Proposed Medicare Outpatient Payment Changes: 2027 Adjustments

The Centers for Medicare & Medicaid Services (CMS) recently unveiled a proposed rule aiming to adjust the Medicare hospital outpatient prospective payment system rates by an approximate net increase of 2.4% for the calendar year 2027. This adjustment includes a proposed market basket update of 3.2%, offset by a 0.8 percentage point reduction for productivity improvements. The changes signal a shift in Medicare's approach to balancing cost management with healthcare quality.

Ashley Thompson, Senior Vice President for Public Policy Analysis and Development at the American Hospital Association (AHA), voiced concerns over the financial strain on hospitals and health systems. She noted that the proposed updates might further stretch resources, arguing that they do not adequately cover expenses due to significant productivity adjustments and additional payment reductions that affect critical hospital services.

In a move to expand its site-neutral payment policy, CMS plans to include imaging services without contrast performed at certain off-campus hospital outpatient departments. The new proposal suggests these services be reimbursed at 40% of the standard outpatient prospective payment system (PPS) rate, potentially reducing outpatient PPS expenditures by $260 million in 2027. Thompson stressed the importance of recognizing the distinct patient care complexities in hospital outpatient departments versus independent physician offices to ensure equitable payment policies.

Further proposed changes by CMS include a nearly 40% reduction in payments for drugs obtained under the 340B program, shifting from ASP plus 6% to ASP minus 33.4%. This adjustment could decrease payments by approximately $4.85 billion in 2027. However, CMS plans to offset this change in a budget-neutral manner by increasing the conversion factor for non-drug services to outpatient PPS hospitals by 8.14%. Thompson commented on the potential repercussions these cuts might have on drug affordability for vulnerable patients amid escalating insurance costs and healthcare coverage challenges.

Moreover, the proposal seeks to accelerate the recoupment of 340B funds by altering the outpatient PPS conversion factor reduction from 0.5% annually to 3%, targeting completion by 2029 instead of 2041. The AHA criticized this plan, stating that it unfairly penalizes 340B hospitals due to a CMS policy error previously deemed unlawful by the Supreme Court, which could elevate healthcare expenses for rural and underserved communities.

Additional proposals include removing specific services from the inpatient-only list, adjusting the Outpatient and ASC Quality Reporting Programs by eliminating one measure, and granting authorization to certain accrediting organizations to assess Emergency Medical Treatment and Labor Act compliance. Furthermore, CMS mandates that off-campus provider-based departments use separate National Provider Identifiers for billing. CMS is accepting public comments on the proposed rule until August 31, inviting stakeholders to weigh in on these significant changes.