CMS Proposes CY 2027 Hospital Outpatient and ASC Payment Rule: 2.4% Rate Increase, Deeper 340B Drug Cuts, and an Expanded Site-Neutral Payment Policy

The Centers for Medicare & Medicaid Services (CMS) has proposed its annual update to how Medicare pays hospital outpatient departments and ambulatory surgical centers (ASCs), releasing the Calendar Year 2027 Hospital Outpatient Prospective Payment System and ASC Payment System proposed rule — officially designated CMS-1850-P — on July 2, 2026. The rule was published in the Federal Register on July 7, 2026, opening a public comment period that runs through August 31, 2026.

Beyond the routine annual payment update, this year's proposed rule carries several provisions with real financial stakes for hospitals, physician practices, drug manufacturers, and Medicare beneficiaries alike: a further reduction to what Medicare pays hospitals for drugs purchased through the 340B discount program, an expansion of CMS's "site-neutral" payment policy to cover certain imaging services performed at hospital-owned outpatient clinics, a new cost-of-living adjustment for Alaska and Hawaii hospitals, the continued phase-out of the list of procedures Medicare will only pay for in an inpatient setting, and a request for public input on tightening hospital price transparency requirements. According to CMS, the proposed policies would touch roughly 3,500 hospitals and 6,400 ambulatory surgical centers nationwide. Below, HealthBridge US walks through what CMS is proposing, why, and what it would mean for hospitals, ASCs, and the patients who use them.

Quick-Read Summary

Before the details, here is the essential rundown of what CMS is proposing for CY 2027. Medicare payment rates under both the Hospital Outpatient Prospective Payment System (OPPS) and the ASC payment system would rise by 2.4% for facilities that meet applicable quality reporting requirements, reflecting a 3.2% projected hospital market basket increase reduced by a 0.8 percentage point productivity adjustment. CMS is proposing to expand its existing "site-neutral" volume-control policy — which already applies a lower, physician-office-equivalent payment rate to certain clinic visit and drug administration services furnished at hospital-owned outpatient clinics located off a hospital's main campus — to also cover imaging services performed without contrast at those same off-campus locations, exempting rural Sole Community Hospitals. Separately, and based on a new hospital drug acquisition cost survey CMS conducted earlier in 2026, the agency is proposing to cut what Medicare pays for drugs hospitals acquire through the 340B discount program to the drug's average sales price minus 33.4%, while simultaneously proposing to accelerate a related, separate reduction to non-drug OPPS payments tied to recovering earlier 340B-related overpayments made between 2018 and 2022. CMS also wants to remove 638 more procedures from the inpatient-only list as part of a three-year phase-out, add a new cost-of-living adjustment benefiting hospitals in Alaska and Hawaii, update the methodology behind the Overall Hospital Quality Star Rating to place more weight on patient safety measures, expand prior-authorization requirements to eight additional botulinum toxin injection billing codes, and let hospital accrediting organizations incorporate certain EMTALA administrative-compliance checks into their routine accreditation surveys. The rule also includes a request for public comment on strengthening hospital price transparency data standards. Public comments on all of these provisions are due by August 31, 2026.

Why This Matters Right Now

The annual OPPS/ASC rule is one of the most consequential pieces of Medicare rulemaking each year, because it sets payment rates for an enormous share of American healthcare delivered outside the hospital inpatient setting — everything from outpatient surgery and diagnostic imaging to emergency department visits, drug administration, and increasingly, behavioral health services delivered through intensive outpatient and partial hospitalization programs. With roughly 3,500 hospitals and 6,400 ambulatory surgical centers directly affected, small percentage changes in this rule translate into billions of dollars in payment shifts across the healthcare system.

This year's rule arrives amid two ongoing, high-profile Medicare policy fights that both surface again in this proposal. The first is the years-long dispute over how Medicare should pay hospitals for drugs they acquire at a discount through the federal 340B drug pricing program, a fight that has moved through multiple rulemaking cycles, litigation, and now a fresh government-run survey of what hospitals actually pay for these drugs. The second is the broader push toward "site-neutral" Medicare payment policy — the principle that Medicare (and its beneficiaries, through cost-sharing) should generally pay the same amount for the same service regardless of whether it happens to be billed through a hospital's outpatient department or a physician's office, even when both are furnishing clinically identical care. This year's rule expands that site-neutral logic to a new category of services for the first time since drug administration services were added the prior year.

