CMS Issues Sweeping CY 2027 Hospital OPPS/Ambulatory Surgical Center Proposed Rule

The Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2027 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Proposed Rule on July 2, 2026. Although the rule includes the annual Medicare outpatient payment update, it is principally a policy rule that advances the Trump Administration's broader priorities of reducing Medicare spending, expanding site-neutral payment, strengthening program integrity and promoting lower-cost care settings. In the proposed rule, CMS puts forward significant changes affecting hospital reimbursement, 340B drug payment, ASCs, provider-based departments (PBDs), utilization management, quality reporting and hospital compliance.

Among the most consequential proposals are a fundamental restructuring of Medicare payments for 340B-acquired drugs, the acceleration of the budget neutrality adjustment associated with the 340B remedy, continued elimination of the Inpatient Only (IPO) List, expansion of site-neutral payment policies, additional prior authorization requirements and new compliance obligations for hospitals. CMS also seeks stakeholder feedback through requests for information (RFIs) on hospital price transparency and potential payment incentives to support domestic manufacturing and procurement of personal protective equipment (PPE) and essential medicines. Collectively, these proposals carry significant financial, operational and compliance implications for hospitals, health systems, ASCs, manufacturers, physician practices and other Medicare stakeholders.

CMS will accept comments on the proposed rule through August 31, 2026.

The accompanying CMS press release and fact sheet are available for reference.

Executive Summary

The CY 2027 OPPS/ASC Proposed Rule reflects CMS' continued effort to use annual payment notice-and-comment rulemaking to advance broader Medicare policy objectives beyond routine payment updates. Though CMS proposes a 2.4 percent increase in OPPS and ASC payment rates, much of that increase is offset for many providers by proposals that reduce reimbursement for certain outpatient drugs, expand site-neutral payment policies and accelerate recovery of prior budget neutrality adjustments. As a result, the financial impact of the proposed rule will vary considerably depending on provider type, service mix, participation in the 340B Drug Pricing Program and outpatient utilization patterns.

CMS proposes to replace the long-standing Medicare payment methodology for most 340B-acquired drugs with a new acquisition cost-based approach, paying such drugs at average sales price (ASP) minus 33.4 percent while continuing to pay non-340B drugs at ASP plus 6 percent, which CMS distilled from the recent 340B Drug Cost Acquisition Survey. The agency also proposes increasing the annual OPPS conversion factor reduction associated with the 340B remedy from 0.5 percent to 3 percent, significantly accelerating recovery of prior budget neutrality payments. Together, these proposals represent the most significant changes to Medicare outpatient drug reimbursement since 2022.

The proposed rule also continues CMS' long-standing movement toward site-neutral payment by expanding Physician Fee Schedule (PFS)-equivalent payment rates to additional imaging services furnished in off-campus PBDs and by continuing the multiyear elimination of the IPO List. CMS further proposes expanding the ASC Covered Procedures List (CPL), revising device and drug pass-through payment policies, maintaining current payment methodologies for Partial Hospitalization Programs (PHP) and Intensive Outpatient Programs (IOP) and establishing new payment policies for Software as a Medical Service (SaMS).

Finally, CMS proposes several operational and compliance changes affecting hospitals, including expansion of the Hospital Outpatient Department (HOPD) Prior Authorization Program, new PBD attestation requirements, integration of certain Emergency Medical Treatment and Labor Act (EMTALA) administrative reviews into accreditation surveys, and RFIs regarding hospital price transparency and domestic procurement of PPE and essential medicines. Collectively, these proposals illustrate CMS' continued focus on balancing payment modernization with program integrity, transparency and value-based purchasing objectives.

Key Takeaways

• CMS proposes a 2.4 percent increase in OPPS payment rates for CY 2027. ASC payment rates would also increase 2.4 percent for facilities meeting quality reporting requirements.
• CMS proposes reducing Medicare payment for 340B-acquired drugs from ASP plus 6 percent to ASP minus 33.4 percent, while continuing payment at ASP plus 6 percent for non-340B drugs.
• CMS proposes increasing the annual 340B remedy budget neutrality adjustment from 0.5 percent to 3 percent, accelerating recoupment by approximately CY 2029.
• CMS proposes removing 637 additional procedures from the IPO List as part of the second phase of its three-year elimination strategy.
• Approximately 618 procedures would be added to the ASC CPL.
• Site-neutral payment policies would expand to include certain imaging services without contrast furnished in off-campus PBDs.
• Seven devices would receive new pass-through payment status, while CMS proposes eliminating the Alternative Pathway for future device pass-through applications.
• CMS proposes updates to pass-through payment status for drugs, biologicals and radiopharmaceuticals, including expiration of pass-through status for 49 products and continuation for 45 others.
• As a first step in developing a comprehensive payment methodology for SaMS technologies, CMS proposes to assign SaMS technologies to new technology Ambulatory Payment Classifications (APCs).
• CMS proposes continuing temporary separate payment for qualifying non-opioid pain relief treatments during the final year of the statutory authority.
• Eight additional botulinum toxin injection procedures would become subject to prior authorization beginning July 1, 2027.
• Accrediting Organizations (AOs) would incorporate review of certain EMTALA administrative requirements into routine accreditation surveys.
• CMS requests stakeholder feedback regarding hospital price transparency and potential payment incentives supporting domestically manufactured PPE and essential medicines.

