The Centers for Medicare & Medicaid Services (CMS) recently released a proposed rule updating the Medicare fee-for-service outpatient prospective payment system (OPPS), effective Jan. 1, 2027.
The proposed rule would:
- Provide a net 8.85% increase to the OPPS conversion factor from $90.97 to $99.01 for hospitals enrolled in Medicare before Jan. 1, 2018. The update includes a 3.2% market basket update, a mandated 0.8 percentage point productivity adjustment, other budget-neutrality adjustments, a positive 8.4% budget-neutrality adjustment to offset the proposed cut for 340B drugs and a 3% reduction for the 340B remedy offset (both described below). Hospitals that fail to meet Outpatient Quality Reporting Program requirements are subject to an additional 2-percentage-point reduction.
- Cut payments for 340B-acquired outpatient drugs by nearly 40% from average sales price (ASP) plus 6% to ASP minus 33.4% based on results of the 2026 drug acquisition cost survey. Rural sole community hospitals would be exempt from this policy. In addition, the policy would not apply to critical access hospitals participating in the 340B program, since they are not paid under the OPPS. This proposal would be implemented in a budget-neutral manner, increasing payments to all OPPS hospitals for non-drug services by 8.4%.
- Accelerate the recoupment of the $7.8 billion received through higher payments for non-drug services in 2018-2022 due to CMS’s budget-neutral policy that cut payments to 340B hospitals. The CMS proposes a 3% reduction in the OPPS conversion factor to repay the full $7.8 billion by 2029, rather than 2041.
- Implement a site-neutral payment policy for imaging without contrast services, with the CMS proposing to pay roughly 40% of the OPPS rate, for ambulatory payment classifications 5521-5524. The CMS also proposes to apply site-neutral payment to APCs 8004 (Ultrasound Composite), 8005 (CT and CTA without Contrast Composite), and 8007 (MRI and MRI without Contrast Composite). The CMS proposes to exempt rural sole community hospitals from this cut.
- Continue the phase out of the inpatient only (IPO) list by proposing to remove 637 services from the auditory, digestive, endocrine, female genital, hemic and lymphatic systems, integumentary, male genital, maternity care and delivery, mediastinum and diaphragm, respiratory and urinary clinical families from the IPO list for 2027, making these procedures payable in outpatient settings. The CMS indicates that the remaining 801 IPO services are generally more complex and will require consideration but still expects to evaluate these procedures for removal in 2028.
- Expand the prior authorization process to add Botulinum Toxin Injection codes to the existing category of services subject to the hospital outpatient department prior authorization process for dates of service on or after July 1, 2027.
- Increase the outlier fixed-dollar threshold by 14% from the current $6,225 to $7,100.
- Update the Outpatient and Ambulatory Surgical Center (ASC) Quality Reporting Programs to remove the Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients measure from the Hospital Outpatient and ASC Quality Reporting Programs, beginning with the 2027 reporting period/2029 payment determination. CMS also proposes to incorporate validation of an electronic clinical quality measure used in the outpatient quality reporting program when a full year of data for the measure is available. CMS also proposed changing the number of hospitals randomly selected for validation and the number selected using targeted criteria, beginning with the 2030 payment determination, resulting in fewer hospitals undergoing data validation overall.
- Require unique national provider identifiers and attestation for all off-campus provider-based departments.
- Update the ASC-covered procedures list to add 618 codes recommended by stakeholders or proposed for removal from the IPO list for 2027.
- Permit accrediting organizations, such as the Joint Commission, to assess hospital compliance with the Emergency Medical Treatment and Labor Act (EMTALA) administrative requirements as part of their routine accreditation and reaccreditation surveys. CMS would continue to enforce all other EMTALA requirements.
- Request information on Strengthening the Standardization and Comparability of Hospital Price Transparency Data to improve comparability and standardization of information reported in machine-readable files and consumer-friendly displays.
The MHA will provide a hospital-specific impact analysis within the next few weeks and encourages hospitals to contact the MHA health finance team by Aug. 14 regarding issues identified. Hospitals are encouraged to review the proposed rule and its impact on operations and submit comments to CMS by Aug. 31. CMS is expected to release a final rule around Nov. 1, for the Jan. 1, 2027, effective date.
Members with questions should contact the MHA health finance team.