Both of these debates involve genuinely competing, good-faith positions among stakeholders, and this proposed rule is unlikely to resolve either one on its own. Hospital groups have historically argued that off-campus outpatient departments carry higher fixed costs than independent physician offices — including standby emergency capacity, more extensive regulatory compliance obligations, and typically sicker or more complex patient populations — and that applying a uniform, physician-office-equivalent rate fails to account for those structural cost differences, potentially threatening the financial viability of hospital-affiliated outpatient networks that serve as an access point in many communities. Advocates of expanding site-neutral policy, including CMS itself in this rule and independent bodies like the Medicare Payment Advisory Commission in past reports, counter that Medicare and beneficiaries generally shouldn't pay more for a clinically identical service simply because of how a facility is licensed or owned, particularly as more hospital systems have acquired physician practices and rebranded existing office-based practices as hospital outpatient departments without any actual change in the clinical setting or complexity of care delivered.

By the Numbers: The Rule's Financial Scope

Several of this year's provisions carry specific, CMS-estimated dollar impacts worth viewing together. The 340B drug payment change is projected to reduce original Medicare drug payments by approximately $4.55 billion and beneficiary drug cost-sharing by approximately $1.15 billion in its first year alone, by far the largest single figure in the rule. The accelerated 340B non-drug offset would complete recovery of the full $7.8 billion in prior overpayments by CY 2029, several years earlier than under the original 0.5% annual schedule. The expanded site-neutral imaging policy is projected to reduce Medicare Part B expenditures by about $260 million in its first year, split between roughly $190 million in direct program savings and about $70 million reflected in lower Part B premiums, with an additional $70 million in reduced beneficiary cost-sharing. The new Alaska and Hawaii cost-of-living adjustment, by contrast, would increase payments to hospitals in those two states by an estimated $55 million in CY 2027, funded on a budget-neutral basis by modest reductions spread across the broader OPPS system nationally. Combined, these provisions illustrate a rule that redistributes several billion dollars annually within the outpatient payment system — largely away from 340B-related drug reimbursement and toward beneficiary savings, non-drug OPPS services, and a small number of geographically targeted adjustments.

The table below summarizes several of the rule's highest-dollar-impact provisions before we walk through each in detail.

The Basic Payment Update: 2.4% for OPPS and ASC Rates

CMS is proposing a 2.4% payment rate update for CY 2027 under both the Hospital Outpatient Prospective Payment System and the ASC payment system, applicable to facilities that meet their respective quality reporting program requirements. That figure is built the same way CMS typically constructs its annual hospital-linked payment updates: starting from a projected hospital market basket percentage increase of 3.2%, reflecting the expected rise in the cost of goods, labor, and services hospitals purchase, and then subtracting a mandatory productivity adjustment of 0.8 percentage points, a factor intended to reflect expected efficiency gains across the broader economy. Facilities that fail to meet their quality reporting obligations under the Hospital Outpatient Quality Reporting Program or the ASC Quality Reporting Program continue to face a 2-percentage-point reduction to their annual payment update, separate from the routine market-basket calculation, as has been the case in recent years.

Expanding Site-Neutral Payment: Off-Campus Imaging Without Contrast

Since the CY 2019 OPPS/ASC final rule, CMS has used its statutory authority to control unnecessary growth in outpatient service volume to apply a lower, Physician Fee Schedule-equivalent payment rate to certain clinic visit services furnished at off-campus hospital outpatient departments that are otherwise "excepted" from standard site-neutral treatment under a provision of the Bipartisan Budget Act of 2015. The underlying logic is straightforward: when a hospital-owned clinic located away from the hospital's main campus performs a service that could just as easily be performed in an independent physician's office, CMS has increasingly moved to pay the same, generally lower physician-office rate regardless of which type of facility bills for it, on the theory that the site of care alone shouldn't determine how much Medicare — and the beneficiary, through coinsurance — pays for clinically equivalent care.