Overview of the Proposed Rule

The CY 2027 OPPS/ASC Proposed Rule continues several policy initiatives introduced in prior years and introduces new proposals that collectively reshape Medicare outpatient reimbursement. Although the annual payment update receives significant attention, the proposed rule is principally characterized by structural policy changes affecting drug reimbursement, outpatient payment methodology and hospital operations.

Consistent with broader Trump Administration priorities, CMS repeatedly emphasizes four overarching objectives throughout the proposed rule:

• aligning Medicare payment more closely with provider acquisition costs
• reducing incentives that encourage furnishing services in higher-cost settings
• strengthening utilization management and program integrity
• increasing transparency and accountability across outpatient hospital services

Many proposals build upon policies finalized during CY 2025 and CY 2026 rulemaking, suggesting CMS intends to continue pursuing these initiatives over multiple years rather than through isolated annual updates. Stakeholders should therefore evaluate the proposals not only for their immediate financial implications but also for what they signal regarding the future direction of Medicare outpatient payment policy.

Proposed Payment Updates

OPPS Payment Update

CMS proposes increasing OPPS payment rates by 2.4 percent for CY 2027. The proposed update reflects a projected 3.2 percent hospital market basket increase, reduced by a 0.8 percentage point productivity adjustment as required under current law. CMS estimates that total OPPS payments – including beneficiary cost sharing and projected utilization changes – will reach approximately $110.9 billion in CY 2027, representing an increase of approximately $9.5 billion compared to estimated CY 2026 payments.

Hospitals that fail to satisfy Hospital Outpatient Quality Reporting (OQR) Program requirements would continue to receive a two-percentage-point reduction in the annual payment update by applying the existing reporting factor of 0.9805. CMS also proposes applying the increased 340B remedy adjustment discussed later in this alert to affected providers, further reducing payments for many hospitals beyond the standard annual update.

CMS estimates that the combined impact of the proposed policies taken altogether would result in an overall 1.9 percent increase in OPPS payments across providers. However, aggregate estimates mask significant variation among hospitals. Facilities participating in the 340B Program, organizations with substantial outpatient pharmacy utilization and providers affected by expanded site-neutral payment policies may experience payment changes that differ substantially from the national average.

Although the proposed 2.4 percent payment update will likely receive significant attention, it should not be viewed in isolation. The proposed rule simultaneously includes several redistributive payment policies – including the revised 340B reimbursement methodology, accelerated 340B remedy offset and expanded site-neutral payment policies – that may substantially offset or exceed the benefit of the annual update for many providers. Hospitals should therefore evaluate the proposed rule holistically, assessing the cumulative financial impact across all outpatient service lines rather than focusing solely on the annual increase in the conversion factor.

ASC Payment Update

CMS proposes continuing to use the hospital market basket as the annual update factor for the ASC payment system for one additional year. Accordingly, ASCs that meet the requirements of the ASC Quality Reporting (ASCQR) Program would receive a 2.4 percent payment update for CY 2027, and facilities that fail to satisfy quality reporting requirements would receive the applicable payment reduction.

CMS estimates total Medicare payments to ASCs will increase to approximately $9.9 billion during CY 2027, representing approximately $520 million in additional Medicare expenditures compared to CY 2026. The agency also proposes a CY 2027 ASC conversion factor of $57.766 for ASCQR-compliant facilities and $56.638 for noncompliant facilities, along with a revised weight scalar of 0.809. CMS would otherwise maintain the existing ASC rate setting methodology and payment policies.

Wage Index and Conversion Factor

CMS proposes adopting the FY 2027 Inpatient Prospective Payment System (IPPS) post-reclassified wage index for OPPS payment while maintaining long-standing policies governing the labor-related share, 5 percent cap on annual wage index decreases, frontier state floor and low-wage index transitional policy.

CMS also proposes a CY 2027 OPPS conversion factor of $102.004, reflecting the annual payment update together with multiple budget neutrality adjustments, including:

• wage index adjustments
• cancer hospital payment adjustment
• Alaska and Hawaii cost-of-living adjustment
• outlier adjustments
• transitional pass-through adjustments
• the proposed 340B budget neutrality adjustment

Hospitals failing OQR requirements would receive a reduced conversion factor through application of the reporting ratio.

Proposed Hospital Outlier Payments

CMS proposes maintaining its policy of targeting one percent of total OPPS payments for outlier payments. To achieve this target, CMS proposes increasing the fixed-dollar threshold from $6,225 to $7,100 while maintaining the existing multiple-threshold methodology. For Community Mental Health Centers furnishing PHP and IOP services, CMS proposes no substantive changes to existing outlier payment policies.

Rural Sole Community Hospitals (SCHs) and Cancer Hospitals

CMS proposes continuing several long-standing payment adjustments designed to support providers serving vulnerable populations.

