One of the most immediate developments affecting hospitals is a new compliance requirement for off-campus hospital outpatient departments (OPDs) enacted through the FY2026 federal appropriations bill.

Beginning January 1, 2028, hospitals must obtain a unique National Provider Identifier (NPI) for each of its off-campus outpatient departments. Hospitals will also be required to attest that each off-campus facility meets Medicare’s provider-based requirements. Failure to comply with these requirements may render the department ineligible for Medicare reimbursement.

Increased Scrutiny of Provider-Based Departments

The new statutory requirement builds on earlier site-neutral payment reforms and expands the Centers for Medicare & Medicaid Services’ (CMS) oversight of provider-based departments (PBDs). Historically, hospitals could bill certain off-campus facilities under the Outpatient Prospective Payment System (OPPS) if they met CMS provider-based criteria. This often resulted in higher reimbursement than services billed by freestanding physician offices.

Under the new provisions, CMS is expected to increase scrutiny of whether off-campus departments truly satisfy provider-based requirements under 42 C.F.R. § 413.65, including standards related to clinical integration, financial control, and public awareness of hospital affiliation.

Hospitals may face both prospective payment denials and potential recoupment of past payments if CMS determines that a department is improperly billing under OPPS.

Broader Site-Neutral Payment Trends

The new requirements are widely viewed as part of a broader federal push toward site-neutral payment policies. For example, CMS has already taken steps to expand site-neutral payments to certain drug administration services, and to begin phasing out the Medicare inpatient-only list. Increased transparency into off-campus billing patterns may further accelerate site-neutral payment reforms in future rulemaking.

Extension of Key Provider Programs

At the same time, the FY2026 appropriations package extends several provider-favorable programs, including:

  • Medicare telehealth waivers through 2027
  • The hospital-at-home program through fiscal year 2030
  • Supplemental payments for low-volume and Medicare-dependent hospitals
  • Add-on payments for ambulance services

Implications for Hospitals and Healthcare Stakeholders

Viewed collectively, these developments signal a continued federal shift toward greater transparency, tighter compliance oversight, and expanded site-neutral payment policies across care settings. Hospitals and health systems should begin evaluating their off-campus outpatient department structures well in advance of the January 1, 2028, compliance deadline, including confirming whether each location satisfies Medicare’s provider-based requirements under the federal regulations, and preparing for the operational implications of obtaining separate NPIs.

At the same time, stakeholders should closely monitor future regulatory and legislative activity and related appropriations measures that may further accelerate payment reform, increase scrutiny of hospital-affiliated outpatient operations, and reshape reimbursement dynamics across the healthcare system.

Proactive compliance planning and strategic review of outpatient facility structures may help providers mitigate financial exposure and adapt to the evolving federal policy landscape.

Early federal enrollment data for the 2026 Affordable Care Act (ACA) marketplace plan year indicates a meaningful decline in coverage following the expiration of enhanced premium tax credits, which may have significant implications for hospitals and providers as coverage affordability pressures grow and payer mix volatility increases.

Enrollment Declines Following Subsidy Expiration

As of early January 2026, approximately 22.8 million individuals had enrolled in ACA marketplace coverage, compared with 24.2 million enrollees at the end of the 2025 enrollment cycle, a 5.8% decline in coverage, with 1.4 million fewer enrollees overall.

While enrollment remains open in some states, these figures represent the first major data point illustrating the impact of the expiration of enhanced federal premium tax credits, which had substantially lowered coverage costs in recent years. Importantly, the FY2026 appropriations bill did not extend these enhanced subsidies, meaning many consumers are now facing significantly higher out-of-pocket premium costs.

Current projections suggest that premiums for many enrollees may more than double, on average, in comparison to 2025 costs. Although a bipartisan group of lawmakers continues to discuss potential legislative extensions, no such measure has been enacted to date.

State-Level Enrollment Trends

State-reported enrollment data released by the Centers for Medicare & Medicaid Services (CMS) on January 28, 2026, show uneven but concerning shifts across markets, with several large federally facilitated marketplace states experiencing notable enrollment declines, including Florida, North Carolina, and Ohio.