CMS expanded that policy to cover drug administration services furnished at these off-campus locations in the CY 2026 OPPS/ASC final rule, and is now proposing to expand it again for CY 2027 to include imaging services performed without contrast at the same off-campus, excepted provider-based departments, applying the Physician Fee Schedule-equivalent rate to the relevant billing codes rather than the standard OPPS rate. As with the existing clinic-visit and drug-administration versions of this policy, CMS is proposing to exempt rural Sole Community Hospitals from the new imaging provision, recognizing the more limited care-setting alternatives available to patients in many rural communities. CMS estimates the imaging expansion would reduce Medicare Part B expenditures by approximately $260 million in its first year — roughly $190 million in direct Part B program savings and about $70 million reflected in lower beneficiary Part B premiums — while also reducing beneficiary out-of-pocket cost-sharing obligations by an estimated $70 million in the same period.

A Deeper Cut to 340B Drug Payments — Backed by a New Government Survey

The single largest dollar figure in this proposed rule involves how Medicare pays hospitals for drugs purchased through the 340B Drug Pricing Program, which allows certain hospitals serving disproportionately low-income or vulnerable patient populations to buy outpatient drugs from manufacturers at a statutorily mandated discount. Medicare's separate question — how much to reimburse those hospitals when they bill Medicare for a 340B-acquired drug administered to a Medicare beneficiary — has been a recurring, high-stakes point of dispute for nearly a decade, including a Supreme Court ruling that found an earlier CMS rate cut had not been properly adopted under the applicable statutory process.

Some background helps explain why this issue keeps resurfacing in CMS's annual outpatient rulemaking. Beginning in 2018, CMS had cut the Medicare payment rate for 340B-acquired drugs from the standard average sales price plus 6% down to average sales price minus 22.5%, without first conducting the hospital acquisition cost survey that the underlying statute requires before CMS varies payment rates by hospital group in this way. Hospital groups challenged that cut in court, and in 2022 the U.S. Supreme Court unanimously ruled that CMS's 2018–2022 rate reduction had been adopted unlawfully because CMS had skipped the required survey step, leading CMS to restore the standard average sales price plus 6% rate for 340B drugs and to address the resulting several years of underpayments through the "remedy" mechanism — including the non-drug payment offset — described in more detail below.

This year's proposal grows out of a new data-collection exercise. Following an April 2025 executive order directing HHS to survey hospitals' actual drug acquisition costs, CMS conducted a survey of acquisition costs for separately payable drugs across all OPPS hospitals between January 1, 2026, and April 7, 2026. According to CMS, the survey documented a significant gap between what hospitals actually pay to acquire drugs through the 340B program and what they pay for the same drugs outside the program — a gap large enough that, in some cases, the standard 20% beneficiary coinsurance charged on the Medicare payment amount exceeded the hospital's entire acquisition cost for the drug. Citing that survey data, CMS is proposing to set the CY 2027 payment rate for 340B-acquired drugs at the drug's average sales price minus 33.4%, a formula CMS says more accurately reflects what hospitals are actually paying to acquire these drugs. CMS estimates this change would reduce original Medicare drug payments by approximately $4.55 billion and reduce beneficiary drug cost-sharing by approximately $1.15 billion in its first year. Because federal law requires this specific policy to be implemented in a budget-neutral manner, CMS is proposing to offset the reduction by increasing OPPS payments for non-drug items and services by a corresponding amount — meaning the savings on the drug side would be redirected, in the aggregate, toward higher payments for other hospital outpatient services rather than net savings to the Medicare program as a whole from this provision alone.

A Second, Related 340B Change: Speeding Up the Remedy Clawback

Layered on top of the new 340B payment rate is a second, related proposal addressing a separate and older piece of 340B history. A 2023 CMS final rule — issued in response to the earlier legal dispute over 340B payment cuts — established a mechanism for recovering roughly $7.8 billion in increased non-drug OPPS payments that hospitals had received between CY 2018 and CY 2022, a period during which a since-invalidated 340B payment cut had been offset, in a budget-neutral fashion, by higher payments for non-drug services across the OPPS system. That 2023 rule set a 0.5% annual reduction to the non-drug OPPS conversion factor, applicable to most hospitals that were already enrolled in Medicare as of January 1, 2018, structured to run until the full $7.8 billion had been recovered.