Specifically, CMS proposes to:

• continue the 7.1 percent payment adjustment for Rural SCHs
• maintain the existing payment adjustment methodology for the 11 PPS-exempt cancer hospitals payment-to-cost ratios to a target PCR – the weighted average PCR of other OPPS hospitals (0.89) minus the statutory 1-point reduction, yielding 0.88 for CY 2027; no extra reduction is proposed; hospital-specific adjustments range from 5.3 percent to 52.9 percent, finalized at cost report settlement; transitional outpatient payments continue to be applied last
• continue existing rural protections applicable to certain off-campus PBDs

OPPS Ambulatory Payment Classification (APC) Policies

CMS proposes numerous technical updates to the OPPS APC system that collectively affect payment rates, coding assignments and reimbursement for outpatient services. Though many of these proposals are routine annual maintenance updates, several include meaningful revisions affecting specific technologies and procedures.

Quarterly Healthcare Common Procedure Coding System (HCPCS) Updates

CMS proposes continuing its long-standing quarterly HCPCS update process. The CY 2027 proposed rule includes proposed APC assignments for:

• April 2026 HCPCS updates
• July 2026 HCPCS updates
• January 2027 current procedural terminology (CPT) codes received in time for publication

October 2026 HCPCS updates and additional January 2027 Level II HCPCS codes will be addressed in the final rule.

2-Times Rule Exceptions

Under Section 1833(t) of the Social Security Act, CMS annually evaluates compliance with the "two-times rule," which generally requires that services assigned to the same APC exhibit comparable resource costs. Using CY 2025 claims data, CMS identified 27 APCs exceeding the statutory threshold. Rather than reassign services, CMS proposes granting exceptions for all 27 APCs, concluding that existing clinical and resource similarities justify maintaining current assignments.

New Technology APCs

CMS proposes several notable changes affecting New Technology APCs. Among the most significant proposals:

• increased payment assignments for several emerging technologies, including liver histotripsy, renal histotripsy, LimFlow Transcatheter Arterialization of Deep Veins (TADV), Biology-guided Radiotherapy (BgRT) and Stanford Accelerated Intelligent Neuromodulation Therapy (SAINT) Neuromodulation
• graduation of cardiac Positron Emission Tomography (PET)/Computed Tomography (CT) procedures into standard clinical APCs
• consolidation of sacroiliac joint fusion coding
• continued interim payment methodology for SaMS technologies

CMS also proposes establishing a new payment status indicator (O1) for SaMS, reflecting the agency's recognition that software-based technologies require a distinct payment framework while permanent reimbursement methodologies continue to evolve.

Universal Low Volume APC Policy

CMS proposes continuing its Universal Low Volume APC policy for clinical and brachytherapy APCs with fewer than 100 single claims. Nine APCs would qualify for the policy during CY 2027, including five brachytherapy APCs and four clinical APCs

CMS would continue using modified rate setting methodologies designed to improve payment stability where claims volume remains insufficient to support standard APC calculations.

APC-Specific Payment Changes

CMS proposes numerous APC-specific coding and payment revisions, including changes affecting:

• nuclear medicine imaging
• breast and lymphatic surgery
• hypoglossal nerve stimulation
• permanent prostatic urethral stents
• sacral neuromodulation
• drug-eluting coronary stents
• cardiac contractility modulation
• endovascular revascularization procedures

Most proposals are intended to improve clinical consistency and better align reimbursement with observed resource utilization.

Although these revisions affect relatively narrow categories of services, APC-specific reassignment can significantly influence reimbursement for providers specializing in these procedures. Hospitals, physician groups and manufacturers should carefully review whether proposed APC assignments appropriately reflect current clinical practice and associated resource costs.

Device Pass-Through Payment Policies

One of the more significant technology-related proposals involves CMS' continued refinement of transitional device pass-through payment. CMS received 13 complete applications for CY 2027 consideration (following withdrawal of six applications) and proposes approving seven devices for pass-through status, providing for temporary, separate reimbursement for the devices in hospital outpatient or ASC settings. CMS proposes denying six applications, primarily because the technologies did not satisfy the statutory substantial clinical improvement standard.

Perhaps more significantly, CMS proposes eliminating the Alternative Pathway for device pass-through applications beginning October 1, 2026. If finalized, all future applicants would be required to demonstrate substantial clinical improvement under the traditional statutory framework.

This proposal could substantially affect manufacturers introducing innovative technologies into the Medicare market. The Alternative Pathway has provided a more predictable route to temporary pass-through payment for certain breakthrough devices. Eliminating that pathway may make it considerably more difficult for emerging technologies to obtain transitional reimbursement, potentially increasing the importance of robust clinical evidence demonstrating meaningful improvements over existing standards of care.

Drugs, Biologicals, Radiopharmaceuticals and Device Payment Policies

The CY 2027 Proposed Rule includes numerous updates affecting payment for drugs, biologicals, radiopharmaceuticals and medical devices under the OPPS. Although CMS proposes several routine annual updates to pass-through payment and packaging policies, the agency also proposes the most significant restructuring of Medicare outpatient drug reimbursement in recent years by fundamentally revising payment for drugs acquired through the 340B Drug Pricing Program. The proposed changes build upon policies finalized during CY 2026 rulemaking and reflect CMS' broader effort to align Medicare payment with provider acquisition costs while continuing to encourage efficient outpatient care delivery. If finalized, these proposals will have substantial financial and operational implications for hospitals, manufacturers, specialty pharmacies and other stakeholders participating in the Medicare outpatient drug benefit.

Drug and Biological Pass-Through Payment Policies

CMS proposes to continue its long-standing methodology governing transitional pass-through payment for drugs, biologicals and radiopharmaceuticals.

