The Centers for Medicare and Medicaid Services on Tuesday finalized its annual outpatient hospital payments rule with a lower-than-proposed rate bump and its major, industry-opposed policy shifts moderated, but largely intact.
The 2027 Hospital Outpatient Prospective Payment (OPPS) and Ambulatory Surgical Center (ASC) Payment Systems rule outlines a 2.3% reimbursement increase for those meeting applicable quality reporting requirements. That’s below the proposed 2.4% increase, and reflects a 3.2% projected hospital market basket increase and a 0.9 percentage point productivity adjustment.
The agency is also moving forward with a substantial and controversial cut in 340B drug reimbursements, though not quite to the extent that it initially proposed.
The final rule adjusts these drug payments down from the current bar of average sales price (ASP) plus 6% to ASP minus 28%, as opposed to the proposed 33.4% below ASP. To make the reimbursement change budget neutral as required by statute, OPPS payments for non-drug services will be boosted by 7.5%.
CMS said it tweaked the proposed 340B reimbursement cut based on 340B ceiling price data from the Health Resources and Services Administration, with the baseline reductions informed by a drug acquisition cost survey it conducted earlier this year. Those changes will reduce Original Medicare drug payments by $4.35 billion and the drug payments from beneficiaries by $1.1 billion (or $900 on average per beneficiary who receives an affected drug from a hospital outpatient department) in the policy’s first year, CMS said.
The rate adjustment did little to calm hospital industry groups who’d railed against the 340B reimbursement changes as a threat to safety-net care and a gift to for-profit hospitals that do not participate in the subsidy program but would benefit from the budget-neutral offset. The American Hospital Association, the Association of American Medical Colleges and America’s Essential Hospitals each condemned the finalized policy in reaction statements, with the latter two issuing more forceful rebukes.
“CMS has based its reimbursement to 340B hospitals on the results of a hasty and faulty survey, failing to follow the clear requirements of the Medicare statute,” AAMC Chief Health Care Officer Jonathan Jaffery, M.D., said. “The drug payment cuts disproportionately affect and target non-profit and public hospitals serving low-income patients, while redistributing billions of dollars to hospitals that do not share the same safety-net and academic missions. These cuts threaten access to critical services made possible by the 340B program and will lead to worse health outcomes for patients.”
“Rather than strengthening and preserving safety net funding, CMS is instead prioritizing hospitals that do not serve the safety net and nodding to the pharmaceutical industry’s interests,” AEH’s statement reads. “These cuts are landing at a time when essential hospitals and their mission are more important than ever, as millions of people risk losing their Medicaid coverage in the coming months.”
The Federation of American Hospitals, which represents for-profit hospitals that do not participate in 340B, struck a different tone, calling the rulemaking “a win for for patients, taxpayers, and the hospitals that communities depend on.”
“By bringing Medicare drug payments more in line with actual costs, this reform will lower seniors’ out-of-pocket expenses and redirect billions in Medicare dollars where they’re needed most—supporting access to care for patients served by small and rural hospitals across the country,” Charlene MacDonald, the group’s president and CEO, said in a statement. “We applaud the Administration for advancing a smarter, fairer approach to Medicare payment.”
Additionally, CMS finalized an increase in an annual OPPS conversion factor to non-drug items and services, speeding up the agency’s effort to offset a prior $7.8 billion recoupment to 340B hospitals it was forced to make after previously reducing 340B rates contrary to law. But while this accelerated payback—often described by non-340B hospitals as a clawback—was proposed as an increase from 0.5% to 3%, the final rule brings the conversion factor to 2%.
AHA Senior Vice President of Public Policy Analysis and Development Ashley Thompson described both 340B policy changes together as a “continued assault” on the subsidy program that “will further stress hospitals’ ability to care for their patients.” AAMC’s Jaffery said the combined policies’ impact “will be devastating to patients,” and that his group “remains committed to pursuing all available avenues to reverse these payment cuts.”
Further rankling the hospital industry was the final rule’s continued push toward site-neutral payment policy and a phase-out of the inpatient-only list.
For the former, the agency will apply Physician Fee Schedule payment rates for some imaging services to off-campus provider-based departments. In line with the proposed rule, CMS said it expects the plan to trigger first-year reductions in Medicare Part B expenditures and beneficiary cost-sharing obligations of $260 million and $70 million, while also reducing a market incentive for provider consolidation.
Meanwhile, CMS finalized its proposal to remove 647 services from the inpatient-only list, allowing them to be delivered and paid for in the lower-cost outpatient setting.
“Both policies are misguided,” AHA’s Thompson said, “and overlook the unique role hospital outpatient departments play in delivering care to patients in communities nationwide. Hospital outpatient departments treat sicker and more complex groups of patients than independent physician practices, including those with higher rates of disability and who are more likely to come from low-income and rural communities.”
CMS’ fact sheet on the 1,270-page annual rule also noted various changes to quality reporting programs for hospital outpatient departments and ASCs, a proposal to require prior authorization for eight botulinum toxin injection codes CMS said it has seen a jump in claim volume, and new permission for accreditation organizations to assess hospitals’ compliance with EMTALA (the Emergency Medical Treatment and Labor Act of 1986).
“CMS is committed to spending taxpayer funds wisely and efficiently, so America’s seniors can continue getting the care they need,” CMS Administrator Mehmet Oz, M.D., said in a release. “By right-sizing payments and rooting out waste, today’s reforms will drive affordability in Medicare for current beneficiaries while ensuring it will still be there to serve their children and grandchildren.”