Developments with MOON, PEPPER, and Payment Reductions for Out-of-Network Care

Let me start with the two big news items. First, Nina Youngstrom, the editor of the Report on Medicare Compliance, actually got a response from the Centers for Medicare & Medicaid Services (CMS) about the Medicare Outpatient Observation Notice (MOON). As you know, the current form expired Nov. 30, and the new version has not been released. She was told that the new MOON should be released early in 2026. And until that time, the old form should be used. And once the new version is released, there will be a 60-day grace period to allow transition to the new form.

She also obtained a copy of the proposed form, and CMS actually did a nice job of removing information that was superfluous and confusing to patients. The use of checkboxes is still allowed. So, for now, stay calm and carry on.

The other breaking news is about the Program for Evaluating Payment Patterns Electronic Report (PEPPER). It’s out.

The PEPPER for the third quarter of 2025 is now available for download to your authorized officials. (I am hearing hospitals are struggling to figure out who that authorized official is, since the PEPPER previously was sent out via email to quality department staff.)

The good news is that we will be getting them with data that is more current than we used to see. The bad news, though, is that it appears there will be no significant changes to the report, except a new contractor producing the report. There are two tiny changes to a couple Diagnosis-Related Groups (DRGs) for the “Surgical CC/MCC (complication and comorbidity/major complication and comorbidity)” measure, and an Excel formatting change, but that is it.

I know I sent in many suggestions for improvement, such as expanding the Total Knee Replacement measure to also include Total Hip Replacement, which to me seemed like a no-brainer, and not one of them was adopted. I am truly disappointed.

Changing topics, several weeks ago there was another interesting policy announcement from a major payer that deserves attention.

But let me step back to my days in practice. Every year, I sat down with the paper provider manuals from all the insurance companies and created a spreadsheet with the contracted specialists for each one. So, if my patient needed to see a cardiologist, I could be sure I was sending them to one in their insurance network.

But that rarely happens in the hospital. If a hospitalist wants to call a cardiologist for a patient, if the patient has never seen one, they likely either call the doctor on call or the doctor they think is best-suited for the patient based on their issue, without checking to see if that doctor is contracted with the patient’s payor.

Now, with hospitals that employ all physicians, that is not a problem, since if the hospital is in-network, the doctors will all be in-network.

But that’s not universal.

Why is this a problem? Well, one payer has announced that it will be reducing payment to the hospital for the stay, both outpatient and inpatient, by 10 percent if the patient receives care from any non-contracted provider, unless it was approved by the payer or there are no contracted providers in the area. This includes not only the ED physicians, the hospitalists, and the specialists, but also the radiologists and pathologists, who never actually see the patient, but do bill the insurer for their services.

Now, this is actually patient-centered, to refer to in-network physicians. When a hospitalized patient seen by an out-of-network physician during their stay is discharged and tries to see that doctor in the office for follow-up, they will face the obvious obstacles and likely end up not getting that necessary care. And we can all see a readmission looming in the horizon.

Among all our tasks, developing processes to ensure that patients are seen by in-network doctors is probably low on the list, but the financial implications of this new payer policy may lead your CFO to move it up the list very soon.

So be aware, and ready to act.