For CY 2027, CMS proposes:

• expiration of pass-through status for 49 drugs and biologicals by December 31, 2026
• termination of pass-through status during CY 2027 for 28 additional products whose three-year eligibility period expires
• continuation of pass-through status for 45 drugs and biologicals through CY 2027

Products whose pass-through status expires would continue to receive either packaged payment or separate payment, depending upon whether their estimated daily cost exceeds the applicable packaging threshold. CMS proposes maintaining payment for separately payable pass-through drugs using the statutory ASP methodology – generally ASP plus 6 percent.

CMS also estimates total pass-through spending for CY 2027 at approximately $195.3 million, representing only 0.18 percent of projected OPPS spending and therefore well below the statutory 2 percent limitation requiring prospective reductions.

Packaging Policies for Non-Pass-Through Drugs and Biologicals

CMS proposes maintaining its long-standing packaging methodology for non-pass-through drugs, biologicals and radiopharmaceuticals.

For CY 2027, CMS proposes:

• a $140 packaging threshold for drugs, biologicals and therapeutic radiopharmaceuticals
• a $665 packaging threshold for diagnostic radiopharmaceuticals

Products falling below the applicable threshold generally would be packaged into the payment for the associated outpatient procedure, and products exceeding those thresholds would continue receiving separate payment unless otherwise packaged by policy.

CMS also proposes continuing existing policies that package certain categories of products regardless of cost, including anesthesia drugs and drugs functioning as surgical or diagnostic supplies. Separately payable non-pass-through drugs would generally continue receiving payment at ASP plus 6 percent, subject to 340B-acquired drug cuts as discussed below, with existing wholesale acquisition cost (WAC)- and average wholesale price (AWP)-based methodologies remaining available where ASP information is unavailable.

Payment Methodology for Separately Payable Diagnostic Radiopharmaceuticals

CMS proposes to continue using mean unit cost (MUC) as the basis for paying separately for diagnostic radiopharmaceuticals with per-day costs above the packaging threshold (proposed at $665 for CY 2027). CMS notes that the MUC, derived from 2025 hospital claims data, reflects the actual average cost reported by hospitals and is considered a more accurate proxy for real-world pricing than alternatives such as WAC or AWP.

Though MUC will remain the primary payment basis for CY 2027, CMS encourages manufacturers to voluntarily report ASP for their diagnostic radiopharmaceuticals. CMS notes that ASP reporting is not mandatory under OPPS but states there could be "potential value in the use of ASP data for payment purposes for diagnostic radiopharmaceuticals when reported correctly and by all manufacturers." CMS will also publish an ASP reporting Framework for Diagnostic Radiopharmaceuticals on the Medicare Hospital Outpatient PPS website.

CMS also proposes to set the payment rate for new diagnostic radiopharmaceuticals that exceed the packaging threshold for diagnostic radiopharmaceuticals – and do not have pass-through status and are without claims data – at ASP plus six percent. CMS states it believes beginning with ASP plus six percent for the payment hierarchy is appropriate until MUC is available.

Payment for Skin Substitute Products

CMS proposes no substantive changes to the payment methodology for skin substitute products for CY 2027, opting instead to maintain the payment framework finalized in the CY 2026 OPPS/ASC Final Rule while additional utilization and claims data become available.

Beginning January 1, 2026, CMS implemented a significant restructuring of payment for skin substitute products by separately paying these products as incident-to supplies across physician offices, HOPDs and ASCs. CMS also established three payment categories based on weighted average per-unit acquisition costs derived from ASP, MUC, WAC or AWP, depending on data availability.

In the CY 2027 Proposed Rule, CMS states that it does not yet have sufficient claims experience reflecting the CY 2026 payment reforms to appropriately recalibrate the payment rates for the three skin substitute APCs. CMS explains that CY 2026 claims will form the basis for future rulemaking and that revising payment rates before those data are available could introduce unnecessary payment volatility and disrupt beneficiary access.

Accordingly, CMS proposes maintaining the existing payment methodology and APC payment rate of $127.14 per square centimeter for CY 2027 while continuing to monitor utilization patterns and acquisition costs. CMS indicates it expects to revisit payment rates during CY 2028 rulemaking after more complete claims data become available.

Medicare Outpatient Drug Acquisition Cost Survey

The foundation of CMS' proposed 340B payment reform is an acquisition cost survey conducted pursuant to Section 1833(t)(14)(D)(ii) of the Social Security Act.

During CY 2025, CMS surveyed OPPS hospitals regarding acquisition costs for separately payable outpatient drugs purchased between July 1, 2024, and June 30, 2025. The survey requested National Drug Code (NDC)-level acquisition cost information for drugs purchased through both the 340B program and traditional purchasing channels.

Approximately 43.6 percent of eligible hospitals responded to the survey, and approximately 29.8 percent submitted usable acquisition cost information. CMS notes that many hospitals declined participation through coordinated form-letter responses objecting to the survey itself.

Among hospitals providing usable data, CMS found:

• hospitals acquired non-340B drugs at approximately 2.7 to 2.8 percent above ASP
• hospitals acquired 340B drugs at approximately 33.4 percent below ASP

CMS concludes these findings provide sufficient evidence to establish acquisition cost-based reimbursement under the authority provided by Section 1833(t)(14)(D)(ii).