CMS is now proposing to speed that recovery up substantially, increasing the annual offset from 0.5% to 3% effective CY 2027, while keeping the same exclusion for hospitals that enrolled in Medicare after January 1, 2018. At the accelerated 3% rate, CMS projects the full $7.8 billion recovery target would be reached by CY 2029, several years sooner than the original 0.5% schedule would have allowed. CMS frames the acceleration as a rebalancing between two competing goals it has weighed since the original 2023 rule: restoring hospitals to the financial position they would have occupied had the earlier, invalidated 340B cut never taken effect, without imposing the full recovery amount in a single disruptive year — a balance CMS now believes tips toward a shorter overall recovery period than it originally selected.

Continuing the Phase-Out of the Inpatient-Only List

Medicare's "inpatient-only" (IPO) list identifies procedures that CMS will only pay for when performed in the hospital inpatient setting, generally because they are considered to carry enough clinical risk or require enough post-procedure monitoring that outpatient furnishing isn't considered appropriate. CMS began a three-year phase-out of this list, aimed at giving physicians and patients more flexibility to choose an outpatient setting when clinically appropriate, and this proposed rule represents the second year of that phase-out.

For CY 2027, CMS is proposing to remove 638 additional services from the inpatient-only list, spanning a wide range of clinical areas including auditory, digestive, endocrine, female genital, hemic and lymphatic system, integumentary, male genital, maternity care and delivery, mediastinum and diaphragm, respiratory, and urinary procedures. CMS's stated rationale is that evolving clinical practice and improved recovery protocols now allow many of these procedures to be safely performed on an outpatient basis with shorter recovery times than when they were originally placed on the inpatient-only list, and that removing them gives physicians and patients more choice in selecting the clinically appropriate site of care — potentially reducing out-of-pocket costs for beneficiaries who can be treated outpatient rather than requiring a full inpatient admission.

CMS's phase-out of the inpatient-only list did not begin with this rule. The list itself dates back to the earliest years of the OPPS system, originally intended to identify procedures considered too clinically intensive, too likely to require extended monitoring, or too likely to involve significant complication risk to be safely performed outside a hospital inpatient stay. Over time, as surgical technique, anesthesia protocols, and post-operative recovery management have improved, CMS and much of the physician community have increasingly viewed the list as outdated for a growing share of the procedures still on it, particularly certain orthopedic, cardiac, and other procedures that have become routine in outpatient and ambulatory surgical settings well before CMS's list caught up. The three-year phase-out approach — rather than removing all remaining eligible procedures at once — reflects CMS's stated intent to give hospitals, ASCs, and physicians a gradual transition period to adjust staffing, scheduling, and care-pathway protocols as more procedures become eligible for outpatient furnishing, rather than a disruptive single-year change.

A New Cost-of-Living Adjustment for Alaska and Hawaii

CMS is proposing a new policy specifically addressing hospitals in Alaska and Hawaii, whose noncontiguous geography creates cost pressures — dependence on imported goods and equipment, remote transportation logistics, and related factors — that CMS says are already partially recognized on the inpatient side of Medicare payment through a cost-of-living adjustment built into the inpatient hospital wage index, but that have no comparable adjustment on the outpatient side. Under current OPPS rules, the nonlabor portion of outpatient hospital payments does not reflect these elevated nonlabor costs the way inpatient payments do.

To close that gap, CMS is proposing to apply a cost-of-living adjustment to the nonlabor share of OPPS payments for services furnished in Alaska and Hawaii, beginning in CY 2027 and continuing in future years, based on the existing inpatient cost-of-living adjustment methodology. The policy is proposed to be implemented in a budget-neutral manner across the OPPS system as a whole, and CMS projects it would increase payments to hospitals in these two states by approximately $55 million in CY 2027.

A Request for Comment on Hospital Price Transparency

Since January 1, 2021, CMS has required hospitals nationwide to publish pricing information in two formats: a comprehensive machine-readable file listing negotiated rates and other pricing data, and a separate, more accessible consumer-friendly display intended to help patients shop and compare prices directly. In this proposed rule, CMS is not proposing new binding price transparency requirements, but is including a formal Request for Information seeking public input on how to strengthen the standardization, comparability, and overall usability of that data, consistent with a recent executive order directing the administration to pursue clearer, more actionable healthcare pricing information for patients.