Other states, including California, Colorado, Minnesota, New Mexico, Idaho, Virginia, and Pennsylvania, reported strong enrollment totals in early snapshots, although year-over-year comparisons remain incomplete.

Overall, the available data suggests a broad downward pressure on coverage uptake across multiple states, rather than isolated market fluctuations.

New Jersey Marketplace Trends

The national coverage shifts are particularly relevant for New Jersey, which operates its own state-based exchange through GetCoveredNJ. In recent years, New Jersey saw record marketplace participation, with more than 500,000 residents enrolled in 2025 coverage, driven in part by enhanced federal subsidies and state outreach initiatives.

However, with the expiration of those subsidies entering the 2026 plan year, many residents are now facing higher net premiums. In response, New Jersey extended its open enrollment period through January 31, 2026, to allow additional time for consumers to evaluate coverage options.

Even so, early data suggests notable shifts in consumer behavior. Among individuals actively shopping for plans, the selection of Silver plans declined from approximately 83% in 2025 to 69% in 2026, while Bronze plan selections increased from 16% to 30%.

At the same time, the share of consumers receiving financial assistance that reduced premiums to $10 per month or less dropped from 48% in 2025 to just 10% in 2026. These changes suggest that consumers are responding to higher premiums by selecting lower-cost plans with higher deductibles and cost-sharing obligations.

Implications for Hospitals and Providers

For healthcare providers, these coverage trends should raise concerns. Even when patients remain insured, higher deductibles and increased cost sharing may lead to delayed care, increased uncompensated care, and growing patient bad debt.

Hospitals and health systems should anticipate continued potential payer mix volatility and greater patient financial responsibility as these market shifts continue to unfold.

Implementation of the One Big Beautiful Bill Act (OBBBA) continues to reshape Medicaid financing structures across the country. In early 2026, the Centers for Medicare & Medicaid Services (CMS) issued several regulatory actions that operationalize key OBBBA provisions that affect how states fund Medicaid programs and how hospitals receive supplemental payments.

Two developments that are particularly significant for providers are CMS’s Provider Tax Waiver Final Rule limiting certain state Medicaid financing arrangements and new CMS guidance imposing caps on Medicaid managed care State Directed Payments (SDPs).

Together, these changes may significantly alter Medicaid supplemental payment flows and introduce new fiscal uncertainty for hospitals, particularly those serving large Medicaid populations.

CMS Finalizes Provider Tax Waiver Rule

On January 29, 2026, CMS issued a final rule implementing OBBBA provisions restricting how states may use provider taxes to generate federal Medicaid matching funds. The rule becomes effective April 3, 2026.

Historically, some states relied on non-uniform or non-broad-based provider taxes, approved through federal waivers, to finance Medicaid supplemental payments and maintain program funding levels. The new rule narrows the circumstances under which such arrangements may qualify for federal approval and establishes phased compliance deadlines for existing waiver-based financing structures.

As a result, states relying heavily on waiver-supported provider taxes may need to restructure Medicaid funding models or identify alternative revenue sources.

For hospitals, these changes are significant because provider tax structures are often closely tied to:

  • Supplemental Medicaid payments
  • Medicaid Disproportionate Share Hospital (DSH) funding
  • State Medicaid program sustainability

The practical impact will vary across states depending on how heavily they relied on waiver-based financing arrangements.

CMS Caps Medicaid Managed Care State Directed Payments

On February 2, 2026, CMS released guidance implementing Section 71116 of the OBBBA, which governs Medicaid managed care State Directed Payments (SDPs).

The guidance limits certain SDP payments for hospitals, nursing facilities, and academic medical centers by capping reimbursement levels at a specified percentage of Medicare rates. States must revise payment arrangements exceeding these caps beginning with rating periods on or after July 4, 2025, although limited grandfathering provisions extend through 2028.

Over the past several years, SDPs have become a major source of supplemental Medicaid funding for hospitals, particularly in states with large managed care populations. The new caps could reduce available supplemental funding and force states and providers to revisit existing financing arrangements.

FY2026 Appropriations Bill Adjusts Medicaid DSH Cuts

The recently enacted FY2026 federal appropriations bill further modifies Medicaid hospital financing.