The acquisition cost survey represents the legal and policy foundation for CMS' proposed 340B payment methodology. Stakeholders should carefully evaluate both the survey methodology and CMS' interpretation of the data during the comment period. Questions regarding survey response rates, representativeness, hospital purchasing variation and statutory authority are likely to receive significant attention from hospitals, manufacturers and congressional stakeholders.

Proposed Payment for 340B-Acquired Drugs

Perhaps the most consequential proposal contained in the CY 2027 Proposed Rule is CMS' proposal to fundamentally revise Medicare reimbursement for drugs acquired through the 340B Drug Pricing Program.

Currently, separately payable outpatient drugs generally receive payment at ASP plus 6 percent, regardless of whether they are acquired through the 340B program.

Beginning January 1, 2027, CMS proposes:

• paying 340B-acquired drugs at ASP minus 33.4 percent
• continuing payment for non-340B drugs at ASP plus 6 percent
• requiring all separately payable drugs to be identified through new billing modifiers

CMS estimates this methodology more accurately reflects hospitals' actual acquisition costs while reducing Medicare expenditures and beneficiary cost sharing. According to CMS, beneficiary coinsurance would decline by approximately $1.15 billion during CY 2027 if the proposal is finalized.

CMS proposes exempting Rural SCHs, children's hospitals and PPS-exempt cancer hospitals. These providers would continue receiving payment generally equal to ASP plus 6 percent. CMS notes it may revisit its policy to exempt certain entities from the 340B drug payment reduction in future rulemaking.

Proposed Billing Modifier Changes

To operationalize the new reimbursement methodology, CMS proposes revising outpatient billing requirements.

Beginning January 1, 2027:

• modifier JG would identify 340B-acquired drugs subject to the payment reduction
• modifier TB would identify exempt 340B drugs that continue receiving ASP plus 6 percent payment
• CMS proposes establishing a new placeholder modifier, "XX," to identify all separately payable non-340B drugs

Under the proposal, every separately payable outpatient drug claim would require one of these three modifiers.

Relationship to the Medicare Part B Inflation Rebate Program

CMS also proposes conforming revisions to regulations governing the Medicare Part B Inflation Rebate Program to reflect the proposed 340B payment methodology. These technical revisions are intended to ensure consistency between reimbursement for separately payable outpatient drugs and calculation of inflation rebate obligations under the Inflation Reduction Act. Although largely conforming in nature, manufacturers should review these revisions carefully to evaluate any downstream implications for rebate calculations or reporting requirements.

Accelerated Recovery of the 340B Remedy

Separate and apart from the proposed reduction in payment for 340B-acquired drugs, CMS also proposes significantly accelerating recovery of the budget neutrality adjustment associated with a recent U.S. Supreme Court's decision in American Hospital Association v. Becerra.

Following the Court's decision, CMS issued the CY 2024 Remedy Rule providing lump-sum payments to affected hospitals while implementing a 0.5 percent annual reduction to the OPPS conversion factor beginning in CY 2026 to preserve statutory budget neutrality.

CMS now proposes increasing that reduction from 0.5 percent to 3 percent annually beginning January 1, 2027.

Under the proposal:

• the adjustment would apply only to hospitals enrolled before January 1, 2018
• recovery would continue until approximately $7.8 billion has been recouped
• CMS estimates repayment would conclude by approximately the end of CY 2029, rather than extending into the 2040s under the current methodology

CMS explains that the accelerated recovery better aligns repayment with the period during which the original payment policy remained in effect and reduces the duration of annual budget neutrality adjustments.

Hospital Outpatient Services and Other OPPS Payment Policies

CMS proposes several modifications affecting hospital outpatient payment policy, including payment for clinic visits and critical care services, PHPs, IOPs, the continued elimination of the IPO List, expansion of site-neutral payment policies and establishment of a new payment framework for SaMS. Though many of these proposals build upon policies finalized in prior rulemaking cycles, together they continue CMS' broader effort to modernize outpatient payment and encourage care in lower-cost settings when clinically appropriate.

OPPS Payment for Hospital Outpatient Visits and Critical Care Services

CMS proposes maintaining its existing payment policies for outpatient clinic visits, emergency department visits and critical care services.

Specifically, CMS would continue to:

• pay HCPCS code G0463 furnished by excepted off-campus PBDs at 40 percent of the OPPS payment rate
• maintain current payment policies for emergency department visits and critical care services
• exempt off-campus PBDs operated by Rural SCHs from the reduced payment policy

CMS does not propose substantive policy changes in this area for CY 2027.

Continued Elimination of the IPO List

CMS continues implementation of its three-year strategy to eliminate the Medicare IPO List.

The IPO List historically identified procedures Medicare would cover only when performed in the inpatient hospital setting because of clinical complexity, anticipated length of stay or patient safety considerations.

Beginning with CY 2026, CMS initiated a phased elimination of the IPO List after concluding that advances in surgical technology, anesthesia, perioperative care and postoperative recovery have substantially expanded the range of procedures that may be safely performed on an outpatient basis.

During CY 2026, CMS removed 285 procedures from the IPO List.