Specifically, CMS says it is interested in feedback on mechanisms to improve consistency in the machine-readable file, including better standardization of free-text fields and clearer reporting of complex contract mechanisms such as outlier payments, stop-loss provisions, rate tiering, and service carve-outs — all of which have made hospital price files difficult for outside researchers, employers, and consumers to interpret and compare across institutions since the requirement first took effect. CMS is also seeking input on the consumer-friendly display requirement specifically, including whether to modify or eliminate the current "deemed compliance" pathway that lets hospitals satisfy the display requirement through an internet-based price estimator tool, whether to update the required list of "shoppable services" hospitals must price transparently, and how to more clearly define which ancillary and bundled services should be reflected in displayed prices.

The price transparency requirements have drawn sustained attention, and some criticism, since they first took effect in 2021, with researchers, employer coalitions, and journalists repeatedly reporting that inconsistent formatting, incomplete files, and vague or missing rate descriptions across thousands of individual hospital postings have limited the data's practical usefulness for the price comparison and market-competition goals CMS originally intended. This RFI signals that CMS is actively reconsidering how to close that gap between the requirement's stated purpose and its real-world usability, though because it is a request for information rather than a proposed regulatory change, any resulting binding requirements would need to go through a separate future rulemaking rather than taking effect through this rule.

Quality Reporting and Star Rating Changes

This year's rule touches several of CMS's outpatient quality measurement programs. CMS is proposing to update the methodology behind the Overall Hospital Quality Star Rating — the five-star consumer-facing rating system published on Medicare's hospital comparison tools — to place greater emphasis on the Safety of Care measure group relative to other measure categories that feed into a hospital's overall star rating.

Within the Hospital Outpatient Quality Reporting Program and the ASC Quality Reporting Program, both of which carry a 2-percentage-point payment reduction for facilities that fail to meet reporting requirements, CMS is proposing to remove the "Appropriate Follow-Up Interval for Normal Colonoscopy in Average-Risk Patients" measure from both programs beginning with the CY 2027 reporting period, affecting the CY 2029 payment determination. CMS's rationale is that this particular measure assesses only whether a recommended follow-up interval was documented in a colonoscopy report, whereas a separate, existing colonoscopy-related measure in both programs is more directly tied to clinical outcomes rather than documentation practices alone. CMS is also proposing updates to validation and validation-appeals procedures specific to digital quality measures, aimed at strengthening data accountability as more quality reporting shifts toward electronic, digitally sourced measures, and is separately requesting comment on whether to add an Advance Care Planning measure to hospital outpatient quality reporting, and on stratifying an existing ASC transfer/admission measure by phase of care.

EMTALA Oversight: A New Role for Accrediting Organizations

The Emergency Medical Treatment and Labor Act (EMTALA) requires Medicare-participating hospitals, including Critical Access Hospitals and Rural Emergency Hospitals, to provide appropriate emergency medical screening, necessary stabilizing treatment, and appropriate transfers for patients presenting with emergency medical conditions. CMS is proposing a structural change to how compliance with EMTALA's administrative requirements — as opposed to its substantive patient-care protections — gets verified.

Specifically, CMS is proposing to let hospital Accrediting Organizations that hold "deeming authority" (organizations whose accreditation surveys CMS accepts in place of a direct government survey) assess compliance with EMTALA's administrative requirements, such as posting required signage, maintaining a central emergency department log, retaining transfer records for five years, and keeping an on-call physician list, as part of their routine accreditation and reaccreditation survey process, rather than these items being checked only through separate state complaint investigations. CMS notes that more than 80% of hospitals nationally are already accredited through one of these deeming organizations, so folding EMTALA administrative checks into that existing survey cycle would, in CMS's view, reduce duplicative oversight processes and administrative disruption for hospitals without changing the underlying compliance obligations. CMS is explicit that this delegation is limited to administrative requirements only: enforcement authority over EMTALA's substantive patient-care protections — the actual screening, stabilization, and transfer obligations — would remain exclusively with CMS and the HHS Office of Inspector General, including CMS's existing EMTALA complaint investigation process.

