In addition to proposing payment rates, this year’s rule includes a proposal to update the methodology used to calculate the Overall Hospital Quality Star Rating to emphasize the Safety of Care measure group in hospitals’ star ratings. CMS is also proposing changes to the Hospital Outpatient Quality Reporting (OQR) ASC Quality Reporting (ASCQR) programs to further meaningful measurement and reporting for outpatient quality of care.
In order to summarize the 723-page proposed rule, CMS has published a companion fact sheet. Much of the OPPS proposed rule synopsis below is taken from that publication.
Payment Rates
CMS proposes updating OPPS payment rates for hospitals that meet applicable quality reporting requirements by 2.4%. This update is based on the projected hospital market basket percentage increase of 3.2%, reduced by a 0.8 percentage point productivity adjustment.
For CY 2027, using the hospital market basket update, CMS proposes an update factor to the ASC rates of 2.4%. The update applies to ASCs meeting relevant quality reporting requirements. This update is based on the proposed IPPS market basket percentage increase of 3.2%, reduced by 0.8 percentage point for the productivity adjustment.
Controlling Volume of Outpatient Services
In the CY 2019 OPPS/ASC final rule, CMS adopted a method to control unnecessary increases in the volume of the clinic visit services furnished in excepted off-campus provider-based departments (PBDs). This method prevents Medicare and beneficiaries from paying significantly more in the excepted off-campus PBD setting than in the physician office setting for some services. In the CY 2026 OPPS/ASC final rule, CMS finalized a policy expansion to include drug administration services furnished in excepted off-campus PBDs.
For CY 2027, CMS is proposing to include imaging without contrast services furnished in excepted off-campus PBDs. Specifically, CMS is proposing to use the agency’s authority under section 1833(t)(2)(F) of the Social Security Act to apply the Physician Fee Schedule equivalent payment rate for any HCPCS codes assigned to the imaging without contrast ambulatory payment classifications (APCs) when provided at an off-campus PBD excepted from section 603 of the Bipartisan Budget Act of 2015. As with the existing volume control method for off-campus clinic visits and drug administration services, CMS is proposing to exempt rural Sole Community Hospitals from this proposed policy.
340B-Acquired Drugs
Section 1833(t)(14)(D)(ii) of the Social Security Act requires the secretary of the Department of Health and Human Services (HHS) to periodically conduct hospital drug acquisition cost surveys for specified covered outpatient drugs and use this information to set the payment rates for such drugs. Additionally, on April 18, 2025, Executive Order (EO) 14273, “Lowering Drug Prices by Once Again Putting Americans First” was signed by the president. Section 5 of the EO, “Appropriately Accounting for Acquisition Costs of Drugs in Medicare” directs the secretary of HHS to publish in the Federal Register a plan to conduct a survey under section 1833(t)(14)(D)(ii) of the Social Security Act to determine the hospital acquisition cost for covered outpatient drugs at hospital outpatient departments.
Accordingly, from January 1, 2026, through April 7, 2026, a survey of the acquisition costs for each separately payable drug acquired by all hospitals paid under the OPPS was conducted. The survey 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.
Taking the survey’s results into account to more accurately align Medicare payments with hospital drug acquisition costs, CMS is proposing for CY 2027 to pay for 340B acquired drugs at the drug’s Average Sales Price (ASP) minus 33.4%.
On a related issue, the November 2023 340B Remedy final rule (88 FR 77150) finalized changes to the calculation of the OPPS conversion factor applicable to non-drug items and services beginning in CY 2026. Specifically, effective January 1, 2026, the rule codified a 0.5% reduction in the OPPS conversion factor applicable to non-drug items and services, excluding hospitals that enrolled in Medicare after January 1, 2018. This reduction would remain in effect until the estimated aggregate payment reduction reached the $7.8 billion of increased non-drug item and services payments made from CY 2018 through CY 2022.
CMS is proposing to revise the annual offset percentage for non-drug items and services from 0.5% to 3% effective CY 2027, excluding hospitals that enrolled in Medicare after January 1, 2018. This 3% reduction would remain in effect until the estimated payment reduction reaches $7.8 billion, which CMS estimates will occur in CY 2029.
We will have more highlights from the proposed rule in upcoming July alerts.