Most notably, the legislation delays and reduces previously scheduled Medicaid DSH cuts, scaling a planned three-year, $24 billion reduction down to an $8 billion cut beginning in fiscal year 2028.

While this postponement provides temporary relief, the law also changes how hospital-specific DSH limits are calculated. Under the revised methodology, Medicare, Medicare Advantage, and other primary payments must be deducted when calculating uncompensated care costs. This adjustment could materially affect hospitals serving large numbers of dual-eligible patients, potentially reducing allowable DSH payments.

What Hospitals Should Monitor

These developments reflect a broader trend emerging under OBBBA implementation: while Congress has softened certain funding reductions, it has simultaneously imposed tighter fiscal guardrails on Medicaid financing structures.

Hospitals should expect continued scrutiny of state financing mechanisms and should monitor how their state Medicaid agencies respond to the new federal requirements. Key areas to watch include:

  • State responses to CMS provider tax restrictions
  • Changes to Medicaid managed care SDP arrangements
  • Adjustments to Medicaid DSH calculations
  • Potential shifts in hospital supplemental payment programs

For providers with high Medicaid utilization, these policy changes could materially affect reimbursement levels and long-term financial planning.

The Rural Health Transformation (RHT) Program, created under the One Big Beautiful Bill Act (OBBBA), has moved from authorization to implementation with the distribution of the first $10 billion in federal funding for fiscal year 2026 (FY26). The RHT program represents a $50 billion, five-year federal initiative designed to strengthen rural healthcare infrastructure and expand access to care nationwide.

CMS announced the first round of RHT funding allocations in early 2026. States received awards averaging approximately $200 million, based on a formula incorporating rural population size, healthcare access needs, and proposed transformation strategies.

New Jersey received slightly over $147 million in FY26 funding. Although this allocation is smaller than awards to more heavily rural states, it still represents a substantial investment aimed at strengthening healthcare capacity in underserved areas of the state.

How RHT Funds May Be Used

The RHT program allows states to use federal funds for a broad range of healthcare system improvements, including:

  • Workforce recruitment, training, and retention initiatives
  • Expansion of primary, preventive, and behavioral health services
  • Investments in telehealth and health information technology
  • Regional collaborations and innovative care delivery models designed to improve rural access to care

Importantly, RHT funds are distributed to states rather than directly to healthcare providers. State agencies are responsible for designing implementation plans and distributing sub-awards to participating providers and healthcare organizations.

Importance of State Engagement for Hospitals & Providers

Because funding flows through state programs, hospitals and providers seeking to access RHT funding will need to engage closely with state agencies as implementation plans are developed. Participation in state-level planning processes may be critical to ensuring that funding opportunities align with provider needs and regional healthcare priorities. For rural hospitals and clinics in New Jersey, early engagement with state policymakers and health agencies may help position organizations to benefit from the program’s funding opportunities.

Since the enactment of the One Big Beautiful Bill Act (OBBBA) in mid-2025, the healthcare industry has been navigating a period of accelerated policy change affecting coverage, reimbursement, and care delivery. As the implementation of OBBBA-authorized funds continues, the data offers insights into how the law is reshaping the healthcare landscape at both the national and state levels.

Against this backdrop, President Trump recently unveiled a new policy framework, the Great Healthcare Plan, and on February 5, 2026, signed a fiscal year 2026 appropriations bill introducing significant operational and reimbursement implications for hospitals that will interact directly with both OBBBA implementation and future reform efforts. For hospitals and providers, these developments arrive at a moment of heightened financial and operational sensitivity, particularly as payer mix volatility and underinsurance concerns continue to grow.

Our healthcare team will continue to examine the early implementation of the OBBBA and related federal healthcare policy developments shaping the healthcare landscape and will address various aspects of those developments in future posts on this blog.

The New Jersey Board of Public Utilities (BPU) has taken several significant actions affecting the state’s solar and energy storage programs, primarily in response to Governor Mikie Sherrill’s Day One Executive Orders addressing New Jersey’s energy cost crisis. This Client Alert from our Energy & Renewable Resources team provides the details.

