 
HHS to Freeze Funds for New York Medicaid Fraud Unit
On June 30th, The Office of the Inspector General for HHS suspended approximately $24 million in federal funding for New York’s Medicaid Fraud Control Unit (MFCU), citing the unit’s alleged failure to meet federal performance standards. HHS stated that New York recovered just $0.40 for every federal dollar invested in the program during FY 2024, well below the national average of roughly $3.30, and said the unit has not met required performance benchmarks for several years.
 
The MFCU, housed within the Office of the New York Attorney General, investigates Medicaid provider fraud and abuse, as well as patient abuse and neglect in health care facilities. HHS directed the State to submit a corrective action plan within 30 days demonstrating how it will improve performance before federal funding is restored.
 
Attorney General Letitia James condemned the decision, noting that the Medicaid Fraud Control Unit has recovered more than $627 million through criminal and civil Medicaid fraud investigations and prosecutions since 2019. James argued that suspending federal funding would undermine the State’s efforts to combat fraud and protect Medicaid beneficiaries. HHS said the action is part of the Administration’s broader effort to strengthen Medicaid program integrity and ensure federal funds are directed to high-performing fraud enforcement programs.
 
A letter to New York officials from HHS’ Office of Inspector General is available here and response from AG James is available here.

Other

26 States Sue Trump Administration Over Medicaid Work Requirements
On June 29th, a coalition of 25 states and the District of Columbia filed a lawsuit challenging CMS’ interim final rule implementing Medicaid work requirements enacted under the One Big Beautiful Bill Act (OBBBA). The lawsuit argues that CMS unlawfully narrowed the law’s exemption for individuals who are “medically frail” by requiring states to determine not only whether an individual has a qualifying medical condition, but also whether that condition significantly impairs the individual’s ability to work. The states also contend that CMS reversed earlier implementation guidance after states had already begun developing their compliance plans, imposed the new standards without adequate notice and comment, and established an implementation timeline that is unworkable.

The lawsuit seeks to block portions of the interim final rule before states must begin notifying beneficiaries of the new requirements later this summer. CMS has defended the rule as necessary to implement the statute enacted by Congress and ensure Medicaid resources are directed to eligible beneficiaries.

The legal challenge is the first major lawsuit over the federal Medicaid work requirements and could affect implementation of the policy before it takes effect on January 1, 2027.

The complaint is available here.

ACA Enrollment Drops by Three Million in the First Month of 2026
On June 26th, the HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) released a report showing that effectuated enrollment in ACA Marketplace plans fell to 19.2 million in February 2026, down from 22.1 million a year earlier, a 13% decline. The report attributes the decrease primarily to the Trump Administration’s efforts to reduce fraud, waste, and abuse in the Marketplace. According to ASPE, federal program integrity initiatives prevented or terminated subsidies for roughly 2.9 million ineligible or fraudulent enrollments and estimates that approximately 2.6 million improper or “phantom” enrollments remain, including more than one million without a Social Security number. Outside analysts, however, note that the enrollment decline also coincided with the expiration of enhanced ACA premium tax credits on January 1st, which substantially increased consumer premium costs and likely contributed to coverage losses.  

The ASPE report is available here.

Judge Partially Blocks Student Loan Cap Rule
On June 24th, a federal judge temporarily blocked an Education Department rule tightening the federal student loan system to comply with provisions of the OBBBA. The rule limits the amount of money that “professional” students can borrow to $50,000 annually (or $200,000 in aggregate for graduate programs) and to $20,500 annually (or $100,000 in total) for all other graduate students. The final rule includes 11 areas in its definition of “professional” students including law, medicine and other fields but does not include nursing, social work, physical therapy, occupational therapy, audiology, public health, and education.

U.S. District Judge Beryl Howell for the District of Columbia sided with the plaintiffs, eight trade organizations including the American Association of Nurse Practitioners and the PA Education Association, concluding that the rule added requirements to the definition of “professional” degree not included in the OBBBA, thereby violating the Administrative Procedures Act. Judge Howell did not rule on the legality of the two-tiered loan structure itself.

Most provisions of the rule were scheduled to go into effect July 1, 2026. More information on the rule is available here. The ruling is available here.

AHA Names New CEO
On July 1st, the American Hospital Association (AHA) announced that Steve Walsh will become its next president and CEO this fall, succeeding Rick Pollack, who is retiring after leading the organization since 2015. Walsh currently serves as president and CEO of the Massachusetts Health & Hospital Association. He led Massachusetts hospitals through the Covid-19 pandemic and the bankruptcy and restructuring of Steward Health Care. He previously served six terms in the Massachusetts House of Representatives.

