On February 3, 2026, President Donald Trump signed into law the Consolidated Appropriations Act, 2026, a package of five full-year appropriations bills for the Departments of Defense, Labor, Health & Human Services (HHS), Education, Transportation, and Housing and Urban Development for fiscal year (FY) 2026. In addition to providing full-year funding for these departments, the legislation includes a bipartisan health package. While many health provisions continue long-standing policies, the bill also introduces several bipartisan changes that Congress has contemplated for years and will affect hospitals, physicians, payors, and other stakeholders in the years ahead.
Below is a detailed summary of the major health-related provisions and their implications for healthcare organizations.
Healthcare Extenders & Other Policy Changes
Affordable Care Act (ACA) Medicaid Disproportionate Share Hospital (DSH) Cuts Modified
The bill eliminates the ACA’s Medicaid DSH cuts through FY 2027. This provides immediate relief to safety-net hospitals that have faced years of uncertainty around scheduled reductions. In FY 2028, the scheduled reduction is $8 billion. These changes reduce the impact from $24 billion over three years to $8 billion over one year.
Revisions to the Uncompensated Care Calculation for Medicaid DSH
The bill makes several structural revisions to the Medicaid DSH program that broaden the definition of uncompensated care and give states greater flexibility in distributing funds. Hospitals may now count costs for Medicaid-eligible patients even when Medicare has paid part of the claim, provided the hospital’s costs still exceed total payments. States are also permitted to redistribute unused DSH allotments from prior years, going back to FY 2022, and payments already made cannot be recouped if they complied with the rules in place at the time. In addition, states may submit retroactive state plan amendments to implement these changes quickly and accelerate the flow of funds to hospitals. Collectively, these updates are expected to benefit safety-net, children’s, and rural hospitals that serve large numbers of dually eligible and underinsured patients.
Medicare Dependent Hospital (MDH) & Low-Volume Adjustment (LVA)
Both programs are extended through calendar year (CY) 2026, providing continued support for rural hospitals facing low patient volumes and high fixed costs.
Advanced Alternative Payment Model (AAPM) Bonus
The bill extends the 3.1% AAPM bonus for 2028 only, offering one additional year of incentive payments for qualifying clinicians participating in certain value-based payment models.
Telehealth Flexibilities
COVID-era telehealth waivers—including geographic and originating site flexibilities, audio-only coverage, expanded practitioner eligibility, and delayed in-person requirements for tele-mental health—are extended through CY 2027. These extensions also apply to services furnished by FQHCs and Rural Health Clinics (RHCs).
Hospital at Home Model
The Acute Hospital Care at Home waiver program is extended through FY 2030, providing long-term stability for hospitals investing in home-based acute care models.
Physician Fee Schedule Work Geographic Practice Cost Index (GPCI) Floor
The 1.0 floor on the physician work GPCI is extended through December 31, 2026.
Rural Ambulance Add-Ons
The rural and super-rural ambulance add-ons are extended through January 1, 2028, supporting emergency medical services agencies facing persistent workforce and cost pressures.
Targeted Critical Access Hospital (CAH) Distance Requirement Fix
Section 241 of the HHS funding package provides targeted relief for hospitals that lost CAH status solely due to distance calculations. Facilities that were designated and certified as CAHs as of January 1, 2024, and that had their status revoked due only to distance requirements between December 1, 2024 and January 1, 2026, are recertified. This is a narrow but meaningful fix for several rural hospitals.
CHC Funding
The bill provides $5.8 billion to fund CHCs through the end of CY 2026, supporting continuity of primary care access in underserved communities.
Health Resources & Services Administration (HRSA) Funding for Qualifying Rural Hospitals
The bill provides $25 million to be divided equally among hospitals with no more than 50 beds and a wage index value of less than 0.90.
Medicare Advantage (MA) Provider Directory Accuracy Requirements
MA plans must now maintain accurate provider directories. If a beneficiary inadvertently sees an out-of-network provider due to directory errors, their cost sharing will be limited to the in-network amount. This provision aims to improve transparency and reduce surprise billing scenarios.
Pharmacy Benefit Manager (PBM) Reforms
The legislation includes a set of bipartisan reforms that reshape how PBMs operate. For employer-sponsored plans, PBMs are prohibited from retaining any portion of the manufacturer’s rebate. However, they may still negotiate a separate flat, administrative fee. In Part D, the legislation shifts PBM compensation toward flat-fee or price-neutral models while imposing new transparency and audit requirements. It also reinforces “any willing pharmacy” rules to support broader pharmacy participation and requires PBMs serving employer plans to pass through all manufacturer rebates rather than retaining a share.
Although the long-term financial impact remains a subject of debate, analysts anticipate pressure on PBM margins with potential downstream effects on the earnings for the health plans that own the three largest PBMs. For example, Cigna’s decision to eliminate drug rebates in response to policymakers’ scrutiny is projected to reduce earnings by $500 to $600 million.1 This downward pressure on health plans’ earnings may exacerbate tensions between plans and providers related to claims processing and contract renegotiations.
Separate Billing Identifiers for Off-Campus Hospital Outpatient Departments (HOPDs)
Provider-based off-campus HOPDs are required to obtain individual National Provider Identification (NPI) numbers beginning January 1, 2028. The legislation also requires ongoing attestations that each location continues to meet CMS provider-based requirements. This shift creates a significant operational burden, as hospitals will need to update billing systems, compliance processes, and internal controls to manage multiple NPIs. It also introduces new negotiation risks, since payors may use the separate identifiers to push for lower rates at off-campus sites. Given the scale of these changes, hospitals should begin evaluating their off-campus footprints and preparing for a multiyear implementation effort.
Medicare Sequester Extension
To partially offset the cost of the package, Congress extended the Medicare sequester for an additional five months. While expected, the extension continues downward pressure on Medicare reimbursement.
How Forvis Mazars Can Help
Our professionals at Forvis Mazars are committed to helping healthcare organizations develop the core capabilities necessary to understand and adapt to the impact of evolving federal policies and congressional legislation. If you have questions about policy changes in the Consolidated Appropriations Act, 2026 and how they may affect your organization, please reach out to a professional on our team.
- 1“Cigna Sees Up to $600M Earnings Hit From Ending Drug Rebates,” modernhealthcare.com, January 22, 2026.