Calendar Year 2027 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Proposed Rule (CMS-1850-P)
On July 2, 2026, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would update Medicare payment policies and rates for hospital outpatient and Ambulatory Surgical Center (ASC) services under the Hospital Outpatient Prospective Payment System (OPPS) and ASC Payment System Proposed Rule for calendar year (CY) 2027. CMS is publishing this proposed rule consistent with the legal requirements to update Medicare payment policies for hospital outpatient and ASCs annually. This fact sheet discusses the proposed rule’s major provisions.
These proposed payment policies would affect approximately 3,500 hospitals and approximately 6,400 ASCs. In addition to proposing payment rates, this year’s rule includes a proposal to update the methodology used to calculate the Overall Hospital Quality Star Rating to emphasize the Safety of Care measure group in hospitals’ star ratings. CMS is also proposing changes to and requesting comment on the Hospital Outpatient Quality Reporting (OQR) ASC Quality Reporting (ASCQR) programs to further meaningful measurement and reporting for outpatient quality of care.
To align with current administrative priorities, CMS is including a Request for Information (RFI) to seek public input on strengthening requirements for hospital price transparency to increase the information’s standardization and comparability.
Updates to OPPS and ASC Payment Rates
In accordance with Medicare law, CMS proposes updating OPPS payment rates for hospitals that meet applicable quality reporting requirements by 2.4%. This update is based on the projected hospital market basket percentage increase of 3.2%, reduced by a 0.8 percentage point productivity adjustment.
For CY 2027, using the hospital market basket update, CMS proposes an update factor to the ASC rates of 2.4%. The update applies to ASCs meeting relevant quality reporting requirements. This update is based on the proposed IPPS market basket percentage increase of 3.2%, reduced by 0.8 percentage point for the productivity adjustment.
Expanding the Method to Control Unnecessary Increases in the Volume of Outpatient Services
In the CY 2019 OPPS/ASC final rule, CMS adopted a method to control unnecessary increases in the volume of the clinic visit services furnished in excepted off-campus provider-based departments (PBDs). This method prevents Medicare and beneficiaries from paying significantly more in the excepted off-campus PBD setting than in the physician office setting for some services. In the CY 2026 OPPS/ASC final rule, CMS finalized a policy expansion to include drug administration services furnished in excepted off-campus PBDs. For CY 2027, CMS is proposing to include imaging without contrast services furnished in excepted off-campus PBDs. Specifically, CMS is proposing to use the agency’s authority under section 1833(t)(2)(F) of the Social Security Act to apply the Physician Fee Schedule equivalent payment rate for any HCPCS codes assigned to the imaging without contrast ambulatory payment classifications (APCs) when provided at an off-campus PBD excepted from section 603 of the Bipartisan Budget Act of 2015. As with the existing volume control method for off-campus clinic visits and drug administration services, CMS is proposing to exempt rural Sole Community Hospitals from this proposed policy.
For CY 2027, we estimate this provision would reduce Medicare Part B expenditures by approximately $260 million in the first year, including approximately $190 million in Part B savings and approximately $70 million in reduced beneficiary premiums. In addition, beneficiary cost-sharing obligations are estimated to decrease by approximately $70 million in the first year. This policy helps ensure that beneficiaries are not subject to higher premiums and cost sharing based solely on the site at which care is furnished.
Reduced Payments for 340B-Acquired Drugs Based on the Medicare OPPS Drugs Acquisition Cost Survey
Section 1833(t)(14)(D)(ii) of the Social Security Act requires the Secretary to periodically conduct hospital drug acquisition cost surveys for specified covered outpatient drugs and use this information to set the payment rates for such drugs. Additionally, on April 18, 2025, President Trump signed Executive Order (E.O.) 14273, “Lowering Drug Prices by Once Again Putting Americans First.” Section 5 of the E.O., “Appropriately Accounting for Acquisition Costs of Drugs in Medicare” directs the Secretary of HHS to publish in the Federal Register a plan to conduct a survey under section 1833(t)(14)(D)(ii) of the Social Security Act to determine the hospital acquisition cost for covered outpatient drugs at hospital outpatient departments.
