In the CY 2027 Hospital Outpatient Prospective Payment System (OPPS) Proposed Rule, the Centers for Medicare & Medicaid Services (CMS) proposes to reduce Medicare Part B payments for certain separately payable outpatient drugs and biologicals acquired through the 340B Program. The proposal would represent a renewed effort by CMS to align OPPS drug payment for 340B hospitals with hospital acquisition costs, rather than paying for 340B drugs at the generally applicable OPPS drug payment rate.
History
Beginning in 2018, the first Trump administration reduced OPPS payment for many separately payable drugs purchased under the 340B Program from average sales price (ASP) plus 6 percent to ASP minus 22.5 percent, a reduction of nearly 30 percentage points from the prior payment methodology. Hospitals challenged the policy, and in 2022 the Supreme Court unanimously held in American Hospital Association v. Becerra that the U.S. Department of Health and Human Services (HHS) could not vary payment rates for 340B hospitals without first conducting the acquisition cost survey required by the Medicare statute.
After that decision, CMS was required to unwind the prior payment reductions and make remedial lump-sum payments totaling approximately $9 billion to 340B providers that lost reimbursement under Original Medicare (fee-for-service (FFS)). Further, because many Medicare Advantage plans tie reimbursement to a percentage of the CMS payment rate, 340B hospitals also incurred significant reimbursement losses under Medicare Advantage. The current proposal reflects CMS' attempt to do what the Supreme Court said the agency had not done the first time: use acquisition cost survey authority before varying payment for a subset of hospitals. It also follows recent executive branch drug-pricing directives that renewed the focus on whether Medicare should continue paying 340B hospitals at rates above their acquisition costs for outpatient drugs.
CMS' Proposed CY 2027 340B Payment Policy
CMS is proposing to reduce Part B payment for affected 340B-acquired drugs paid separately under OPPS beginning in CY 2027 from ASP plus 6 percent to ASP minus 33.4 percent, a reduction of nearly 40 percent. In practical terms, the proposal would again distinguish between drug claims submitted by 340B hospitals and otherwise comparable drug claims submitted by non-340B hospitals, with 340B claims paid at a lower rate intended to approximate acquisition cost.
Providers should evaluate which entities, locations, drugs, and claim types would be subject to the reduction; whether any categories of hospitals or drugs would be excluded or treated differently; and how CMS expects hospitals to identify 340B-acquired drugs on claims through modifiers or other billing mechanisms.
This proposal is significant for two reasons. First, it could materially reduce Medicare Part B revenue for hospitals that rely on 340B savings to support outpatient pharmacy, infusion, oncology, specialty drug, and uncompensated care programs. Even if the proposal is budget neutral within OPPS, the redistributive effect could be substantial for 340B hospitals because the reduction would be concentrated on high-cost outpatient drug claims.
Second, the proposal is legally significant because CMS is attempting to revive a policy that the Supreme Court already invalidated while trying to cure the statutory defect by relying on survey-based authority. Commenters are likely to focus on the adequacy of the survey, whether the proposed rate reasonably reflects acquisition costs, whether CMS has appropriately defined the impacted hospital groups, and how any budget-neutrality adjustments should be handled.
What 340B Hospitals Should Be Doing Now
340B hospitals should begin by modeling the reimbursement impact of the proposed policy across high-cost drugs, outpatient departments, infusion centers, oncology programs, and other service lines with significant Medicare Part B drug utilization. That analysis should account not only for lost drug reimbursement but also for how reduced 340B savings could affect access programs, charity care, contract pharmacy arrangements, and other hospital programs that depend on the 340B margin to remain financially viable.
Hospitals should also review their 340B claim identification processes, modifier use, pharmacy and revenue cycle controls, and documentation supporting whether a drug was acquired under the 340B Program.
Providers considering submitting comments should address the survey methodology, the proposed payment rate, the scope of covered hospitals and drugs, operational burden, patient access implications, and unintended consequences before the August 31, 2026, comment deadline.
Comments can be submitted electronically at https://www.regulations.gov/docket/CMS-2026-2344.
For more information about the proposed 340B payment changes or further analysis regarding the 340B Program, please contact Gregory Fliszar, Samuel Cottle, or any other member of Baker Donelson's Health Law Group.