The Centers for Medicare & Medicaid Services released its Calendar Year 2027 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center proposed rule on July 2, 2026. The proposal outlines potential changes to Medicare payment rates, 340B drug reimbursement, outpatient procedure coverage, prior authorization, quality reporting and hospital price transparency.
Known as CMS-1850-P, the proposed rule would affect approximately 3,500 hospitals and 6,400 ambulatory surgical centers if finalized. Healthcare organizations should begin evaluating the possible operational and financial effects while remembering that the policies may change before CMS publishes the final rule.
For hospital leaders, ASC administrators and revenue cycle teams, the proposal is not simply an annual payment update. Several provisions could require changes to charge capture, authorization workflows, site-of-service reporting and reimbursement forecasting.
CMS Proposes a 2.4% OPPS Payment Update
CMS proposes increasing OPPS payment rates by 2.4% for hospitals that meet applicable quality reporting requirements.
The proposed increase is based on a projected hospital market basket increase of 3.2%, reduced by a 0.8 percentage-point productivity adjustment.
Although the headline rate is positive, it does not mean every hospital outpatient department would see an equal increase in revenue. Actual reimbursement would continue to depend on the services performed, Ambulatory Payment Classification assignments, geographic adjustments and other payment policies.
Hospitals should model the potential effect at the service-line and procedure level rather than applying the 2.4% increase across all expected outpatient revenue.
Organizations that do not meet Hospital Outpatient Quality Reporting Program requirements could receive a two-percentage-point reduction to their annual payment update.
ASC Payment Rates Could Also Increase by 2.4%
CMS proposes a 2.4% payment update for ambulatory surgical centers that meet applicable ASC Quality Reporting Program requirements.
The ASC update is also based on a 3.2% projected market basket increase, reduced by the 0.8 percentage-point productivity adjustment.
ASCs should review how the proposed update interacts with their procedure mix, payer contracts and Medicare volume. A general percentage increase does not automatically resolve reimbursement pressure caused by staffing, supplies, implants and administrative costs.
Facilities may benefit from using healthcare revenue cycle analytics to compare current reimbursement with proposed 2027 rates. This analysis can help identify procedures that may remain financially challenging despite the proposed update.
Certain Off-Campus Imaging Services Could Receive Lower Payments
CMS proposes expanding its method for controlling unnecessary increases in outpatient service volume.
Under the proposal, imaging-without-contrast services performed in certain excepted off-campus provider-based departments would be paid at a Physician Fee Schedule-equivalent rate instead of the generally higher OPPS rate.
The policy would apply to HCPCS codes assigned to imaging-without-contrast Ambulatory Payment Classifications when the services are furnished in affected off-campus departments. Rural Sole Community Hospitals would be exempt.
CMS estimates that the provision could reduce Medicare Part B expenditures by approximately $260 million in its first year. This includes an estimated $190 million in Medicare savings and $70 million in reduced beneficiary premiums. Beneficiary cost-sharing obligations could also decrease by approximately $70 million.
Hospitals with excepted off-campus departments should review:
- The status of each outpatient location
- Imaging services performed without contrast
- Affected HCPCS and APC assignments
- Site-of-service reporting
- Current and projected reimbursement
- Beneficiary cost-sharing estimates
Accurate location reporting will remain important. Incorrect site-of-service information can affect payment and increase the risk of claim corrections, audits or denials. Organizations should coordinate their coding, registration and medical claim submission processes before any final policy becomes effective.
CMS Proposes Significant Changes to 340B Drug Payments
One of the most financially significant provisions involves drugs acquired through the 340B Drug Pricing Program.
CMS conducted a hospital drug acquisition cost survey between January 1 and April 7, 2026. According to the agency, the survey showed substantial differences between the acquisition costs of drugs purchased through the 340B program and drugs purchased outside the program.
CMS proposes paying separately payable 340B-acquired drugs at Average Sales Price minus 33.4% beginning in CY 2027.
CMS estimates that this policy could reduce Original Medicare drug payments by approximately $4.55 billion during the first year. Beneficiary drug payments could decrease by approximately $1.15 billion.
Because the change must be implemented in a budget-neutral manner, CMS proposes increasing OPPS payments for non-drug items and services by an equivalent amount.
Hospitals participating in the 340B program should evaluate how the proposal could affect:
- Drug acquisition and reimbursement margins
- Charge-master configurations
- 340B drug identification
- Patient cost-sharing calculations
- Pharmacy and billing system integration
- Revenue forecasting
- Non-drug service payments
Accurate drug coding will be especially important. Hospitals should verify that their systems correctly identify separately payable drugs and maintain reliable connections between pharmacy records, clinical documentation and claims. Additional information about drug billing identifiers is available in our guide to J codes in medical billing.
The 340B Remedy Offset Could Increase From 0.5% to 3%
CMS also proposes revising the existing prospective adjustment associated with the 340B remedy payment policy.
