Medicare Overbilling Crackdown: Hospitals Must Use Separate IDs for Off-Campus Sites by 2026

The aptly named Preventing Hospital Overbilling of Medicare Act is basically Congress saying, "Enough is enough" to hospitals charging premium prices for services delivered at satellite clinics. This bill targets a practice where services provided miles away from the main hospital—say, at a local clinic—are billed to Medicare and private insurers at the much higher hospital rate, instead of the standard, cheaper outpatient rate. Starting January 1, 2026, the bill is tightening the screws on this practice, known as site-neutral billing.

The End of the Hospital Rate Loophole

For years, hospitals have used certain exceptions to classify remote clinics as extensions of the main campus, allowing them to charge what are often called "facility fees." This bill fundamentally changes the definition of an "off-campus outpatient department of a provider." If that clinic isn't physically on the main campus or within a specific distance of a remote facility, it’s considered "off-campus"—period. The bill removes several previous exceptions, including those covering off-campus emergency departments after the 2026 deadline. This means that if you get the same service at a hospital-owned clinic that you could get at a private doctor's office, the hospital shouldn't be able to bill Medicare for five times the price just because they own the building.

Mandatory IDs for Transparency

To make sure hospitals can’t play accounting games, the bill mandates a massive administrative change: every single off-campus outpatient department must obtain its own unique identification number (NPI), separate from the main hospital, by January 1, 2026. This is a huge deal for transparency. Think of it like this: if you run a chain of coffee shops, each location has to have its own address and tax ID, not just one for the whole company. This requirement (Section 2) gives the Secretary of Health and Human Services the clear authority to enforce payment policies that treat services equally regardless of location.

How This Hits Your Wallet

If this bill works as intended, it’s a win for Medicare, private insurers, and, most importantly, patients. Right now, when hospitals overbill for these off-site services, it drives up overall healthcare costs, which translates into higher premiums for group health plans and increased out-of-pocket costs for patients—especially those with high-deductible plans. Under the new rules, hospitals must use that unique off-campus ID when billing Medicare (using the CMS 1500 form or X12 837P transaction). Crucially, the bill also applies this rule to private insurance: providers cannot bill group health plans or hold the patient responsible for payment unless they use the separate ID and specified forms. This means less chance of getting hit with a surprise, inflated bill for a routine service at a local clinic that happens to be owned by a big hospital system.

The Real-World Friction

While this is great news for cost control, it’s going to cause some serious headaches for large hospital systems, which are the groups negatively impacted by this change. They’ve built business models around acquiring outpatient centers and billing them at higher rates. Now, they face a significant administrative lift to re-identify and re-credential every single off-campus location by 2026. We can expect hospitals to push back or try to find new ways to classify their services. However, the bill is specific, and it encourages state regulators—via a request to the National Association of Insurance Commissioners (NAIC)—to adopt model laws to ensure private insurers can reject improper claims, just like Medicare will be doing. This dual approach aims to close the loophole completely, making sure that when you get blood drawn at the clinic down the street, you’re paying the clinic price, not the hospital price.