Walsh takes over the AHA as hospitals face Medicaid funding reductions, increased federal scrutiny of health care consolidation, and continued pressure over rising health care costs. He said his priorities will include advancing access to care, quality, and innovation.
A press release is available here.

Paragon Institute Paper Calls for Lower Federal Health Care Spending
On July 1st, the Paragon Health Institute released a policy paper recommending additional reforms to federal health programs to reduce spending and improve long-term fiscal sustainability. The report argues that current financing structures reward higher spending rather than better value and calls for reforms that strengthen program integrity, promote competition, and reduce payment distortions.

Among its recommendations, the report calls for expanding Medicare site-neutral payments, reforming the 340B Drug Pricing Program, further limiting Medicaid financing arrangements beyond changes enacted in the OBBBA, strengthening ACA eligibility verification and enrollment integrity, and revisiting policies affecting employer-sponsored insurance and ACA medical loss ratio requirements.

Given Paragon’s close ties to congressional Republicans and the Trump administration, the report is expected to influence future Republican health policy discussions.

The report is available here.

New York State

DOH Issues Q&A for Rural Health Transformation Funding
On July 2nd, the New York State Department of Health (NYSDOH) issued responses to 415 questions regarding the Community Health Integration funding opportunity under the Rural Health Transformation Program. The funding opportunity covers Planning and Implementation projects, which must be completed during Year one of the five year program. The responses span program eligibility, allowed uses of funds, and contracting, among other topics.
 
Notable clarifications include: 

  • There is no limit on the number of partners or on how many applications one organization can join.
  • The hospital required in an application can be a hospital located in a different eligible county than the project’s focus, unless it is the Lead Applicant.
  • Planning and implementation applications in a county can have different Lead Applicants, though they should be coordinated and aligned.
  • Administrative costs may not exceed 5% of the total award in aggregate across the Lead and partner organizations (these are general costs not attributable to a specific project outcome).
  • Staff time for new project work and consultants are allowable planning costs; stipends are allowed but can’t be based on a pay rate.
  • No scoring rubric or section weights will be released.
  • A letter of intent should be included until a project-specific agreement is in place.
  • Vendors should be named in the application if known, but may be selected post-award.
  • Post-award, partners must receive prior written approval from the Department before entering into an agreement for services to be provided by a subcontractor. Subcontractors whose contracts are valued at or above $100,000 will be required to submit the Vendor Responsibility Questionnaire upon selection of the prime contractor.
  • New applicants will be allowed in later periods.
  • Funding may be used for training that results in certification or licensure, however CMS requires that such training and funds used for signing bonuses, recruitment, or retention may trigger a 5-year service commitment. 

The Q&A can be found here.

OMH and OASAS Issue Revised Proposed CCBHC Certification Regulations
On July 1st, the NYS Office of Addiction Services and Supports (OASAS) published a notice of revised rulemaking for state-level certification of Certified Community Behavioral Health Clinics (CCBHCs) following the end of the federal CCBHC demonstration. The proposed regulations establish new standards for the certification, operation, and reimbursement of CCBHCs under the NYS Medicaid benefit. CCBHCs will be jointly certified by OASAS and the Office of Mental Health (OMH) under Article 36 of the Mental Hygiene Law. The initial proposed regulations were published in October 2025 and have been revised in response to public comment.
 
Key revisions include: 

  • Removing references to Intensive Outpatient Program (IOP) because there are no restrictions on the number of services in a day or payment reductions in the CCBHC Prospective Payment System (PPS).
  • Adding clarifying language to identify how individuals with lived experiences are represented in CCBHC governance.
  • Prioritizing current federal CCBHC demonstration sites for certification for the first 15 months and authorizing a streamlined certification process.
  • Allowing certification to consider public need and geographic access, including whether existing CCBHC or alternative services are inadequate or unavailable.
  • Establishing a prior consultation process to assist applicants in addressing concerns before submitting a certification application.
  • Revising hospital discharge coordination requirements to clarify expectations for communication with both discharging facilities and individuals within 24 hours of discharge.
  • Specifying that all nine required CCBHC services must be provided at the main site and removing the previous ability to grant exceptions to the 30-minute/30-mile service accessibility requirement.
  • Clarifying that care coordination and preliminary triage are required activities but not billable services.
  • Updating treatment plan review frequency from every 12 months to every 6 months, with more frequent reviews as clinically indicated.
  • Revising the definition of Telehealth Practitioner to include non-licensed or non-certified staff members.

 The notice is available here. Public comment may be submitted to Kelly.Grace@oasas.ny.govthrough August 15th.