For CY 2027, CMS proposes removing an additional 637 procedures, representing approximately one-half of the remaining procedures currently on the list. Proposed removals include procedures involving:

• auditory system
• digestive system
• endocrine system
• female genital system
• hemic and lymphatic system
• integumentary system
• male genital system
• maternity care and delivery
• mediastinum and diaphragm
• respiratory system
• urinary system

CMS explains that these clinical families were selected because they most readily align with existing APC payment methodologies. The remaining neurologic, cardiovascular and transplant procedures would be evaluated during the final phase of IPO elimination proposed for CY 2028.

The continued elimination of the IPO List represents one of CMS' most significant structural reforms to outpatient payment policy. Hospitals should evaluate not only the reimbursement implications of these changes but also potential impacts on surgical scheduling, physician practice patterns, care coordination, staffing and outpatient capacity. Manufacturers of technologies used in affected procedures should similarly assess how expanded outpatient coverage may influence utilization and market access.

Expansion of Site-Neutral Payment Policies

CMS proposes further expanding its site-neutral payment initiatives by applying PFS-equivalent payment rates to certain imaging services furnished in excepted off-campus PBDs.

Building upon the CY 2019 policy applicable to clinic visits and the CY 2026 expansion affecting drug administration services, CMS now proposes extending the policy to imaging services without contrast.

Specifically, CMS proposes applying PFS-equivalent payment rates to:

• APCs 5521-5524 (Imaging Without Contrast)
• APC 8004 (Ultrasound Composite)
• APC 8005 (CT/CTA Without Contrast Composite)
• APC 8007 (MRI/MRA Without Contrast Composite)

CMS estimates these changes would reduce Medicare spending by approximately $190 million while decreasing beneficiary cost sharing by approximately $70 million, producing approximately $260 million in combined savings during CY 2027. Consistent with prior policy, Rural SCHs would remain exempt.

This proposal continues one of CMS' longest-running payment reform initiatives. Rather than focusing exclusively on individual services, CMS increasingly appears to be establishing a framework that can be expanded to additional outpatient service categories in future rulemaking. Hospitals should therefore view the imaging proposal not as an isolated payment adjustment but another step toward broader site-neutral reimbursement across the Medicare program.

SaMS

Recognizing the rapid evolution of software-enabled clinical technologies, CMS proposes renaming "Software as a Service (SaaS)" to SaMS to better distinguish healthcare software from traditional information technology services.

As an interim payment policy, CMS proposes to:

• designate 36 HCPCS codes as SaMS technologies
• reassign certain services into New Technology APCs
• create the O1 new payment status indicator
• continue separate APC payment while CMS develops a permanent reimbursement methodology

CMS also proposes transferring 10 HCPCS codes currently paid under the Clinical Laboratory Fee Schedule into the OPPS because the associated technologies more closely resemble software-based clinical services than traditional laboratory testing.

Cost-of-Living Adjustment for Alaska and Hawaii

CMS proposes applying a cost-of-living adjustment (COLA) to the non-labor share of OPPS payments furnished by hospitals located in Alaska and Hawaii.

The proposal would:

• mirror the existing IPPS methodology
• utilize U.S. Department of War (DOW) Overseas Cost-of-Living Allowance (OCOLA) data
• remove the existing 25 percent payment cap
• maintain budget neutrality

CMS states the proposal is intended to more accurately reflect geographic differences in operating costs.

Cardiac Rehabilitation, Intensive Cardiac Rehabilitation and Pulmonary Rehabilitation Furnished in the Home

CMS also incorporates statutory changes enacted under the Consolidated Appropriations Act (CAA) of 2026, permitting cardiac rehabilitation (CR), intensive cardiac rehabilitation (ICR) and pulmonary rehabilitation (PR) services to be furnished to eligible hospital outpatients in their homes using real-time audio and video technology through December 31, 2027.

Because CMS has already implemented these statutory changes through subregulatory guidance, the agency proposes no additional payment policy changes in the CY 2027 rule.

ASC Payment System

Consistent with its broader efforts to encourage care in lower-cost settings, CMS proposes several updates to the ASC payment system for CY 2027. Though the agency proposes relatively few methodological changes to ASC payment, the continued expansion of the ASC CPL, coupled with the phased elimination of the IPO List, represents another significant step toward increasing the volume and complexity of services furnished in the ASC setting. CMS also proposes maintaining existing payment methodologies for non-opioid pain treatments and quality reporting while incorporating several technical payment updates.

ASC Payment Methodology

CMS proposes maintaining its existing ASC rate setting methodology for CY 2027, including continued use of the OPPS relative payment weights and the hospital market basket update as the ASC annual update factor.

For CY 2027, CMS proposes:

• a 2.4 percent payment update for ASCs meeting ASCQRP requirements
• continued use of OPPS relative payment weights adjusted through the ASC weight scalar
• a CY 2027 weight scalar of 0.809, compared to 0.872 for CY 2026
• ASC conversion factors of $57.766 for ASCQR-compliant facilities and $56.638 for facilities failing ASCQR requirements

CMS estimates total Medicare ASC expenditures will increase by approximately $520 million during CY 2027.

Expansion of the ASC CPL

CMS proposes another substantial expansion of the ASC CPL. Building upon the continued phase-out of the IPO List, CMS proposes adding approximately 618 additional surgical and surgery-like procedures that CMS believes can be safely performed in an ASC.

