CMS 2027 outpatient pay proposal targets 340B, site-neutrality

The Centers for Medicare and Medicaid Services has proposed its annual outpatient hospital payment update for 2027, and the plan is drawing quick opposition from hospital groups. The rule includes a major change to 340B drug reimbursement and additional steps in CMS’ effort to steer more care to lower-cost outpatient settings.

CMS released the proposed 2027 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment Systems rule on Thursday. The agency said it would produce a net 2.4% increase in payment rates for outpatient services and ASCs, based on a projected 3.2% hospital market basket update and a 0.8 percentage point productivity adjustment. CMS said the proposal, together with other policies in the rule, would amount to a 1.9% overall increase, or $1.8 billion, in total payments over calendar year 2026, excluding changes in enrollment, utilization and case mix.

Hospital organizations responded with immediate criticism, saying the update was too small and that the proposed 340B changes were especially troubling. The rule would reduce 340B drug reimbursements to 33.4% below average sales price and offset that change by raising non-drug service payments by 8.44% to keep the policy budget neutral. CMS also proposed increasing the share of the annual OPPS conversion factor used to offset its earlier 340B remedy from 0.5% to 3%, a move intended to speed recovery of money tied to a prior $7.8 billion recoupment from 340B hospitals.

CMS said the 340B proposal follows a survey of hospital drug acquisition costs that showed what it described as “significant disparities” between acquisition costs for drugs obtained inside and outside the discount program. The agency estimated that lowering the rate would reduce Medicare drug payments by nearly $4.6 billion and beneficiary payments by $1.2 billion in the first year. Because the law requires the change to be budget neutral, CMS paired it with the large non-drug payment increase. Still, the agency said that for most 340B providers, lower drug payments would outweigh the higher non-drug payments.

Ashley Thompson, senior vice president of public policy analysis and development at the American Hospital Association, said the proposals come at a difficult time because hospitals are treating more patients who are sicker while also seeing more uncompensated care tied to additional uninsured patients. She said payment policy should recognize those pressures rather than worsen them and should protect access to comprehensive care and support long-term improvements to the healthcare system.

Maureen Testoni, president and CEO of 340B Health, which represents more than 1,600 participating hospitals, said the reimbursement cut would not help meet administration goals for spending or affordability. Instead, she said, the proposal would use that revenue to pay more to non-safety net providers. Testoni also said the plan was not about reducing seniors’ costs, arguing that beneficiaries would face higher payments for non-drug Part B services.

The proposed rule also continues CMS’ effort to offset the earlier 340B remedy. The agency’s plan to raise the conversion factor share from 0.5% to 3% is expected to reduce payments to affected providers by $2.3 billion in calendar year 2027. Hospitals have long objected to the offset, which they say acts like a clawback against non-340B hospitals to correct CMS’ mistake in implementing the unlawful 2017 rate cut. This week, they renewed that criticism.

Charlene MacDonald, president and CEO of the Federation of American Hospitals, said CMS’ push to ensure payments more closely reflect hospital costs is a step toward a fairer and more predictable system. But she said the accelerated recoupment runs against those principles and would create an unnecessary financial burden at a time when preserving access to care remains important.

Outside the 340B provisions, CMS is again pushing care toward outpatient and non-hospital settings. The agency wants to continue its three-year phase-out of the inpatient-only list, which currently excludes certain procedures from reimbursement at outpatient sites or ASCs. CMS said an additional 638 services would be removed under the proposal, which it said would let more patients choose outpatient surgery while maintaining patient safety standards.

CMS is also seeking to use statutory authority to limit unnecessary growth in outpatient service volume and to apply Physician Fee Schedule payment rates for some imaging services delivered in off-campus provider-based departments. The agency said a similar policy was adopted last year for drug administration services. CMS said this imaging policy would help curb consolidation incentives that encourage health systems to provide care in higher-cost settings. It estimated first-year reductions of $260 million in Medicare Part B spending and $70 million in beneficiary cost-sharing.

Thompson said the AHA was concerned about the imaging proposal and repeated the hospital industry’s longstanding view that site-neutral policies fail to account for the fact that hospital outpatient departments treat more complex patients and must maintain more capabilities than other lower-cost settings. Jennifer DeCubellis, president and CEO of America’s Essential Hospitals, called the rule another Medicare payment cut that hospitals need to stay open and serve their communities.

The proposed rule includes additional changes as well. CMS outlined updates to quality reporting programs for hospital outpatient departments and ASCs, proposed prior authorization for eight botulinum toxin injection codes because claim volume has risen, and sought public input on how to standardize new hospital price transparency requirements. CMS said it will accept public comments for 60 days and typically finalizes the annual outpatient rule in late fall.