Medicare telehealth received a critical, if temporary, reprieve with the enactment of new legislation that extends key pandemic-era telehealth flexibilities that were set to expire on January 31, 2026, to December 31, 2027. In this Client Alert from our healthcare team, learn more about the impacts of the new law and why providers, health systems, and digital health companies should use this window to assess compliance, billing, infrastructure, and long-term strategy in anticipation of potential policy shifts after 2027.  

Healthcare providers in New Jersey operate in one of the most highly regulated environments in the state, where employment law changes can directly affect daily operations, compliance obligations, and risk exposure. New legislation expanding employee leave and job-protection rights requires healthcare employers to reassess existing policies and practices to ensure they align with evolving state requirements. With expanded coverage thresholds and earlier employee eligibility, these changes may impact a wide range of healthcare organizations, making early awareness and preparation essential.

Read more in our latest Client Alert about the significant changes to Family Leave and job-protection obligations that take effect July 17, 2026.

On January 21, 2026, the New Jersey Appellate Division rejected a physician’s appeal concerning an Order of the Board of Medical Examiners dated April 19, 2024 enforcing a prior Consent Order that had been entered on March 14, 2007. The 2007 Consent Order had required the respondent physician to be accompanied by a chaperone whenever he examined or treated a female patient in all practice settings. The case illustrates the unsoundness of relying on the maxim that “it is better to ask for forgiveness than to ask for permission in advance.” Whatever the origin of this adage and despite its common usage in “business banter,” it has been observed that it “is almost never a valid approach in a court of law.”

The Board of Medical Examiners proceeding commenced in 2002 following disclosure of pending charges of criminal sexual contact against the respondent physician with a patient in 2002. (The physician was the respondent in the Board proceeding and the appellant before the Appellate Division.)  The Board entered an Interim Consent Order permitting the physician’s continued practice but requiring that during the pendency of the criminal case he employ a licensed health care professional to act as chaperone when he rendered medical services to female patients. The physician was acquitted of the criminal charge; however, the BME matter remained open and under investigation with an administrative complaint being eventually filed. The licensure proceeding was resolved with entry of the 2007 Consent Order with a finding of professional misconduct. The Consent Order suspended the physician’s license for one year but stayed the suspension to be served as a probationary period and continued the requirement of a chaperone for female patients, who was to be “approved by the Board” and who would provide regular reports to the Board. It further provided that after four years, the respondent could apply to the Board for relief from the chaperone requirement in all settings when treating a female patient. The Consent Order was signed both by the physician and his then attorney. Any deviation from its terms without prior written consent from the Board would constitute a violation of the order.

Based on an investigative report from the Attorney General’s Enforcement Bureau, the physician appeared before a Preliminary Evaluation Committee (PEC) of the Board on November 22, 2022, in which his non-compliance was discussed. There was a follow-up investigative report in June 2023. In November 2023, the Attorney General moved to enforce the terms of the 2007 Consent Order. The physician was now represented by a different attorney. The motion to enforce litigant’s rights was based on the two investigative reports indicating that the respondent physician had failed to comply with the chaperone requirements of the Consent Order. Instead of using a Board-approved chaperone, he was utilizing unlicensed members of his staff, who had not been approved by the Board. In testimony before the PEC and later in a public hearing before the full Board on December 13, 2023, the respondent physician admitted that he had been using employees and had not received permission from the Board to do so. Now represented by different legal counsel than he had in 2007, he further testified that while he had used Board-approved chaperones from 2003 until 2010, “his prior attorney had advised him he no longer needed to follow the consent order.” He claimed that his attorney indicated that he would file a motion to relieve the physician of the conditions of the Consent Order but no such motion was filed. There was no documentation or evidential support for these assertions. He further contended that inspectors for the Board making periodic visits to the office after 2010 knew he was using office staff and told him that he was compliant with the order.

At the conclusion of the December 13, 2023, hearing, the Board directed that the respondent physician be in full compliance with the 2007 Consent Order by January 12, 2024, and that he could temporarily use office staff until Board-approved chaperones were in place. If he did not obtain Board approval for the chaperones, he had to cease and desist from treating female patients until he did obtain approval. The Board announced its decision at the conclusion of the December meeting, which was memorialized in the Order of April 19, 2024, that became the subject of the Appellate Division’s review.