Accordingly, from January 1, 2026, through April 7, 2026, we conducted a survey of the acquisition costs for each separately payable drug acquired by all hospitals paid under the OPPS. The survey revealed significant disparities between hospital acquisition costs for drugs acquired through the 340B program and those drugs acquired outside of the 340B program. In some instances, the survey revealed that the beneficiary cost sharing amount, typically 20% of the total payment amount, was greater than the total price that the hospital paid for the drug.
Taking the survey’s results into account to more accurately align Medicare payments with hospital drug acquisition costs, we are proposing for CY 2027 to pay for 340B acquired drugs at the drug’s Average Sales Price (ASP) minus 33.4%.
This proposal is estimated to reduce Original Medicare drug payment by $4.55 billion dollars and beneficiary drug payments by $1.15 billion in the first year. Statute requires that this policy be implemented in a budget neutral manner, so this proposal would increase OPPS payments for non-drug services by an equivalent amount.
CY 2027 Prospective Adjustment to Payments for Non-Drug Items and Services to Offset the Increased Payments for Non-Drug Items and Services Made in CY 2018 Through CY 2022 as a Result of the Prior 340B Payment Policy
The November 2023 340B Remedy final rule (88 FR 77150) finalized changes to the calculation of the OPPS conversion factor applicable to non-drug items and services beginning in CY 2026. Specifically, effective January 1, 2026, the rule codified a 0.5% reduction in the OPPS conversion factor applicable to non-drug items and services, excluding hospitals that enrolled in Medicare after January 1, 2018. This reduction would remain in effect until the estimated aggregate payment reduction reached the $7.8 billion of increased non-drug item and services payments made from CY 2018 through CY 2022.
This prospective offset aimed to balance the goal of restoring hospitals to their financial position had the original 340B policy never existed with avoiding burdening them with an immediate single year recovery. After subsequent reconsideration of balancing these two goals, CMS has determined a shorter timeframe to be more appropriate, consistent with our discussion in the CY 2026 OPPS/ASC final rule with comment period. Consequently, CMS is proposing to revise the annual offset percentage for non-drug items and services from 0.5% to 3% effective CY 2027, excluding hospitals that enrolled in Medicare after January 1, 2018. This 3% reduction would remain in effect until the estimated payment reduction reaches $7.8 billion, which CMS estimates will occur in CY 2029.
Eliminating the Inpatient Only (IPO) List
To give beneficiaries more choices on where to obtain care with the potential for lower out-of-pocket expenses, CMS is continuing to phase out the IPO list over a 3-year period. For this second year of the phase-out, CMS is proposing to remove 638 services from the following clinical families: auditory, digestive, endocrine, female genital, hemic and lymphatic systems, integumentary, male genital, maternity care and delivery, mediastinum and diaphragm, respiratory, and urinary. CMS believes that the evolving nature of medical practice allows more procedures to be performed on an outpatient basis with a shorter recovery time. This proposal would allow for these services to be paid by Medicare in the hospital outpatient setting when determined to be clinically appropriate, giving physicians greater flexibility in determining the most appropriate site of service.
Adjustment to Cost-of-Living in Alaska and Hawaii
Hospitals located in Alaska and Hawaii face unique geographical circumstances, including dependency on outside goods and components, remote locations and transportation challenges, and other factors inherent to providing healthcare in these noncontiguous states. While higher labor-related costs for these two states are considered under the OPPS through the IPPS hospital wage index, the nonlabor portion of OPPS payment does not currently address higher nonlabor costs in these states as in the IPPS through a Cost-of-Living-Adjustment (COLA) policy. To resolve this inconsistency between the IPPS and OPPS, we are proposing to apply a COLA to the nonlabor share of outpatient hospital service payments provided in Alaska and Hawaii for CY 2027 and future years based on the IPPS COLA. This policy is proposed to be budget neutral across the OPPS and is projected to increase payments to hospitals in these states by $55 million in CY 2027.
