As we’ve noted over the last two weeks, the Centers for Medicare & Medicaid Services (CMS) has released its final rule relating to the Outpatient Prospective Payment System (OPPS) for next year. Beginning next month, many new provisions will be in place, including those dealing with Medicare’s Intensive Outpatient Program (IOP) and its Partial Hospitalization Program (PHP). Let’s take a look at each of these in turn.
Intensive Outpatient Program
Program Background
The 2026 OPPS final rule updates Medicare payment rates for intensive outpatient program services furnished in hospital outpatient departments and Community Mental Health Centers (CMHCs). The IOP is a distinct and organized outpatient program of psychiatric services provided for individuals who have an acute mental illness or substance use disorder, consisting of a specified group of behavioral health services paid on a per diem basis for a minimum of nine hours of IOP services per week under the OPPS—or other applicable payment system—when furnished in hospital outpatient departments, CMHCs, Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs). These IOP services may also be furnished in Opioid Treatment Programs (OTPs) for the treatment of opioid use disorder (OUD).
Payment Rates
CMS is finalizing its proposal to maintain the existing rate structure, with two IOP ambulatory payment classifications (APCs) for each provider type: (a) one for days with three services per day, and (b) one for days with four or more services per day. CMS is using the CY 2024 claims data and the latest available cost information, from cost reports beginning three fiscal years prior to the year that is the subject of the rulemaking.
For 2026, CMS is calculating hospital-based IOP payment rates for three services per day and four or more services per day based on cost per day using OPPS data that includes IOP or PHP and non-IOP or PHP days.
CMS is also finalizing its proposal to change the methodology for calculating the CMHC IOP costs for three services per day and four or more services per day. Specifically, CMS will calculate the CMHC costs based on 40% of the final hospital-based IOP costs. This change will resolve a cost inversion in CMHC cost data that would have otherwise resulted in higher geometric mean costs for three-service days than for four-service days. It will also stabilize rates for CMHCs by basing them on data from a much larger set of providers while preserving the adjustment for the structural differences between CMHC and hospital costs.
Partial Hospitalization Program
Program Background
The 2026 OPPS final rule updates Medicare payment rates for partial hospitalization program services furnished in hospital outpatient departments and CMHCs. The PHP is an intensive, structured outpatient program provided as an alternative to psychiatric hospitalization, consisting of a specified group of mental health services paid on a per diem basis for a minimum of 20 hours of PHP services per week under the OPPS, based on PHP per diem costs.
Payment Rates
CMS is finalizing our proposal to maintain the existing rate structure, with two PHP APCs for each provider type: (a) one for days with three services per day, and (b) one for days with four or more services per day. Consistent with OPPS,for this CY 2026 rate-setting, CMS is using the CY 2024 claims data and the latest available cost information from cost reports, beginning three fiscal years prior to the year that is the subject of the rulemaking.
For CY 2026, CMS is calculating hospital-based PHP payment rates for three services per day and four or more services per day based on cost per day using OPPS data that includes IOP or PHP and non-IOP or PHP days.
Finally, CMS is finalizing its proposal to change the methodology for calculating the CMHC PHP costs for three services per day and four or more services per day. Specifically, CMS will calculate the CMHC costs based on 40% of the final hospital-based PHP costs. This change will resolve a cost inversion in CMHC cost data that would have otherwise resulted in higher geometric mean costs for three-service days than for four-service days. It will also stabilize rates for CMHCs by basing them on data from a much larger set of providers while preserving the adjustment for the structural differences between CMHC and hospital costs.
We will bring you one final alert concerning the 2026 OPPS final rule next week, which will involve quality-based programs.