In that Order, the Board made the following findings:

Although Respondent makes vague assertions that he did so after he was told by his former counsel that the requirement no longer applied, he has not produced a scintilla of documented evidence to support that claim. Moreover, there is nothing in the Board’s records that suggests that he ever made a request to be relieved of the chaperoning requirement, nor anything in the Board’s records that suggests that the Board ever approved any modification or discontinuation of that requirement. Most significantly, it is clear that [the respondent] knew, or should have known, after he appeared for an investigative hearing before a Committee of the Board on November 22, 2022, that the chaperoning requirements in the 2007 Consent Order continued to apply to his practice, yet he has continued to practice thereafter without a professionally licensed Board-approved chaperone, manifesting a complete disregard for the authority of this Board and an inherent lack of understanding of why a chaperoning requirements was imposed in the first instance to protect vulnerable patients.

On appeal, the physician advanced three arguments. First, he contended that the Board waived the chaperone requirement. Next, he asserted that the Board’s procedure deprived him of proper notice and opportunity to be heard before a judicial forum in violation of the New Jersey constitutional requirement regarding separation of powers. Lastly, he contended that the Board’s decision was unsupported by a clear danger to the public. The Appellate Division was “unpersuaded” and affirmed.

Invoking the deferential standard for review of administrative agencies, it concluded that the Board’s action was neither arbitrary nor capricious. The Legislature had vested broad discretion in the Board for the regulation of the practice of medicine. The Board not only had authority to revoke or suspend licenses but pursuant to the Uniform Enforcement Act it also could order licensees to “submit to any supervision, monitoring or limitation on practice determined by the [Board] to be necessary.” The court rejected the argument that the Board’s supposed “laxity” in enforcing the Consent Order constituted a waiver of its requirements. It concluded that the Board could assess the credibility of the undocumented and non-specific assertions that he was told he was in compliance. It emphasized the continuing non-compliance with the Consent Order after the physician had appeared before the PEC in November 2022 and was made aware of the Board’s concerns. He took no corrective or protective action belatedly seeking relief from the terms of the Consent Order.

He unsuccessfully challenged the use of Zoom video technology to conduct the hearing before the Board as providing only a limited opportunity to testify. His claim that enforcement of the order had to be done in a judicial forum rather than an administrative hearing was summarily rejected with reference to long-standing precedent approving of an administrative agency serving in both prosecutorial and adjudicatory capacities.

The contention that there was no showing of danger or harm to the public was also rebuffed. The court cited a 2006 New Jersey Supreme Court decision holding that “the Legislature did not require a finding of patient harm before authorizing license revocation.” Because the physician did not establish any arbitrary, capricious, or unreasonable action by the Board or that the Board’s decision lacked support by substantial credible evidence, the Appellate Division affirmed.

Neither the Board’s ruling nor the Appellate Division’s opinion provide any insight into why a motion to be relieved of the terms of the Consent Order was not filed after it had been successfully adhered to beyond the four-year period required by its terms. The need for the chaperoning requirements came into existence because of the physician’s inappropriate conduct with a female patient. At a minimum this inappropriate behavior reflected bad judgment and decisions on his part, which he presumptively could remediate. Continuing flawed judgment, however, can be seen in the unilateral decision to discontinue complying with the Board’s chaperoning requirements without applying to the Board for permission, compounded by the decision not to immediately seek to comply after becoming aware of the Board’s concern manifested in the November 22, 2022, hearing.

There is another aspect of interest. The Appellate Division heard oral argument on September 10, 2025. Before that date, additional proceedings took place before the Board. On June 24, 2024, the Attorney General filed an administrative complaint alleging that notwithstanding the requirements of the April 17, 2024, Order, the respondent physician continued to see female patients without a Board-approved chaperone. Finding that the flagrant disregard of the Order constituted a clear and imminent danger to the public, the Board entered an Order on July 5, 2024, as permitted by the Uniform Enforcement Act, temporarily suspending the physician’s license until conclusion of a plenary hearing. Then on April 30, 2025, the Board entered its Final Decision and Order suspending the respondent’s license for a period of five years.  There is no reference to these events in the Appellate Division opinion.