Request for Information (RFI) on Strengthening the Standardization and Comparability of Hospital Price Transparency (HPT) Data – Rider
Since January 1, 2021, CMS has required each hospital operating in the United States to provide clear, accessible pricing information online about the items and services they offer in two ways: (1) as a comprehensive machine-readable file (MRF) and (2) via a consumer-friendly display. The data we require hospitals to disclose in the MRF serves as a critical resource for users, including employers, researchers and innovators, who may be leveraging the data with the goal of stimulating competition, generating new insights, and driving down healthcare costs. In parallel, the consumer-friendly display empowers consumers seeking healthcare services by making it easier to shop and compare prices across hospitals.
To align with Administration priorities and consistent with the President’s E.O. 14221, “Making America Health Again by Empowering Patients with Clear, Accurate, and Actionable Healthcare Pricing Information,” CMS is including an RFI to seek public comment on potential approaches to improve HPT data consistency, comparability, and consumer usability.
Through this RFI, CMS seeks feedback on potential mechanisms to strengthen MRF requirements, including opportunities to increase hospital pricing data standardization and improve the accuracy and completeness of reporting within free text fields. CMS is particularly interested in comments regarding the reporting of contract mechanisms such as outlier payments, stop-loss provisions, rate tiering, and carve-outs. The RFI also seeks public comment on potential approaches to enhance the comparability and usefulness of the consumer-friendly display requirements, including feedback on whether to modify or eliminate the current deemed compliance policy for internet-based price estimator tools, updates to the required list of shoppable services, and additional clarification on the items and services included in displayed prices, such as ancillary and bundled services.
Intensive Outpatient and Partial Hospitalization Programs
Intensive Outpatient Program (IOP) and Partial Hospitalization Program (PHP) Rate Setting
The CY 2027 OPPS/ASC proposed rule would update Medicare payment rates for IOP and PHP services furnished in hospital outpatient departments and Community Mental Health Centers (CMHCs). The IOP is a distinct and organized outpatient program of psychiatric services provided for individuals who have an acute mental illness or substance use disorder, consisting of a specified group of behavioral health services paid on a per diem basis for a minimum of 9 hours of IOP services per week under the OPPS, or other applicable payment system, when furnished in hospital outpatient departments, CMHCs, Federally Qualified Health Centers (FQHCs), and Rural Health Clinics (RHCs). IOP services may also be furnished in Opioid Treatment Programs (OTPs) for opioid use disorder (OUD). The PHP is an intensive, structured outpatient program provided as an alternative to psychiatric hospitalization, consisting of a specified group of mental health services paid on a per diem basis for a minimum of 20 hours of PHP services per week under the OPPS, based on PHP per diem costs.
Update to IOP and PHP Payment Rates in Hospital Outpatient Departments and CMHCs
CMS is proposing to maintain the existing rate structure, with two IOP APCs for each provider type and two PHP APCs for each provider type. CMS is proposing to update PHP and IOP payment rates for CY 2027 using the CY 2025 claims data and the latest available cost information, from cost reports beginning three fiscal years before the year that is the subject of the rulemaking. We are not proposing any changes to the methodology finalized beginning in CY 2026 for calculating costs for hospital-based and CMHC IOPs and PHPs.
Consideration of Potential Approaches for Separate Inpatient Prospective Payment System (IPPS) Payment for Domestic Procurement of Personal Protective Equipment and Essential Medicines
In the “Ensuring Safety Through Domestic Security With Made in America Personal Protective Equipment (PPE) and Essential Medicine Procurement by Medicare Participating Hospitals” advance notice of proposed rulemaking (CMS-1516-ANPRM, 91 FR 3851 through 3856) issued earlier this year, CMS previously sought public comment on potential options we could consider for Medicare-participating hospitals to help foster a more resilient supply chain for American-made PPE and essential medicines to secure our nation’s health and safety and to reflect the additional resource costs incurred when procuring these domestically manufactured items. In this proposed rule, we are seeking further public input on this issue after reviewing the comments on that ANPRM to inform future rulemaking.
