CMS proposes Medicare payment changes that could shift costs and care
Medicare patients will not see an immediate change, but a new CMS proposal could eventually alter what some outpatient services cost and where care is delivered.
The Centers for Medicare & Medicaid Services issued its proposed Calendar Year 2027 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center rule, CMS-1850-P, on July 2, 2026. The Federal Register published it on July 7. The proposal covers approximately 3,500 hospitals and 6,400 ambulatory surgery centers, and public comments are due August 31.
Because CMS-1850-P is a proposed rule rather than a final policy, its provisions could change before the agency issues a final rule.
What CMS is proposing
The rule would provide a 2.4% payment update for qualifying hospital outpatient departments and ambulatory surgery centers. CMS calculates that update from a projected 3.2% hospital market-basket increase minus a 0.8 percentage-point productivity adjustment.
The proposal also includes a major change for drugs acquired through the federal 340B program. For covered drugs generally subject to the policy, Medicare would pay at average sales price minus 33.4%, rather than the current average-sales-price-plus-6% framework. The proposed rule includes exceptions and separate payment approaches for some drugs and hospitals.
CMS estimates that the change would reduce Original Medicare drug payments by about $4.55 billion in its first year. Beneficiary drug payments would fall by an estimated $1.15 billion, according to the agency. Those are aggregate projections for Original Medicare Part B, not a guarantee that every beneficiary would receive the same savings.
CMS proposes to keep the 340B change budget neutral by increasing payments for non-drug outpatient services by an equivalent amount. The agency also proposes accelerating a separate 340B remedy offset from 0.5% to 3% until the estimated $7.8 billion recoupment amount is reached. CMS estimates that the faster offset would continue until 2029.
Another proposal would apply site-neutral payment to certain imaging-without-contrast services performed in grandfathered off-campus hospital outpatient departments. CMS estimates that provision would reduce Medicare Part B spending by about $260 million in 2027, including roughly $70 million in reduced beneficiary premiums and about $70 million in lower beneficiary cost sharing. These are agency-wide estimates, not guaranteed savings for each patient.
CMS also proposes removing 638 services from the inpatient-only list. That would allow Medicare payment in a hospital outpatient setting when a clinician determines that outpatient care is clinically appropriate. It would not require every patient to receive those services outside a hospital.
Why hospitals object
The American Hospital Association said the proposed drug-payment reduction, site-neutral imaging policy and other payment changes could reduce hospital resources and threaten services, particularly in rural and underserved communities. Those are the hospital sector’s concerns, not findings established by the proposed rule.
The AHA also said hospital outpatient departments care disproportionately for patients with more complex conditions and argued that payment policies should account for the costs of maintaining emergency and other essential services.
What ambulatory surgery centers say
The Ambulatory Surgery Center Association supports continued removal of procedures from the inpatient-only list and broader movement of clinically appropriate care into outpatient settings. ASCA also says other parts of the proposal could reduce reimbursement for the most common procedures performed in ambulatory surgery centers, potentially weakening the incentive to move care out of hospital settings.
The competing responses reflect the central policy question: whether lower or more uniform Medicare payments will reduce unnecessary costs without limiting access to services that hospitals and surgery centers provide.
What patients should watch
For now, Medicare coverage, payment and cost sharing remain governed by current rules. If CMS finalizes the proposal, the effect would vary by service, provider, care setting and a patient’s coverage circumstances. Medicare Advantage plans may also operate under different arrangements; the CMS savings estimates cited here concern Original Medicare Part B.
Patients should not assume that every procedure removed from the inpatient-only list will move to an ambulatory surgery center or hospital outpatient department. Clinicians would still determine the appropriate setting for an individual patient, and local provider availability could affect where care is offered.
The next formal step is the public-comment period ending August 31, 2026. In the final rule, readers and providers will want to watch whether CMS keeps the 340B payment formula, the imaging site-neutral provision, the 638-service change and the proposed 2.4% update. Final payment files will determine how those policies translate into specific services and rates.
Sources
- CMS proposed-rule fact sheet
- Federal Register: CMS-1850-P
- American Hospital Association response
- Ambulatory Surgery Center Association response
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