CMS evaluated these procedures using its existing criteria, including whether the procedures:

• are not expected to pose a significant safety risk when performed in an ASC
• do not generally require active medical monitoring or overnight hospitalization
• are consistent with the capabilities of Medicare-certified ASCs

CMS notes that many of the proposed additions correspond to procedures removed from the IPO List and therefore reflect the agency's broader effort to transition clinically appropriate services into outpatient settings.

Covered Ancillary Services

CMS also discusses covered ancillary services eligible for separate ASC payment.

Consistent with policies finalized during CY 2026 rulemaking, CMS reiterates that skin substitute products are included within the regulatory definition of covered ancillary items and services furnished in ASCs. CMS proposes no substantive changes to this policy for CY 2027.

Non-Opioid Pain Relief Treatments

Section 4135 of the 2023 CAA established temporary, separate Medicare payment for certain non-opioid pain relief treatments furnished in HOPDs and ASCs from January 1, 2025, through December 31, 2027. For CY 2027, CMS proposes maintaining the payment methodology finalized during CY 2026.

Specifically, CMS proposes:

• separate payment for seven qualifying drugs
• separate payment for 13 qualifying medical devices
• continued use of a zero-dollar offset, allowing full separate payment
• continued application of the statutory payment limitation equal to 18 percent of the HOPD fee schedule amount for the associated procedure

In addition, CMS seeks comments on product evaluations for the products CMS proposes would qualify if finalized. CMS notes that CY 2027 represents the final year of the temporary statutory authority unless Congress extends the program.

Quality Reporting Programs

CMS proposes relatively limited changes to the Hospital OQR Program, ASCQR Program and Rural Emergency Hospital (REH) Quality Reporting Program.

Hospital OQR Program

CMS proposes no significant changes to the Hospital OQR Program measure set beyond one measure removal.

The agency proposes:

• removing the Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients measure beginning with the CY 2027 reporting period and CY 2029 payment determination
• retaining the Facility Seven-Day Risk-Standardized Hospital Visit Rate After Outpatient Colonoscopy measure
• soliciting comment regarding future adoption of an Advance Care Planning eCQM
• incorporating eCQM validation into the existing Hospital OQR validation process beginning with the CY 2030 payment determination

CMS also proposes maintaining the CY 2027 reporting ratio of 0.9805, which continues to determine payment reductions for hospitals failing OQR requirements.

REH Quality Reporting Program

CMS proposes no substantive changes to the REH Quality Reporting Program for CY 2027. The agency concludes that sufficient experience has not yet accumulated to justify broader revisions to the recently implemented quality reporting framework.

ASCQR Program

Consistent with the proposed removal from the Hospital OQR Program, CMS proposes removing the Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients measure from the ASCQR Program. The agency also requests comments about stratifying the All-Cause Transfer/Admission Measure to distinguish the phase of care (e.g., pre-procedure, intra-procedure or post-procedure) during which a transfer occurs. CMS notes pre-procedure transfers likely represent the effectiveness of pre-operative evaluation, and intraoperative and postprocedural events may be more closely linked to complications that arise during or after the surgery.

Utilization Management

Consistent with the Trump Administration's emphasis on program integrity and appropriate utilization, CMS proposes expanding the HOPD Prior Authorization Program.

Expansion of Prior Authorization Requirements

CMS proposes adding eight additional botulinum toxin injection procedures to the HOPD Prior Authorization Program for services furnished on or after July 1, 2027. CMS explains that utilization of these procedures increased approximately 42.8 percent between 2017 and 2024 despite an overall decline in outpatient department volume during the same period. According to CMS, the agency could not identify clinical factors explaining the increased utilization and therefore believes additional utilization management is warranted.

If finalized, these procedures would join the existing prior authorization categories, including:

• blepharoplasty
• panniculectomy
• rhinoplasty
• vein ablation
• cervical fusion
• implanted spinal neurostimulators
• facet joint interventions
• existing botulinum toxin procedures

Hospital Compliance and Regulatory Proposals

In addition to payment and quality reporting policies, CMS proposes several regulatory changes affecting hospital compliance operations, including EMTALA administrative review, PBD requirements, hospital price transparency and graduate medical education slot redistribution.

AO Deeming Authority for EMTALA

CMS proposes requiring CMS-approved hospital AOs to incorporate review of certain EMTALA administrative requirements into their existing accreditation and reaccreditation survey processes.

The proposal would apply to Medicare-participating hospitals with emergency departments, including Critical Access Hospitals (CAHs) and REHs. AOs would review administrative compliance with requirements related to:

• EMTALA signage
• maintenance of a central emergency department log
• transfer record retention
• on-call physician lists

CMS emphasizes that AOs would not assess or enforce EMTALA requirements related to medical screening examinations, stabilizing treatment, appropriate transfers or receiving hospital responsibilities. CMS and the U.S. Department of Health and Human Services (HHS) Office of Inspector General would retain their existing enforcement authorities.

This proposal appears designed to improve consistency in EMTALA administrative compliance and reduce duplicative survey activity. Hospitals should nevertheless review EMTALA documentation, signage, transfer records and on-call list processes before implementation, as deficiencies identified during routine accreditation surveys could create new compliance exposure.