Expanded Prior Authorization for Botulinum Toxin Injections

CMS has used a prior-authorization process since the CY 2020 OPPS/ASC rule to control what it has identified as unnecessary volume growth in certain hospital outpatient department procedures, relying on statutory authority to address unnecessary increases in the volume of covered outpatient services. CMS says its ongoing data analysis identified a volume increase in botulinum toxin injection procedures that its research could not attribute to any clear clinical explanation, leading the agency to conclude that further program-integrity action was warranted. In this proposed rule, CMS is proposing to add eight additional botulinum toxin injection billing codes to the existing list of services requiring prior authorization before Medicare will pay for them in the hospital outpatient setting, extending a volume-control tool CMS has applied to a growing list of procedures since 2020.

Other Notable Provisions

CMS is also proposing to eliminate the alternative regulatory pathway that has allowed certain FDA "Breakthrough Devices" to qualify for OPPS pass-through payment status without separately demonstrating substantial clinical improvement over existing treatment options, for applications filed on or after October 1, 2026 — a change that would require breakthrough-designated devices to meet the same substantial-clinical-improvement standard as other devices seeking pass-through payment, rather than qualifying through FDA breakthrough status alone.

The rule also updates payment rates for Intensive Outpatient Program (IOP) and Partial Hospitalization Program (PHP) behavioral health services furnished in hospital outpatient departments and Community Mental Health Centers, using more recent CY 2025 claims data and updated cost report information, without proposing changes to the underlying rate-setting methodology finalized in the CY 2026 rule. Separately, CMS is seeking additional public comment on potential approaches to a separate, future payment mechanism that could support domestic procurement of personal protective equipment and essential medicines by Medicare-participating hospitals, building on an earlier advance notice of proposed rulemaking issued on the topic earlier this year.

What This Means for Physicians and Behavioral Health Providers

While much of this rule's attention centers on hospital and ASC facility payment, several provisions carry implications for physicians and behavioral health providers specifically. Physicians who perform procedures newly eligible for outpatient furnishing under the inpatient-only list phase-out should evaluate whether shifting appropriate cases to an ASC or hospital outpatient department setting makes clinical and practical sense for their patient populations, since the removal of a procedure from the inpatient-only list does not obligate a physician to change practice patterns, but does open a new, potentially lower-cost site-of-service option where clinically appropriate. Physicians who administer botulinum toxin injections in the hospital outpatient setting should prepare for the expanded prior-authorization requirement covering the eight newly added billing codes, building workflow time into scheduling to account for prior-authorization turnaround before these procedures can be furnished and billed.

Behavioral health providers operating Intensive Outpatient Programs or Partial Hospitalization Programs in hospital outpatient departments or Community Mental Health Centers should review the proposed CY 2027 per diem rate updates, which are based on more recent CY 2025 claims data and updated cost report information without any proposed change to the underlying rate-setting methodology finalized in the CY 2026 rule — meaning providers already familiar with that methodology should find the CY 2027 update comparatively straightforward to model, even though the specific dollar rates would shift with the newer underlying data.

Timeline: What Happens When

July 2, 2026 — CMS issues the CY 2027 Hospital Outpatient Prospective Payment System and ASC Payment System proposed rule (CMS-1850-P).

July 7, 2026 — The proposed rule is published in the Federal Register, formally opening the public comment period.

January 1 – April 7, 2026 — The period during which CMS conducted its hospital drug acquisition cost survey underlying the proposed 340B payment rate change (data collection preceded the rule's publication).

By August 31, 2026 — The deadline for the public to submit comments on the proposed rule to CMS.

Following the comment period — CMS will review comments and typically issue a final rule later in the year, with most provisions taking effect January 1, 2027, though CMS retains discretion to modify, narrow, or decline to finalize individual proposals based on comments received.

October 1, 2026 — The proposed effective date for the change eliminating the alternative FDA Breakthrough Device pass-through pathway, applicable to applications filed on or after this date.

CY 2029 — The year by which CMS projects the accelerated 340B non-drug payment offset would fully recover the $7.8 billion in prior overpayments, if the proposed 3% annual offset is finalized as proposed.

