CMS takes aim at 340B, site-neural payments in OPPS proposal

CMS wants to be aggressive with 340B reform

In the newly proposed rule, CMS indicated it will update payment rates for 340B drugs to be the drug's average sales price minus 33.4% -- a steep drop from the current formula of ASP plus 6%. The new payment rule is based on a hospital drug acquisition cost survey that President Donald J. Trump directed HHS to conduct last year.

According to CMS, the survey conducted from Jan. 1, 2026, through April 7, 2026, found that hospitals acquired 340B at an average cost significantly below the ASP. In some cases, beneficiary cost-sharing amounts exceeded what the hospital paid for the drug.

CMS expects the 340B payment policy to reduce Medicare spending by $4.55 billion in its first year. Beneficiaries would save $1.15 billion. However, federal law requires that the proposal be applied in a budget-neutral manner, resulting in higher OPPS payments for non-drug services, the federal agency clarified.

Additionally, CMS is pursuing a more aggressive 340B remedy plan, proposing an annual offset percentage for non-drug items and services of 3.0% in CY 2027 from this year's 0.5%.

The 340B remedy plan compensates hospitals for unlawful reimbursement cuts made between 2018 and 2022. Hospitals affected by the cuts received a total of $9 billion, which CMS has to continue to address in a budget-neutral manner by reducing non-drug OPPS payments.

CMS said in the latest OPPS proposal that it believes a shorter repayment timeframe is more appropriate. The agency wants to maintain a 3.0% cut through CY 2029, according to the proposed rule.

How CMS plans to remove site-of-care disparities

The proposed rule would add imaging without contrast services to the growing list of hospital outpatient services subject to site-neutral payment policies.

CMS said in the rule that it wants to pay hospital outpatient departments the equivalent payment rate under the Medicare Physician Fee Schedule for these imaging services next year. Medicare PFS rates are generally lower than the applicable OPPS rate, so CMS expects to save $260 million next year, including $70 million in reduced beneficiary premiums.

The agency defends site-neutral payments under the OPPS, explaining that the policy helps protect beneficiaries from higher premiums and cost-sharing based solely on the site at which care is furnished.

However, hospital groups have vehemently opposed site-neutrality in the OPPS, arguing that hospital outpatient departments treat more complex, rural and low-income patients and provide services around the clock, often including specialty services like trauma and neonatal ICUs.

But CMS wants to shift care from less expensive settings to save its programs and taxpayers money.

The proposed rule would also continue the second year of the inpatient-only list phase-out by removing another 638 services. The proposed services fall under the clinical families: auditory, digestive, endocrine, female genital, hemic and lymphatic systems, integumentary, male genital, maternity care and delivery, mediastinum and diaphragm, respiratory and urinary.

Adding prior auth for Botox injections

CMS also said in the rule that it wants to apply prior authorization requirements to botulinum toxin injection procedures, following an observed increase in volume.

The agency explained that it could not identify explanations to justify the recent uptick in Botox injections among Medicare beneficiaries, leading it to believe the increase is unnecessary.

CMS plans to use the authority that also allows it to apply site-neutral payment policies to use prior authorization as a method to control the unnecessary increases in volumes of Botox injections. The requirements would apply to eight additional Botox injection codes.

"CMS believes prior authorization is an effective mechanism to ensure Medicare beneficiaries receive medically necessary care while protecting the Medicare Trust Funds from unnecessary increases in volume and improper payments," the agency said in a fact sheet.

Other payment policies in the CY 2027 OPPS proposed rule include updates to hospital quality reporting, such as the removal of the Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients measure, and increased auditing for Emergency Medical Treatment and Labor Act compliance.

CMS is also seeking public feedback on improving hospital price transparency requirements to enable better cost comparisons and on creating a separate inpatient prospective payment system for the domestic procurement of essential equipment and medicines.

Comments are due by August 31, 2026.

Jacqueline LaPointe is an Executive Editor at Xtelligent Healthcare Media, covering revenue cycle management, healthcare payers, health policy and health IT since 2016.