Medicare finalizes cost-of-living boost for Alaska hospitals' outpatient payments

Hospitals in Alaska will get a cost-of-living adjustment on Medicare outpatient payments starting Jan. 1, 2027, under a final rule the Centers for Medicare & Medicaid Services published Friday.

Medicare's national outpatient rate is split into a labor-related amount and a nonlabor-related amount. The labor share is already adjusted for local wages through the hospital wage index. The new adjustment covers the nonlabor share, things like supplies, rather than wages.

CMS projects the change will raise payments to hospitals in Alaska and Hawaii by $66 million in 2027, according to the agency's fact sheet on the 2027 outpatient rule. That figure covers both states together.

CMS said Alaska hospitals face higher nonlabor costs because they depend on goods shipped from outside the state, operate in remote locations and contend with transportation challenges. Until now, outpatient payments accounted for higher labor costs in Alaska and Hawaii but not higher nonlabor costs, the agency said.

The outpatient adjustment uses the same factors CMS set for inpatient hospital care in the two states for fiscal 2027. Those inpatient factors apply to discharges on or after Oct. 1, 2026, according to a CMS notice on fiscal 2027 inpatient payment changes. The outpatient policy continues in future years.

The policy is budget neutral, so the added money is offset across the national outpatient payment system.

Not every Alaska facility is affected. The rule excludes critical access hospitals, Indian Health Service hospitals and rural emergency hospitals from the outpatient payment system.

Among other 2027 changes, CMS is raising outpatient rates 2.3% and estimates national outpatient payments will total about $114.4 billion. The agency projects payments to rural hospitals will rise 5.6% and payments to urban hospitals will rise 2.0%.

Some hospitals will see a cut instead. Medicare made $7.8 billion in extra non-drug payments from 2018 to 2022 under an earlier policy for drugs bought through the 340B discount program, and it began recovering that money this year with a 0.5% reduction in non-drug payments. For hospitals subject to that offset, the reduction grows to 2% in 2027, which CMS estimates will cut payments by about $1.6 billion nationally. Hospitals that enrolled in Medicare after Jan. 1, 2018, are exempt.

The rule is final, but CMS is taking public comments through Jan. 4, 2027.