2027 Medicare OPPS final rule cuts 340B payments, expands site-neutral rates

In the 2027 Medicare final rule for hospital outpatient departments, CMS slightly mitigated several issues that providers had cited regarding the proposed version of the rule.

Those steps have not assuaged stakeholder concerns about the rule’s impact on Medicare reimbursement in the hospital outpatient sector.

CMS finalizes 2.3% outpatient payment increase and 2% recoupment

Hospitals that meet quality-reporting requirements are set to receive a 2.3% base payment increase in 2027, according to the final rule for the Outpatient Prospective Payment System (OPPS). The update is based on a 3.2% increase in the hospital market basket minus the statutory economywide productivity adjustment.

However, when accounting for the impact of additional adjustments, many hospitals will come out with a negligible increase or a year-over-year decrease. Most notably, for hospitals that were enrolled in Medicare as of Jan. 1, 2018, a 2% reduction to the OPPS conversion factor for non-drug items and services is in store.

CMS’s intention is to recoup $7.8 billion in non-drug payments that hospitals received from 2018 to late 2022. The agency had reduced Medicare payment for drugs procured in the 340B Drug Pricing Program during those years, leading to the increase in non-drug payments under budget neutrality.

After a 2022 Supreme Court ruling required CMS to increase the payment rate and issue $9 billion in remedy payments to hospitals, the agency said it would seek to recover the additional non-drug payments from the 4.5-year span.

The cut began in 2026 at 0.5% and was projected to last for 16 years. In the 2027 proposed rule, CMS said the budget-neutrality principle could be better met by ramping up the cut to 3% and shortening the claw-back period to three years.

The final rule describes extensive stakeholder criticism regarding the proposal, with a few commenters acknowledging the justification for increasing the recoupment but requesting that it not exceed 2% per year. That’s the number CMS settled on “in recognition of hospitals’ concerns about burden.”

The agency projects that the decrease will be in place through 2031.

340B drug reimbursement falls to ASP minus 28%

A big change to the Medicare payment rate for 340B drugs could cause further financial strain for hospitals with significant participation in the program.

The payment rate has been average sales price (ASP) plus 6% since 2022, but CMS is lowering it to ASP minus 28% starting in 2027. That’s an improvement relative to the proposed rule, which called for a rate of ASP minus 33.4%, a number CMS said was based on a 2026 survey of hospitals’ drug acquisition costs.

The finalized rate instead reflects 340B ceiling-price data, specifically the “acquisition cost margin … which was calculated as the difference between the 340B ceiling price for each [National Drug Code] in the survey and ASPs that were volume-weighted by 340B OPPS claims data utilization during the duration of the survey,” according to the rule.

In a fact sheet, CMS estimates that the payment reduction will amount to first-year savings of $4.35 billion in Medicare drug payments and $1.1 billion for beneficiaries.

Budget neutrality creates divergent financial effects for hospitals

Hospitals with little 340B exposure stand to come out ahead financially amid the payment decrease. CMS estimates that the corresponding budget neutrality adjustment will increase 2027 payments for non-drug OPPS services by 7.5% (5.5% when accounting for the 2% recoupment).

That is of little comfort to safety-net hospitals and their advocates.

“Rather than strengthening and preserving safety-net funding, CMS is instead prioritizing hospitals that do not serve the safety net and nodding to the pharmaceutical industry’s interests,” Beth Feldpush, DrPH, senior vice president of policy and advocacy at America’s Essential Hospitals, said in written comments.

The Federation of American Hospitals (FAH), which represents for-profit hospitals, supports the changes. For-profit hospitals are not eligible for 340B and thus will benefit from the budget neutrality adjustment.

“By bringing Medicare drug payments more in line with actual costs, this reform will lower seniors’ out-of-pocket expenses and redirect billions in Medicare dollars where they’re needed most — supporting access to care for patients served by small and rural hospitals across the country,” Charlene MacDonald, president and CEO of FAH, said in a statement.

Site-neutral payment expansion adds pressure to hospital outpatient revenue

A drag on hospitals’ net 2027 payment update is an expansion of site-neutral payment policy to off-campus imaging services, specifically imaging without contrast. Affected services include some bone density scans, X-rays, ultrasounds, CT scans and MRIs.

Payment for those services in off-campus hospital outpatient departments (HOPDs) will be paid at the Medicare Physician Fee Schedule rate rather than the OPPS rate. An exemption is in place for rural sole-community hospitals.

CMS projects that Medicare Part B spending will drop by $260 million in 2027 due to the provision, including $190 million in Medicare savings and $70 million in reduced beneficiary premiums. Beneficiaries are estimated to save another $70 million in cost sharing.

The provision follows similar Trump administration initiatives to apply site-neutral payment to off-campus clinic visits (2019) and drug administration services (2026).

A form of site-neutral payment also is being advanced through CMS’s continued elimination of the inpatient-only (IPO) list. The second year of a three-year phase-out will affect 637 services.

Removed procedures will be reimbursable in the hospital outpatient setting when assessed to be clinically appropriate starting in 2027, and many are among the 619 services being added to the covered procedures list for ambulatory surgical centers. The 2026 IPO-list removals totaled 285 procedures, predominantly musculoskeletal and orthopedic.

The IPO changes and the imaging reimbursement reduction “are misguided,” Ashley Thompson, senior vice president with the American Hospital Association, said in a statement, noting that HOPDs “treat a sicker and more complex group of patients than independent physician practices, including those with higher rates of disability and more likely to come from low-income and rural communities.”

EMTALA oversight and prior authorization requirements change

In a nod to administrative simplification, CMS will allow hospital accrediting organizations with deeming authority to assess compliance with EMTALA administrative requirements during routine accreditation and reaccreditation surveys.

Among those requirements are posting mandatory EMTALA signage, maintaining a central emergency department log, and keeping an on-call physician list. The new authority does not apply to the statute’s patient-care protections, which remain the purview of CMS and the HHS Office of Inspector General.

CMS says the change can reduce duplicative investigations and associated disruption to hospital operations.

A change that could narrowly add administrative burden is the extension of outpatient prior authorization requirements to eight additional botulinum toxin codes starting July 1, 2027. CMS cites increased billing volume that appears unjustified based on available data and research.