What This Means for Hospitals and ASCs

For hospital finance and revenue-cycle leadership, the most immediate action item is modeling the combined effect of the 2.4% base payment update against the two separate 340B-related provisions, since hospitals that both acquire drugs through the 340B program and bill non-drug OPPS services will feel the new ASP-minus-33.4% drug payment rate and the accelerated non-drug payment offset simultaneously, even though the two provisions are formally separate and, in aggregate, are each designed to be budget-neutral across the system as a whole rather than budget-neutral for any single hospital. Hospitals operating off-campus, excepted provider-based departments that furnish imaging without contrast should specifically model the financial impact of the proposed site-neutral expansion to that service category, building on the clinic-visit and drug-administration versions of the same policy already in effect, and should confirm whether their facility qualifies for the proposed rural Sole Community Hospital exemption.

Hospitals and ASCs performing procedures on the inpatient-only list should review the 638 newly proposed removals against their own surgical volumes to identify which procedures may become billable in the outpatient or ASC setting for CY 2027, since this shift can affect both facility revenue mix and physician scheduling and care-pathway planning. Hospitals in Alaska and Hawaii should track the proposed cost-of-living adjustment closely, given its direct, facility-specific financial impact in those two states. Facilities participating in the Hospital OQR or ASC Quality Reporting Programs should update their quality measure reporting workflows to reflect the proposed removal of the colonoscopy follow-up documentation measure and should monitor the RFIs on Advance Care Planning and transfer/admission measure stratification for signals about future reporting requirements. Hospitals furnishing botulinum toxin injections should prepare billing and utilization management workflows for the expanded prior-authorization requirement covering the eight additional codes. Finally, hospitals working with Accrediting Organizations that hold EMTALA deeming authority should expect EMTALA administrative-compliance items to be folded into their next routine accreditation survey cycle rather than addressed only through separate complaint-driven review, and should ensure required signage, emergency department logs, five-year transfer record retention, and on-call physician lists are survey-ready on that basis.

What This Means for Patients and Beneficiaries

For Medicare beneficiaries, several provisions in this proposed rule are designed to have a direct effect on out-of-pocket costs. CMS estimates the expanded site-neutral imaging policy would reduce beneficiary cost-sharing by approximately $70 million in its first year, on top of an estimated $70 million reduction in Part B premiums tied to the same provision, by aligning payment for off-campus imaging without contrast with the generally lower rate paid in a physician's office setting. The proposed 340B drug payment change is projected to reduce beneficiary drug cost-sharing by approximately $1.15 billion in its first year, addressing the specific scenario CMS's survey identified in which a beneficiary's standard 20% coinsurance obligation could exceed the hospital's entire acquisition cost for a 340B-acquired drug.

The continued phase-out of the inpatient-only list gives patients and their physicians more flexibility to choose an outpatient or ASC setting for an expanding list of procedures where clinically appropriate, which can translate into lower out-of-pocket costs relative to a full inpatient admission for the same procedure, alongside shorter recovery-related disruption for many patients. Patients researching hospital quality through Medicare's public comparison tools should also expect the Overall Hospital Quality Star Rating to weigh patient-safety measures more heavily if the proposed methodology update is finalized, which could shift some hospitals' displayed star ratings even without any underlying change in the hospital's actual clinical performance.

The Bigger Picture

Taken together, this year's OPPS/ASC proposed rule continues two of the more consequential, multi-year Medicare payment trends currently underway: the ongoing effort to align payment for clinically similar outpatient services regardless of where they happen to be billed, now reaching into imaging services for the first time, and the continued unwinding of the 340B payment dispute that has occupied CMS, hospitals, and the courts for the better part of a decade, this time grounded in a fresh, government-conducted survey of actual hospital drug acquisition costs rather than the earlier survey methodology that was successfully challenged in litigation. Both trends carry real financial consequences for hospitals — particularly safety-net and 340B-participating hospitals on the drug-payment side, and hospital systems with extensive off-campus outpatient networks on the site-neutral side — while CMS frames both as aimed at reducing what beneficiaries and the Medicare program pay for care that doesn't clinically require a hospital-based setting or an above-cost drug markup.

The rule's other provisions — the inpatient-only list phase-out, the Alaska/Hawaii cost-of-living adjustment, the price transparency RFI, and the quality reporting and EMTALA oversight changes — are individually narrower but collectively reinforce a consistent CMS posture this rulemaking cycle: continuing to shift care and payment toward outpatient settings where clinically appropriate, addressing longstanding geographic and structural payment gaps, and layering additional oversight and transparency mechanisms onto an outpatient payment system that already touches a large majority of Medicare-covered hospital and surgical care nationwide. The comment period running through August 31, 2026 represents stakeholders' primary opportunity to weigh in before CMS finalizes these policies later in the year.

