CMS’s 2027 OPPS proposed rule would cut 340B and imaging payments

Medicare payment for 340B drugs and imaging services would undergo notable reductions under CMS’s 2027 proposed rule for the hospital Outpatient Prospective Payment System (OPPS) and ambulatory surgical centers (ASCs).

Payment for many services would increase due to budget neutrality requirements, but the net impact of the various changes projects to be negative for most hospitals.

The proposed rule “delivers multiple blows to hospitals already operating under immense financial strain,” John Knapp, vice president for advocacy with Premier Inc., said in a written statement.

Interested parties have until Aug. 31 to submit comments on the proposed rule for consideration by CMS

CMS proposes a 2.4% update

Hospitals and ASCs would receive a 2.4% base increase to Medicare payments in 2027, according to the proposed rule. A 3.2% increase to the market basket would be reduced by 0.8% due to the mandatory economywide productivity adjustment. Those numbers could change moderately when the final rule is issued in November.

The precise update for an individual hospital will vary depending on hospital size, market type (rural or urban) and geographic region. Standard yearly adjustments that apply differently based on those factors include the wage index and the recalibration of ambulatory payment classifications.

When the various adjustments are accounted for, hospitals would receive a net 1.9% increase, on average (see Table 88 in the proposed rule).

An accelerated 340B remedy offset

CMS is proposing an additional adjustment that would take the payment change into negative territory for many hospitals.

The agency plans to accelerate a scheduled reduction to payment for nondrug items and services, implementing a 3% decrease. A much lower adjustment initially was implemented for 2026 as an offset related to a $9 billion remedy payment to hospitals. That payment was required after the Supreme Court ruled 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. After the remedy payment, the same principle mandated a claw-back of those higher nondrug payments, according to CMS.

In the proposed change, what was scheduled to be a 0.5% payment reduction for nondrug items and services starting in 2026 and extending for 16 years would increase to 3% in 2027 and continue through 2029.

“This prospective offset aimed to balance the goal of restoring hospitals to their financial position had the original [2018-2022] 340B policy never existed with avoiding burdening them with an immediate single-year recovery. After subsequent reconsideration of balancing these two goals, CMS has determined a shorter time frame to be more appropriate,” the agency wrote in a fact sheet on the 2027 proposed rule.

340B drug payments would plummet

The claw-back is not the only 340B-related decrease facing hospitals because of the proposed rule.

Based on Q1 survey results of hospitals’ drug acquisition costs, CMS is proposing to slash the Part B payment rate for 340B drugs. The rate would drop from average sales price (ASP) plus 6% to ASP minus 33.4%.

CMS believes it has leeway to reduce 340B payments, unlike in 2018. The Supreme Court’s 2022 ruling stated that the prior decrease might have been allowed if it had been based on survey results.

According to data presented in the newly proposed rule, roughly 1,300 hospitals participated in the Q1 survey. The response rate amounted to 41.4% of hospitals that were eligible to participate and 28.6% of all 340B hospitals.

“CMS is proposing unlawful cuts to Medicare outpatient drug payments that will disproportionately harm essential hospitals, using a flawed methodology that is based on data from less than a quarter of 340B covered entities,” Jennifer DeCubellis, president and CEO of America’s Essential Hospitals, said in a written statement.

First-year savings would be $4.55 billion in Medicare drug payments and $1.15 billion in beneficiary cost-sharing, according to the proposed rule.

Budget neutrality would require payments for nondrug items and services to be raised in step with the drop in 340B payments. Hospitals with relatively little 340B exposure thus could come out ahead after the adjustments.

Site-neutral payment would expand

A year after implementing a site-neutral payment policy for drug administration services, CMS is proposing to do the same for imaging-without-contrast services (including most MRIs). When such services are provided at off-campus hospital outpatient departments (HOPDs), reimbursement would be reduced to the physician payment rate.

Imaging thus would be added to clinic visits and drug administration as services subject to site-neutral payment. Estimated savings from the imaging payment decrease in 2027, according to the proposed rule, would be $190 million for Medicare, $70 million in beneficiary premiums and another $70 million in beneficiary cost-sharing.

“This policy helps ensure that beneficiaries are not subject to higher premiums and cost sharing based solely on the site at which care is furnished,” CMS wrote.

Hospital advocates maintain that such policies are unwarranted.

“Treating hospital outpatient departments as equivalent to other care settings ignores the unique role they play in serving patients with greater medical and other needs,” Ashley Thompson, senior vice president with the American Hospital Association, said in written comments.

CMS continues sunsetting the IPO list

Site-neutral payment policy also is promoted in the plan to continue phasing out the inpatient-only (IPO) list. Year two of the three-year process would include the removal of 638 procedures, adding to 285 that came off the list in 2026. Among the procedures affected for 2027 would be digestive, respiratory, urinary, maternity/delivery, endocrine and integumentary.

“This proposal would allow for these services to be paid by Medicare in the hospital outpatient setting when determined to be clinically appropriate, giving physicians greater flexibility in determining the most appropriate site of service,” the new rule states.

In conjunction with the move, the ASC Covered Procedures List (CPL) would expand by 618 procedures, meaning an increasing number of procedures formerly on the IPO list would be reimbursable by Medicare in nonhospital settings. The CPL grew by 560 procedures in 2026.

A small expansion of prior authorization

The relatively short list of HOPD procedures that are subject to prior authorization in traditional Medicare would add eight botulinum toxin injection codes. CMS cited an unexplained increase in procedure volume, raising concerns about unnecessary utilization.

Prior authorization for a limited number of HOPD services has been in place since 2020. That doesn’t include services requiring prior authorization as part of the Wasteful and Inappropriate Service Reduction (WISeR) Model, a six-state pilot that began this year as authorized by the Center for Medicare & Medicaid Innovation.