Beginning in 2026, CMS implemented a 0.5% reduction to the OPPS conversion factor for non-drug items and services. The reduction was designed to recover approximately $7.8 billion in increased non-drug payments made between CY 2018 and CY 2022.
CMS now proposes increasing the annual reduction from 0.5% to 3% beginning in CY 2027.
The reduction would not apply to hospitals that enrolled in Medicare after January 1, 2018. CMS estimates that the larger adjustment would allow the total recovery amount to be reached in CY 2029.
Hospitals should not evaluate this adjustment in isolation. Finance and revenue cycle teams will need to consider both the proposed reduction and the budget-neutral increase connected to the new 340B drug payment methodology.
The combined effect could vary considerably based on a hospital’s drug utilization, outpatient service mix and Medicare volume.
CMS Proposes Removing 638 Services From the Inpatient Only List
CMS is continuing a planned three-year phase-out of the Inpatient Only List.
For the second year of the phase-out, CMS proposes removing 638 services from several clinical families, including:
- Auditory services
- Digestive system procedures
- Endocrine services
- Female and male genital system procedures
- Hemic and lymphatic system services
- Integumentary procedures
- Maternity care and delivery
- Respiratory services
- Urinary system procedures
- Mediastinum and diaphragm services
Removing a procedure from the Inpatient Only List would allow Medicare to pay for it in the hospital outpatient setting when outpatient treatment is considered clinically appropriate.
However, removal from the list would not mean every affected procedure or patient should automatically be treated as an outpatient. Physicians and hospitals would still need to consider the patient’s condition, expected recovery, procedural risk, medical necessity and applicable Medicare requirements.
Hospitals should prepare for possible changes involving:
- Patient-status determinations
- Utilization review
- Medical-necessity documentation
- Inpatient and outpatient coding
- Authorization requirements
- Patient financial estimates
- Clinical scheduling
- Discharge and recovery planning
The proposal could also create new risks if clinical, coding and billing teams do not apply consistent patient-status criteria. A strong hospital revenue cycle management process can help align documentation, coding and claim submission as the list changes.
Prior Authorization Could Expand for Botulinum Toxin Injections
CMS proposes requiring prior authorization for eight additional botulinum toxin injection codes performed in hospital outpatient departments.
The agency stated that its data showed increased utilization of these procedures without an identified justification for the increase. CMS believes prior authorization could help confirm medical necessity while controlling unnecessary volume and improper Medicare payments.
Hospitals that furnish botulinum toxin injections may need to update:
- Procedure-specific authorization lists
- Scheduling requirements
- Clinical documentation standards
- Authorization submission processes
- Approval tracking
- Claim edits
- Staff training
- Denial prevention procedures
A procedure should not be scheduled under an affected code without confirming whether authorization is required and whether approval has been received.
Failing to obtain authorization before treatment can result in avoidable payment delays or denials. Healthcare organizations can review our guide to authorization in medical billing or learn more about professional prior authorization services.
The eight codes and their effective requirements should be verified in the final rule before organizations make permanent workflow changes.
Hospital Price Transparency Requirements May Become More Standardized
CMS is also seeking public feedback on ways to strengthen hospital price transparency requirements.
Since January 1, 2021, hospitals have been required to publish pricing information through a comprehensive machine-readable file and a consumer-friendly display.
CMS is requesting input on ways to improve the standardization, completeness, accuracy and comparability of this information.
The agency is particularly interested in feedback concerning:
- Outlier payment arrangements
- Stop-loss provisions
- Rate tiers
- Contractual carve-outs
- Free-text reporting fields
- Shoppable-service requirements
- Online price-estimator tools
- Ancillary services
- Bundled services
Hospitals should view price transparency as more than a website compliance responsibility. The displayed information may depend on data from contracts, charge masters, billing systems and patient estimation tools.
Inconsistent information across these systems can produce inaccurate public prices and create confusion for patients. Hospitals should establish clear ownership of pricing data and conduct regular validation across their financial and operational systems.
Alaska and Hawaii Hospitals Could Receive Cost-of-Living Adjustments
CMS proposes applying a cost-of-living adjustment to the nonlabor portion of OPPS payments for hospitals in Alaska and Hawaii.
The agency recognizes that hospitals in these states face higher transportation, supply and operational costs due to their geographic locations.
The policy would be budget neutral across the OPPS. CMS projects that it could increase payments to hospitals in Alaska and Hawaii by approximately $55 million in CY 2027.
Affected hospitals should assess how the adjustment would interact with wage index calculations and other OPPS payment factors.
Proposed Updates for Intensive Outpatient and Partial Hospitalization Programs
The proposed rule would update payment rates for Intensive Outpatient Programs and Partial Hospitalization Programs furnished by hospital outpatient departments and Community Mental Health Centers.
CMS proposes maintaining the existing rate structure, including two IOP APCs and two PHP APCs for each provider type.
The proposed 2027 rates would use CY 2025 claims data and the latest available cost information. CMS is not proposing to change the cost-calculation methodology established for CY 2026.