Hospital Outpatient Quality Reporting (OQR) Program
The Hospital OQR Program is a pay-for-reporting program that requires hospital outpatient departments (HOPDs) to report data on certain quality measures specified by CMS. HOPDs that fail to submit the required quality data receive a 2-percentage point reduction to their annual payment update under the OPPS. CMS also makes data submitted by HOPDs for the Hospital OQR Program available to the public on Care Compare to inform quality improvement efforts and beneficiary decision-making.
In the CY 2027 OPPS/ASC proposed rule, in addition to the proposed cross-program measure removal described below, CMS is proposing updates to validation and validation appeals procedures to increase data accountability for digital quality measures. CMS is also requesting information on potentially including an Advance Care Planning measure for the hospital outpatient department setting.
Ambulatory Surgical Center (ASC) Quality Reporting Program
The ASC Quality Reporting Program is a pay-for-reporting program that requires freestanding ASCs to report data on specified measures of clinical quality. Under the ASC Quality Reporting Program, eligible ASCs must meet all program requirements or may receive a 2-percentage point reduction to their annual payment rate update under the ASC fee schedule.
In addition to the proposed cross-program measure removal described below, CMS is soliciting information on potentially stratifying the All-Cause Transfer/Admission measure by phase of care.
Cross-Program Proposal for the Hospital Outpatient and ASC Quality Reporting Programs
CMS is proposing to remove the Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients measure from the Hospital Outpatient and ASC Quality Reporting Programs, beginning with the CY 2027 reporting period/CY 2029 payment determination. This measure assesses whether the recommended 10-year interval for a follow-up colonoscopy is documented in the colonoscopy report. There is another colonoscopy measure in both programs tied more closely to clinical outcomes instead of documentation.
AO Deeming Authority for EMTALA
The Emergency Medical Treatment and Labor Act (EMTALA) requires all Medicare-participating hospitals, including Critical Access Hospitals (CAHs) and Rural Emergency Hospitals (REHs), to provide appropriate medical screening examinations, necessary stabilizing treatment to individuals with emergency medical conditions, and appropriate transfers for individuals presenting to emergency departments. CMS proposes to permit hospital Accrediting Organizations (AOs) with deeming authority to assess compliance with EMTALA's administrative requirements under 42 CFR 489.20, including posting required signage, maintaining a central emergency department log, retaining transfer records for five years, and keeping an on-call physician list as part of routine accreditation and reaccreditation surveys. To implement this change, CMS would amend 42 CFR 488.5(a) by adding a new provision requiring AOs to document the procedures used to inspect for EMTALA administrative violations within their existing survey processes. Because more than 80% of hospitals are AO-accredited, integrating this oversight into routine surveys would reduce duplicative state complaint investigations and minimize disruption to hospital operations. Enforcement authority over the substantive patient care protections at 42 CFR 489.24 would remain exclusively with CMS and the Office of Inspector General (OIG). This enforcement authority includes EMTALA complaint investigations conducted by CMS, which are carried out to ensure compliance with the patient care protections set forth under 42 CFR 489.24.
Prior Authorization for Additional Botulinum Toxin Injection Codes
Through routine data analysis, CMS identified that botulinum toxin injection procedures showed an increase in volume. CMS researched possible causes for that volume increase but did not find any explanations to justify it. Both data and research showed that an increase in volume for these procedures is unnecessary, and further program integrity action was warranted. In the CY 2020 OPPS/ASC final rule with comment period, CMS established a prior authorization process for certain hospital outpatient department (OPD) services using our authority under section 1833(t)(2)(F) of the Act, which requires the Secretary to develop “a method for controlling unnecessary increases in the volume of covered OPD services.”
CMS continues using prior authorization to reduce unnecessary increases in the volume of OPD services. In the CY 2027 OPPS/ASC proposed rule, CMS is proposing to require prior authorization for eight additional botulinum toxin injection codes. CMS believes prior authorization is an effective mechanism to ensure Medicare beneficiaries receive medically necessary care while protecting the Medicare Trust Funds from unnecessary increases in volume and improper payments.
For more information about Hospital Outpatient PPS, please visit: https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient
The proposed rule (CMS-1850-P) can be downloaded at the Federal Register here: https://www.federalregister.gov/d/2026-13656
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