CMS Acts to Strengthen Care Quality, Cut Drug Costs, and Slash Out-of-Pocket Expenses for Medicare Beneficiaries

CMS Acts to Strengthen Care Quality, Cut Drug Costs, and Slash Out-of-Pocket Expenses for Medicare Beneficiaries

In a move aimed at reshaping how Medicare pays for certain outpatient care services, the Centers for Medicare & Medicaid Services (CMS) today announced a proposed rule that would revise payment policies and rates for hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) beginning in Calendar Year (CY) 2027 - signaling a renewed federal push to lower costs for Medicare beneficiaries, safeguard taxpayer investments, and strengthen access to high-quality care across the country.

"Medicare beneficiaries deserve a program that pays for the right care, in the right setting, at the right time," said CMS Administrator Dr. Mehmet Oz. "This proposed rule focuses squarely on patient affordability by strengthening our utilization management tools, aligning drug payments with actual acquisition costs, and removing site-of-care disparities that have unnecessarily driven up costs for millions of seniors. We are committed to ensuring that Medicare resources are directed toward clinically appropriate, affordable high-value care for every patient we serve."

CMS is proposing to update payment rates for drugs purchased under the 340B Drug Pricing Program to better reflect what hospitals pay for these medications. A CMS survey found that hospitals acquire 340B drugs at an average cost significantly below the Average Sales Price (ASP) - consistent with findings from MedPAC and industry reports showing that Medicare payments have substantially exceeded 340B drug acquisition costs. By aligning payments with documented acquisition costs, CMS estimates this proposal would save people with Original Medicare a collective estimated $1.15 billion in drug costs and save taxpayers an additional estimated $4.55 billion in drug expenditures, for total reduced drugs spending of approximately $5.7 billion in 2027 alone. Statute requires that this policy be implemented in a budget neutral manner, so this proposal would increase Hospital Outpatient Prospective Payment System (OPPS) payments for non-drug services by an equivalent amount. This proposal ensures that hospital drug discounts are passed directly to the Medicare beneficiaries who receive the drugs and the American taxpayers.

CMS continues to focus on addressing Medicare waste, fraud and abuse by leveraging utilization management tools to reduce unnecessary increases in the volume of covered HOPD services. CMS is proposing to expand its utilization management requirements in the HOPD setting by including additional botulinum toxininjection services. Data analysis revealed that claim volumes for these procedures surged 42.8% from 2017 to 2024 - despite an overall decline in HOPD services - with no clear explanation for the increase. Medicare pays medical providers for botulinum toxin injections when necessary to treat certain health conditions. CMS proposes adding additional botulinum toxin injection services to its utilization management process to ensure the medical necessity of the services, projecting more than $17 million in net annual savings.

Medicare and patients should not be charged more for an imaging test solely because it is done in a hospital setting rather than a standalone clinic. Under current policy, people with Medicare can face higher co-pays for the same imaging services, such as X-rays and MRIs, based on whether they are performed in a hospital setting versus a non-hospital outpatient facility. Such payment differentials can encourage health systems to shift services to higher-cost settings without a clinical need for doing so and may encourage greater consolidation within the healthcare system by motivating hospitals to acquire independent physician practices to increase their Medicare prices. Consequently, CMS is proposing to use its statutory authority to control unnecessary outpatient services volume increases used to equalize payment rates between physician offices and off-campus provider-based departments for certain imaging services. If finalized, this proposal would be expected to make healthcare more affordable for Medicare patients and 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.

CMS is proposing to make it easier for doctors and patients to choose outpatient surgery when it is the right fit and safe for the patient. The proposed rule would give physicians greater flexibility to determine the most clinically appropriate setting for care by including provisions that continue to phase out the inpatient-only list and expand the ASC Covered Procedures List. These changes would allow more patients to choose outpatient surgical options while maintaining rigorous patient safety standards.

Additionally, CMS is exploring ways to improve hospital price transparency by issuing a Request for Information (RFI) as part of this proposed rule. Since 2021, hospitals have been required to publicly post their pricing data in two formats - a machine-readable file for researchers and employers, and a consumer-friendly display for patients - but stakeholders have flagged that inconsistencies across hospitals limit how useful and comparable that data is. The RFI would seek public input on how to standardize and improve both formats to make hospital pricing data more transparent, consistent, and actionable for all users.

For more information about Hospital Outpatient Prospective Payment System (OPPS), visit: https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient

To review the CY 2027 Hospital OPPS and ASC proposed rule (CMS-1850-P) fact sheet, visit: https://www.cms.gov/newsroom/fact-sheets/calendar-year-2027-hospital-outpatient-prospective-payment-system-opps-ambulatory-surgical-center

CMS will accept public comments on the proposed rule for 60 days following its publication in the Federal Register . To view the proposed rule, visit: https://www.federalregister.gov/d/2026-13656

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