CMS Proposes Changes to Medicare Outpatient Payments

The Proposal

The Trump administration has introduced a new plan concerning Medicare’s outpatient payment system. The intention is to reduce costs for older Americans, according to officials. However, hospitals have expressed concerns about the implications for providers serving low-income patients.

The Centers for Medicare and Medicaid Services (CMS) revealed this proposal, which includes reducing payments to hospitals in the 340B drug program and broadening site-neutral payment policies for some outpatient services. The aim is to make healthcare less costly and remove payment imbalances that may increase expenses.

Dr. Mehmet Oz, CMS Administrator, stated that the rule seeks to enhance patient affordability by better managing utilization tools, aligning drug payments with acquisition costs, and eliminating care site discrepancies that have escalated costs for seniors.

Importance of Healthcare Cost Reduction

Older Americans face significant healthcare expenses, with premiums and drug prices climbing. While Dr. Oz emphasized “patient affordability,” hospitals fear that the cuts may harm safety-net providers caring for underserved groups.

Jennifer DeCubellis, CEO of America’s Essential Hospitals, commented, “The proposed OPPS rule from CMS takes an axe to critical funding…affecting the patients they serve.”

Details of the New Rule

If approved, the rule will be effective in 2027. It might alter the amounts Medicare beneficiaries pay for certain drugs and outpatient procedures. The proposed increase for outpatient care is 2.4%, slightly lower than the previous year’s 2.6% rate.

Kevin Thompson, CEO of 9i Capital Group, noted, “In the short run, many could pay less because the reimbursement would match hospital costs for drugs more closely. But, if hospitals lose revenue, they might compensate elsewhere.”

340B Drug Payment Adjustments

The CMS proposal includes cuts to Medicare reimbursements for 340B program drugs, which lets hospitals buy discounted outpatient medications. The lower payments are expected to cut both Medicare spending and beneficiary costs.

Thompson stated, “The goal is to lower Medicare drug costs…If hospitals don’t absorb it, these costs could show elsewhere in the health system through higher prices or fewer services.”

Site-Neutral Payment Expansion

The plan would also extend site-neutral payment policies to certain imaging services in hospital outpatient departments. Currently, hospitals may receive higher payments than doctor’s offices for these services.

Alex Beene from the University of Tennessee at Martin explained, “The coinsurance would be calculated from a lower payment amount closer to the actual drug cost,” saving patients on certain physician-administered Part B drugs in participating hospitals.

Effect on Medicare Beneficiaries

Patients stand to benefit from reduced out-of-pocket costs. If the rule is enacted:

• Beneficiaries may see lower costs for specific outpatient prescription drugs.
• Reduced expenses for some imaging services in outpatient settings.
• Greater pricing consistency between hospital outpatient departments and physician offices.

The impact will vary based on the services a patient uses and if the rule is finalized without major amendments.

Next Steps

The CMS proposal is part of the draft 2027 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center payment rule. The process includes a public comment period before a final version is released. If confirmed, the changes would start next year.

Alex Beene questioned, “The long-term question is whether Medicare can eliminate expensive markups without weakening the safety-net hospitals that use 340B revenue to support care for beneficiaries.”