Medicare payment overhaul quietly expands physician-owned hospitals in rural areas

What it does

This bill modifies Medicare payment rules in four main ways: (1) improves how Medicare Advantage plans calculate risk payments using two years of diagnostic data instead of one; (2) changes how hospitals are paid for outpatient services, requiring on-campus departments to be paid at physician-office rates rather than hospital rates, with exceptions for rural hospitals; (3) expands physician-owned hospitals' ability to operate in rural areas by relaxing anti-kickback rules; and (4) requires hospitals to pass drug discounts from the 340B program directly to Medicare patients rather than keeping them. The bill primarily benefits rural healthcare providers and Medicare patients seeking lower drug prices, while potentially reducing payments to urban hospital systems and large healthcare networks.

Why we flagged it

The bill's core function is rewriting Medicare payment methodologies across multiple service categories—risk adjustment, site-neutral payments, and drug pricing—while creating specific exceptions and carve-outs for rural providers and physician-owned hospitals. This is fundamentally a payment-system restructuring, not a consumer protection or access measure, despite the framing.

What the text implies

• The 340B drug-discount pass-through (Section 5) may reduce hospital profit margins on outpatient drugs, potentially forcing cost-shifting to other services or reducing charity care capacity at safety-net hospitals that rely on 340B savings.
• The on-campus outpatient department payment reduction (Section 3) creates a financial incentive for hospitals to shift services to physician-office settings or close outpatient departments, potentially reducing access in areas where hospital-based clinics serve uninsured or Medicaid patients.
• The physician-owned hospital carve-out (Section 4) relaxes Stark Law restrictions in rural areas, potentially enabling physician self-referral patterns that increase utilization and costs without corresponding quality oversight.
• Risk adjustment changes (Section 2) using two years of diagnostic data may penalize plans serving sicker populations or those with better documentation, creating perverse incentives around coding practices.
• The skilled nursing facility payment increase (Section 6) is vague—'between 2 and 5 percentage points'—giving the Secretary broad discretion and creating uncertainty for facility budgeting.

Who it affects

Medicare patients gain from lower drug prices and site-neutral payment rules that reduce unnecessary hospital markups, but rural healthcare access may be harmed if physician-owned hospitals lack adequate oversight, and the risk-adjustment changes could shift costs between Medicare Advantage plans and traditional Medicare beneficiaries in unpredictable ways.

Who stands to gain

• Physician-owned hospitals
• Rural hospital systems
• Critical access hospitals
• Medicare Advantage insurers (via risk adjustment changes)
• Medicare patients (via drug price pass-through)

Named in the bill

Medicare Advantage, Centers for Medicare & Medicaid Services (CMS), 340B Drug Pricing Program, Stark Law (Section 1877), Critical Access Hospitals, Sole Community Hospitals, Medicare-Dependent Small Rural Hospitals, Skilled Nursing Facilities, Physician-Owned Hospitals

Where it stands

• May 6, 2025 — Introduced · Congress.gov: “Introduced in House”
• May 6, 2025 — Referred to House Committee on Ways and Means and House Committee on Energy and Commerce · Congress.gov: “Referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means, for a…”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

1 lobbying clients named this bill on 3 disclosure filings across 3 quarters, Dec 2025 to Jun 2026. Those filings disclosed $720,000 in lobbying spend. A filing names 31 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 0% of bills with at least one filing.

Victoria Spartz, the sponsor, reported $117,000 in PAC receipts in the 2026 cycle.

• Trinity Health — $720,000 on 3 filings

Lobbying Disclosure Act filings through Jul 17, 2026. A filing shows who paid to lobby on a bill it names, not what changed.