Hospitals oppose CMS proposals for 2027 outpatient pay rule changes

CMS proposes 2027 outpatient payment rule with 2.4% base increase but steep 340B drug cuts and expanded site-neutral pricing that hospitals warn will push many into negative net payment territory.

Objective Facts

On July 2, 2026, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule that would update Medicare payment policies and rates for hospital outpatient and Ambulatory Surgical Center (ASC) services under the Hospital Outpatient Prospective Payment System (OPPS) and ASC Payment System Proposed Rule for calendar year (CY) 2027. It outlines a net 2.4% rate increase for outpatient services and ASCs, reflecting a 3.2% projected hospital market basket increase and a 0.8 percentage point productivity adjustment. However, CMS proposes to pay for 340B-acquired drugs at the drug's average sales price minus 33.4% (down from average sales price plus 6%), estimated to cut Original Medicare drug payments by $4.55 billion and beneficiary drug payments by $1.15 billion in the first year. Additionally, CMS proposes raising the annual offset to the OPPS conversion factor from 0.5% to 3% effective in 2027, with full recovery estimated by 2029. CMS also proposes expanding site-neutral payment for imaging-without-contrast services, including most MRIs, seeking to reimburse off-campus hospital outpatient departments at the physician payment rate instead, with CMS estimating the change would save $260 million total in 2027 including $190 million in Medicare Part B spending.

Deep Dive

CMS's drug payment proposal stems from a survey conducted January 1 through April 7, 2026, which revealed significant disparities between hospital acquisition costs for drugs acquired through the 340B program and those drugs acquired outside of the 340B program; in some instances, the survey revealed that the beneficiary cost sharing amount, typically 20% of the total payment amount, was greater than the total price that the hospital paid for the drug, prompting CMS to propose paying for 340B acquired drugs at the drug's Average Sales Price (ASP) minus 33.4%. The clawback acceleration relates to a Supreme Court ruling that CMS had unlawfully lowered payments for drugs procured through the 340B Drug Pricing Program from 2018 through most of 2022; budget neutrality obligated payment for nondrug items and services to be raised while 340B payments were lowered during those years, and after a remedy payment, the same principle mandated a claw-back of those higher nondrug payments. The site-neutral imaging proposal, which CMS made a similar move for drug administration services in last year's rule, aims to head off health systems' consolidation incentives to deliver their care in higher cost settings, and is estimated to bring first-year reductions in Medicare Part B expenditures and beneficiary cost-sharing obligations of $260 million and $70 million, respectively. However, the American Hospital Association reiterated that hospital outpatient departments serve more complex patients and must maintain more capabilities than the other lower cost sites of care. While payment for many services would increase due to budget neutrality requirements, the net impact of the various changes projects to be negative for most hospitals, with John Knapp, vice president for advocacy with Premier Inc., stating the proposed rule 'delivers multiple blows to hospitals already operating under immense financial strain.' CMS will accept public comments on the 2027 calendar year proposed rule for 60 days, and typically finalizes the annual rule in late fall.

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Hospitals oppose CMS proposals for 2027 outpatient pay rule changes

CMS proposes 2027 outpatient payment rule with 2.4% base increase but steep 340B drug cuts and expanded site-neutral pricing that hospitals warn will push many into negative net payment territory.

Jul 2, 2026· Updated Jul 7, 2026
What's Going On
  • On July 2, 2026, CMS made a draft 2027 hospital outpatient pay rule proposal featuring a proposed 2.4% pay bump and a plan to expand site-neutral payments to certain imaging services.
  • CMS proposes to pay for 340B-acquired drugs at the drug's average sales price minus 33.4%, down from the current average sales price plus 6%.
  • CMS estimates the 340B change would cut Original Medicare drug payments by $4.55 billion and beneficiary drug payments by $1.15 billion in the first year.
  • CMS proposes to raise the annual offset to the OPPS conversion factor from 0.5% to 3%, effective in 2027, with CMS estimating the full recovery would be complete by 2029.
  • Jennifer DeCubellis, president and CEO of America's Essential Hospitals, said the proposals will deliver a blow to safety net hospitals, stating 'The proposed OPPS rule from CMS takes an axe to critical funding that supports essential hospitals without concern for how it will affect the patients they serve.'
Objective Deep Dive

CMS's drug payment proposal stems from a survey conducted January 1 through April 7, 2026, which revealed significant disparities between hospital acquisition costs for drugs acquired through the 340B program and those drugs acquired outside of the 340B program; in some instances, the survey revealed that the beneficiary cost sharing amount, typically 20% of the total payment amount, was greater than the total price that the hospital paid for the drug, prompting CMS to propose paying for 340B acquired drugs at the drug's Average Sales Price (ASP) minus 33.4%. The clawback acceleration relates to a Supreme Court ruling that CMS had unlawfully lowered payments for drugs procured through the 340B Drug Pricing Program from 2018 through most of 2022; budget neutrality obligated payment for nondrug items and services to be raised while 340B payments were lowered during those years, and after a remedy payment, the same principle mandated a claw-back of those higher nondrug payments. The site-neutral imaging proposal, which CMS made a similar move for drug administration services in last year's rule, aims to head off health systems' consolidation incentives to deliver their care in higher cost settings, and is estimated to bring first-year reductions in Medicare Part B expenditures and beneficiary cost-sharing obligations of $260 million and $70 million, respectively. However, the American Hospital Association reiterated that hospital outpatient departments serve more complex patients and must maintain more capabilities than the other lower cost sites of care. While payment for many services would increase due to budget neutrality requirements, the net impact of the various changes projects to be negative for most hospitals, with John Knapp, vice president for advocacy with Premier Inc., stating the proposed rule 'delivers multiple blows to hospitals already operating under immense financial strain.' CMS will accept public comments on the 2027 calendar year proposed rule for 60 days, and typically finalizes the annual rule in late fall.