News Briefs: A small increase to hospital outpatient payments could be negated in 2027

Hospital outpatient departments and ambulatory surgical centers would receive a 2.4% base increase to Medicare payments in 2027, according to a CMS proposed rule published July 7.

A 3.2% increase to the market basket would be reduced by 0.8% due to the mandatory economywide productivity adjustment. The numbers could change moderately when the final rule is issued in November.

When various yearly adjustments are accounted for, hospitals would receive a net 1.9% increase, on average. However, an additional adjustment could more than cancel out the update for many hospitals.

CMS announced plans to accelerate a budget neutrality adjustment linked to the $9 billion remedy payment made to hospitals in 2023. 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.

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, according to the newly proposed rule.

340B and imaging payments are set to plummet in 2027, based on CMS proposals

The proposed rule for hospital outpatient care also includes big reductions to payment for 340B drugs and imaging services.

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

A year after implementing a site-neutral payment policy for drug administration services, CMS is proposing to do the same for non-contrast imaging services (a category that includes most MRIs).

When such services are provided at off-campus hospital outpatient departments (HOPDs), reimbursement would be reduced to the physician payment rate. That’s roughly a 60% decline relative to the HOPD rate.

340B claims data requirements put hospital discounts under stress

The drug manufacturer Eli Lilly followed through on a warning that it would cut off 340B Drug Pricing Program discounts for certain hospitals that did not submit newly required claims data, provider advocacy groups confirmed June 18.

Lilly implemented a policy effective Feb. 1 that obligated hospitals to submit claims data for all in-house pharmacy drugs. The policy, which subsequently was implemented by several other companies, marked an escalation from previous manufacturer mandates that applied to 340B contract pharmacy claims.

In early June, Lilly announced it would halt 340B discounts for a handful of unnamed larger hospitals that had not complied.

“As a result of Lilly’s decision to deny hospitals access to 340B pricing for the company’s products unless they submit millions of lines of patient claims-level data from their in-house retail and mixed-use pharmacies, affected hospitals now must purchase those drugs at the significantly higher wholesale acquisition cost, eliminating the statutory 340B savings they should be receiving,” the advocate 340B Health said in written comments.

The Health Resources and Services Administration, which oversees 340B, has not publicly responded to Lilly’s actions. On July 2, Tampa General Hospital sued Lilly over the policy.

DOJ’s OhioHealth antitrust settlement affects payer contracts

The U.S. Department of Justice (DOJ) and OhioHealth have settled antitrust litigation that hinged on allegations concerning the health system’s contracting practices.

A June 16 filing with the Southern District of Ohio federal court states that the parties, which also include the state of Ohio, reached a consent decree in which OhioHealth does not admit wrongdoing nor pays penalties or damages, but does agree to avoid engaging in the disputed actions.

According to the settlement, OhioHealth cannot negotiate anti-steering or anti-tiering clauses in its payer contracts, nor use provisions that stymie price transparency. Forbidden approaches include demanding to be placed in an insurer’s most preferred tier and retaliating against insurers that design cost-conscious benefit plans.

The health system still can negotiate participation in preferred tiers, as clarified in the settlement document.

Work requirement rule adds significant wrinkles to Medicaid eligibility criteria

CMS published an interim final rule with comment period June 3 to implement the Medicaid work requirement established by the One Big Beautiful Bill Act (OBBBA).

As stipulated in the OBBBA, all 40 Medicaid expansion states (plus Washington, D.C.) must apply work and community engagement requirements by Jan. 1, 2027, unless they’re granted an extension. Most adults in the expansion population will be eligible for Medicaid only if they engage in at least one designated activity (i.e., work, education, volunteering or job training) for at least 80 hours per month.

Per CMS, a projected 26% of expansion enrollees will be exempted from the work requirement.

Medical frailty likely will be the most complicated exemption for the healthcare system to navigate. In regulatory language that goes beyond the OBBBA, even serious health conditions will not automatically qualify for an exemption. The beneficiary must document that the condition results in functional impairment.

On June 29, a coalition of more than 20 states filed suit to vacate key parts of the regulations, including the medical frailty exemption.

Final rule lowers No Surprises Act IDR fees, adds requirements

Regulations published June 4 to update the No Surprises Act’s independent dispute resolution (IDR) process represent an effort to improve access while also decreasing the case backlog.

Although arbitrators have become more efficient at closing disputes, a backlog of 430,000 cases remained as of June 2025, according to a report in Health Affairs.

A year later, one finalized change that could further increase traffic in the IDR portal is a reduction in the administrative fee for IDR participants from $115 to $15 per case.

Federal regulators say other new provisions should counter the increased volume by streamlining and fine-tuning IDR operations.