Behavioral health organizations should monitor the final payment rates and confirm that service hours, program requirements, documentation and claims accurately support the reported level of care.
Facilities can also review our resource on behavioral health revenue cycle management for broader billing and reimbursement considerations.
Quality Reporting Changes for Hospitals and ASCs
The Hospital Outpatient Quality Reporting Program requires hospital outpatient departments to report specified quality data. Organizations that fail to satisfy the requirements may receive a two-percentage-point reduction to their annual OPPS payment update.
CMS proposes updating validation and validation appeal procedures for digital quality measures. The agency is also seeking information about potentially introducing an Advance Care Planning measure for hospital outpatient departments.
The ASC Quality Reporting Program similarly requires eligible ASCs to report specified clinical quality measures. ASCs that do not meet the program requirements may receive a two-percentage-point reduction to their annual payment update.
CMS is seeking feedback on whether the All-Cause Transfer/Admission measure should be stratified according to the phase of care.
CMS also proposes removing the Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients measure from both programs beginning with the CY 2027 reporting period and CY 2029 payment determination.
CMS explained that another colonoscopy measure in the programs is more directly connected to clinical outcomes rather than documentation alone.
Proposed EMTALA Oversight Changes
CMS proposes allowing hospital accrediting organizations with deeming authority to evaluate certain administrative EMTALA requirements during routine accreditation and reaccreditation surveys.
The administrative requirements include:
- Posting required EMTALA signs
- Maintaining a central emergency department log
- Retaining transfer records for five years
- Maintaining an on-call physician list
CMS and the Office of Inspector General would retain enforcement authority over EMTALA’s substantive patient-care protections.
According to CMS, more than 80% of hospitals are accredited by accrediting organizations. Incorporating administrative oversight into routine surveys could reduce duplicative investigations and operational disruption.
Hospitals should still maintain complete, accessible and current EMTALA records. The proposal would change aspects of oversight, not eliminate the underlying responsibilities.
What Revenue Cycle Teams Should Do Before the Final Rule
The policies are still proposals, but healthcare organizations can begin preparing without making premature system changes.
Revenue cycle leaders should consider the following steps:
- Identify departments, facilities and services potentially affected by CMS-1850-P.
- Model reimbursement using both current and proposed payment policies.
- Review excepted off-campus departments that perform imaging without contrast.
- Evaluate 340B drug identification and acquisition-cost reporting.
- Assess the combined effect of the proposed 340B drug policy and non-drug payment adjustments.
- Identify procedures proposed for removal from the Inpatient Only List.
- Review authorization workflows for botulinum toxin injections.
- Validate OPPS and ASC quality-reporting responsibilities.
- Examine the reliability of hospital price-transparency data.
- Monitor CMS publications and the final rule before changing permanent billing policies.
Preparation should include clinical, compliance, pharmacy, coding, billing, finance and information technology teams. The proposals cross several operational areas and cannot be managed by the billing department alone.
Healthcare organizations should also evaluate their broader revenue cycle workflow to identify where payment-policy changes could create delays, errors or denials.
When Could the Proposed Changes Take Effect?
The proposed policies are intended for Calendar Year 2027. However, CMS must first review public comments and publish a final rule.
Public comments on the proposed rule are due by August 31, 2026.
Hospitals and ASCs should not treat the proposed policies as final requirements. Payment rates, affected services, implementation details and other provisions may change during the rulemaking process.
Organizations should review the final rule and supporting CMS guidance before changing coding, billing or authorization procedures.
Preparing for Medicare Outpatient Payment Changes
The CMS 2027 OPPS and ASC proposed rule could significantly affect hospital outpatient departments, ambulatory surgical centers and Medicare beneficiaries.
The proposed 2.4% payment updates may provide some reimbursement growth, but other provisions could create substantial redistribution across services and organizations. The proposed 340B payment methodology, larger non-drug offset, off-campus imaging policy and Inpatient Only List changes require more detailed financial analysis.
Revenue cycle teams that begin evaluating the proposals now will be better positioned to respond after CMS publishes the final rule.
Greenhive Billing Solutions supports healthcare organizations with medical billing services, coding, prior authorization, claim submission, denial management and accounts receivable follow-up. Our team helps providers strengthen billing workflows and prepare for reimbursement changes that may affect cash flow.
Talk to our billing experts to discuss your organization’s revenue cycle needs.
Official Sources
This article is based on information published by the Centers for Medicare & Medicaid Services and the Federal Register.
CMS Fact Sheet:
Calendar Year 2027 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Proposed Rule
CMS Proposed Rule Resources:
CMS-1850-P
Federal Register:
Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems
Disclaimer
CMS-1850-P is a proposed rule. Its provisions may be modified before the CY 2027 OPPS and ASC final rule is published. This article is provided for general informational purposes and does not constitute legal, coding, billing or compliance advice. Healthcare organizations should review the final CMS rule and applicable guidance before changing billing, coding, authorization or reimbursement procedures.
