Medicare to pay Alaska hospitals more for outpatient care to cover higher supply costs

Medicare will pay Alaska hospitals more for outpatient care starting Jan. 1 to account for the higher cost of supplies and other goods in the state, under a final rule the Centers for Medicare & Medicaid Services published Friday.

Outpatient care is treatment patients get at a hospital without being admitted. Medicare's payment formula for it already pays Alaska hospitals more because wages here are higher. But it didn't account for the higher cost of other things, like supplies.

CMS said Alaska hospitals depend on goods shipped from outside the state, operate in remote places and face transportation challenges. It projects the new adjustment will raise payments to hospitals in Alaska and Hawaii by $66 million in 2027, according to the agency's fact sheet. That's for both states together.

Medicare already makes the same kind of adjustment for hospital stays in the two states, and the outpatient change uses the same factors. It will continue in future years.

Alaska's congressional delegation has pushed for a similar change. In February 2025, Sens. Dan Sullivan and Lisa Murkowski joined Hawaii Sen. Brian Schatz in introducing the Ensuring Outpatient Quality for Rural States Act, which would have allowed the same kind of adjustment. In a 2024 letter to federal health officials, the Alaska and Hawaii senators said hospitals outside Anchorage "face high transportation costs for supplies."

The bill said its adjustment would not be budget neutral. The CMS rule is, so the added money for Alaska and Hawaii is offset across Medicare's outpatient payments nationwide.

Not every Alaska facility will see the increase. The outpatient payment system doesn't cover critical access hospitals, Indian Health Service hospitals or rural emergency hospitals.

Nationally, CMS is raising outpatient rates 2.3% next year. Some hospitals will also see a cut. Medicare made $7.8 billion in extra non-drug payments from 2018 to 2022 under an earlier policy tied to drugs bought through the 340B discount program, and it began recovering that money this year. For hospitals subject to that offset, the reduction grows from 0.5% to 2% of non-drug payments in 2027. 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.