Provider-Based Status Requirements

CMS proposes codifying Section 6225 of the 2026 CAA, which establishes new requirements for off-campus HOPDs seeking OPPS payment. Beginning January 1, 2028, OPPS payment for services furnished by off-campus outpatient departments would be conditioned on:

• the department billing under a separate National Provider Identifier (NPI)
• the main provider submitting recurring attestations of compliance with provider-based status requirements
• attestations being submitted on a recurring basis not to exceed five years

CMS proposes corresponding revisions to 42 C.F.R. §§ 413.65 and 419.23. To meet the initial attestation requirement, main providers would obtain an NPI for each PBD and update the Medicare Provider Enrollment, Chain and Ownership System (PECOS) prior to submitting an attestation. The initial attestation deadline would depend on when a department begins providing services. Off-campus HOPDs providing services on or before January 1, 2028, would be required to submit an attestation between January 1, 2026, and December 31, 2027, while off-campus HOPDs that begin providing services after January 1, 2028, must submit an attestation within the two years prior to when the billed services are delivered. For off-campus HOPDs that previously received a determination of provider-based status prior to January 1, 2026, and remain in compliance with the relevant criteria, CMS is considering having the authorized official attest to continued compliance in a letter to CMS with evidence of its CMS determination.

CMS also proposes to establish a standardized attestation form to replace the current Medicare Administrative Contractor (MAC)-specific templates and centralized electronic submission system. The agency intends to issue operational guidance, specific review criteria, validation protocols and documentation standards that CMS and its contractors, including MACs, would apply in reviewing and validating initial determinations. Hospitals operating off-campus PBDs should begin evaluating whether their enrollment, billing and documentation systems can support the proposed separate NPI and recurring attestation requirements. These requirements could increase administrative burden and create risk for payment denials if provider-based documentation is incomplete or outdated.

Hospital Price Transparency RFI

CMS requests stakeholder feedback on potential ways to strengthen hospital price transparency reporting.

CMS specifically seeks input on improvements to:

• machine-readable files
• consumer-friendly displays
• reporting of contract mechanisms
• outlier payments
• stop-loss provisions
• rate tiering
• carve-outs
• comparability and usability of disclosed pricing information

CMS does not propose specific regulatory changes in this section but signals continued interest in strengthening the hospital price transparency framework. The RFI suggests CMS may pursue additional hospital price transparency requirements in future rulemaking. Hospitals should consider using the comment period to address operational challenges associated with payer contract reporting, particularly where negotiated rates are affected by complex contract terms that are difficult to represent in standardized machine-readable files.

Domestic Procurement of PPE and Essential Medicines RFI

CMS also solicits comments on a potential voluntary IPPS payment adjustment for hospitals that purchase certain domestically manufactured PPE and essential medicines.

The agency seeks feedback on:

• how to define "domestic" manufacturing
• which PPE and essential medicines should qualify
• whether eligibility should be identified through NDCs, Unique Device Identifiers (UDIs) or other identifiers
• how manufacturers should attest to domestic production
• how CMS should calculate standardized cost differentials between domestic and nondomestic products
• whether claims-based or cost-report-based payment methodologies would be more appropriate
• whether aggregate payment caps should apply

CMS indicates it is not currently pursuing a new "Secure American Medical Supplies" designation or a new Hospital Inpatient Quality Reporting structural measure, which it had noted was under consideration as part of an advanced notice of proposed rulemaking issued January 26, 2026, but the RFI signals ongoing interest in using Medicare payment policy to bolster supply chain resilience and shift healthcare supply chains away from reliance on foreign sources.

Although only an RFI, this section could become highly significant for hospitals, manufacturers, distributors and supply chain stakeholders. CMS appears to be exploring whether Medicare payment policy can be used to offset the higher cost of domestically manufactured medical products. Stakeholders should consider commenting now if they want to shape future eligibility definitions, documentation standards and payment methodologies.

Graduate Medical Education (GME) Slot Redistribution

CMS provides notice of the closure of a hospital in Chicago, making available 85.82 indirect medical education full-time equivalent (FTE) resident cap slots and 66.79 direct GME FTE resident cap slots.

These slots will be redistributed through Round 29 of the Section 5506 process, which authorizes the HHS Secretary to redistribute residency slots after an approved medical residency program closes. Applications must be submitted through MEARIS between July 13, 2026, and October 13, 2026.

Conclusion and Next Steps

The CY 2027 OPPS/ASC Proposed Rule is one of the most consequential outpatient payment rules in recent years. Although CMS proposes a routine 2.4 percent payment update, the broader rule includes substantial payment, operational and compliance changes that could significantly affect hospitals, health systems, ASCs, manufacturers, physician practices and other Medicare stakeholders.

CMS is using OPPS/ASC rulemaking to advance several major policy objectives at once: acquisition cost-based drug reimbursement, site-neutral payment expansion, utilization management, outpatient surgical migration and enhanced hospital compliance oversight. The final rule may materially affect Medicare reimbursement strategy, outpatient service line planning, pharmacy operations, revenue cycle systems, compliance processes and manufacturer market access.

Hospitals, health systems, ASCs, manufacturers and other stakeholders should begin modeling the proposed policies now, identifying operational changes required for implementation and preparing comments that address both policy concerns and practical implementation challenges.

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