Frequently Asked Questions

What is CMS-1850-P? CMS-1850-P is the Calendar Year 2027 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System proposed rule, issued by CMS on July 2, 2026, and published in the Federal Register on July 7, 2026.

How much would Medicare outpatient and ASC payment rates increase under this proposal? CMS is proposing a 2.4% payment update for both OPPS and ASC rates in CY 2027, for facilities meeting applicable quality reporting requirements, based on a 3.2% market basket increase reduced by a 0.8 percentage point productivity adjustment.

What is the proposed change to 340B drug payments? CMS is proposing to pay for drugs acquired through the 340B program at the drug's average sales price minus 33.4%, based on a new hospital drug acquisition cost survey conducted in early 2026, which CMS estimates would reduce Medicare drug payments by about $4.55 billion and beneficiary drug cost-sharing by about $1.15 billion in the first year.

What is the separate 340B "remedy" offset proposal? CMS is proposing to increase, from 0.5% to 3%, the annual reduction applied to non-drug OPPS payments to recover $7.8 billion in prior 340B-related overpayments made to hospitals between CY 2018 and CY 2022, which would complete the recovery by CY 2029 instead of over a longer original schedule.

What is the expanded site-neutral payment policy? CMS is proposing to pay a lower, Physician Fee Schedule-equivalent rate, rather than the standard OPPS rate, for imaging services performed without contrast at off-campus hospital outpatient departments, extending a similar policy already applied to clinic visits and drug administration services. Rural Sole Community Hospitals would be exempt.

How many procedures would be removed from the inpatient-only list? CMS is proposing to remove 638 additional procedures for CY 2027, the second year of a three-year phase-out of the inpatient-only list across a range of clinical specialty areas.

What is the new Alaska and Hawaii provision? A proposed cost-of-living adjustment to the nonlabor portion of OPPS payments for hospitals in Alaska and Hawaii, projected to increase payments to hospitals in those states by about $55 million in CY 2027, implemented budget-neutrally across the broader OPPS system.

Is CMS proposing new hospital price transparency requirements? Not binding new requirements in this rule. CMS is including a Request for Information seeking public comment on ways to strengthen the standardization and usability of existing price transparency data, including the machine-readable file and consumer-friendly display requirements.

What is changing about the Hospital Quality Star Rating? CMS is proposing to update the Star Rating methodology to place greater weight on the Safety of Care measure group relative to other measure categories.

When are comments on this proposed rule due? By August 31, 2026.

Why is CMS proposing to cut 340B drug payments again after the Supreme Court ruling? The 2022 Supreme Court decision found CMS's earlier 340B rate cut unlawful specifically because CMS had not first conducted a hospital drug acquisition cost survey before varying payment rates. CMS has now conducted that survey, covering January through early April 2026, and says the results justify a new, lower payment rate based on documented acquisition costs rather than the prior, legally deficient methodology.

How many hospitals and ASCs does this rule affect? CMS estimates the proposed policies would affect approximately 3,500 hospitals and approximately 6,400 ambulatory surgical centers nationwide.

What is the EMTALA change about? CMS is proposing to let accrediting organizations with deeming authority check EMTALA administrative requirements — such as required signage, emergency department logs, transfer record retention, and on-call physician lists — during their routine accreditation surveys. Enforcement of EMTALA's substantive patient-care protections would remain solely with CMS and the HHS Office of Inspector General.

Does this rule change requirements for FDA Breakthrough Devices? Yes. CMS is proposing to eliminate the pathway that let FDA Breakthrough Devices qualify for OPPS pass-through payment status without separately demonstrating substantial clinical improvement, for applications filed on or after October 1, 2026.

This article is based on CMS's Calendar Year 2027 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System proposed rule (CMS-1850-P), issued July 2, 2026, and published in the Federal Register on July 7, 2026, along with CMS's accompanying fact sheet. For the complete proposed rule and instructions on submitting comments, stakeholders should consult the official Federal Register notice and CMS's newsroom fact sheet directly.

Reporting: HealthBridge US Policy Desk