The Centers for Medicare & Medicaid Services (CMS) finalised the calendar year 2027 hospital outpatient and ambulatory surgical center payment rule on 4 November 2026, and it touches nearly every hospital that treats Medicare patients. The rule covers about 3,500 hospitals and 6,400 ambulatory surgical centers. Outpatient rates rise 2.3% for 2027, but payments for drugs bought through the 340B programme fall sharply, and more imaging will be paid at the lower physician-office rate.
Payment Rates Rise, but Not by Much
Hospitals that meet quality reporting requirements will see outpatient payment rates rise 2.3% in 2027, made up of a 3.2% market basket increase minus a 0.9 percentage point productivity adjustment. Ambulatory surgical centers that meet their reporting requirements get the same 2.3% update. The American Hospital Association said the increase falls short, with Ashley Thompson, its senior vice president of public policy analysis and development, saying the rate does not adequately take into account the financial challenges facing hospitals today.
340B Drug Payments Fall Sharply
The largest single change is to drugs bought under the 340B Drug Pricing Program. From 1 January 2027, Medicare will pay for 340B drugs at the average sales price minus 28%. CMS based the rate on a survey of hospital drug acquisition costs run from 1 January to 7 April 2026, which found hospitals buy 340B drugs well below the average sales price. In some cases the patient's 20% cost share was more than the hospital had paid for the drug.
CMS estimates the change will save people with Original Medicare $1.1 billion in drug costs in 2027 and taxpayers a further $4.35 billion. A beneficiary who receives a qualifying drug in a hospital outpatient department is expected to save about $900 on average in 2027. The policy has to be budget neutral by law, so payments for non-drug outpatient services will rise by the same amount.
The Old 340B Remedy Gets Collected Faster
Separately, CMS is speeding up the collection of an earlier 340B overpayment. A 2023 remedy rule had set a 0.5% annual reduction in the outpatient conversion factor for non-drug services, to claw back $7.8 billion in extra payments made from 2018 to 2022. From 2027 the reduction rises to 2% a year and will stay in place until the $7.8 billion is recovered, which CMS expects in 2031. Hospitals that enrolled in Medicare after 1 January 2018 are excluded.
More Surgery Moves Outpatient
The rule keeps phasing out the inpatient-only list, which names procedures Medicare will only pay for when the patient is admitted. In this second year of a three-year phaseout, 637 more services come off the list, across areas including digestive, respiratory, urinary, maternity care and delivery, and endocrine procedures. The ambulatory surgical center covered procedures list also grows by several hundred surgical procedures, giving physicians more choice over where a procedure happens and often lowering what patients pay.
Imaging moves the same way. CMS is extending its site-neutral policy to imaging without contrast, including certain bone density scans, x-rays, ultrasounds, CT scans and MRIs, when done in excepted off-campus hospital departments. Those services will be paid at the lower physician fee schedule rate. CMS estimates the change will save beneficiaries and taxpayers $260 million in 2027 and more than $9 billion from 2027 to 2036. Rural sole community hospitals are exempt.
Tighter Checks on Botulinum Toxin Claims
Eight more botulinum toxin injection codes will need prior authorisation in hospital outpatient departments. Claims for those codes rose 42.8% from 2017 to 2024 while overall hospital outpatient volume fell 8.3%, and CMS said it found no clinical or coding explanation for the rise. Justice Department reports have also documented fraudulent billing, misbranded products and improper payments involving botulinum toxin services. Medicare will still cover medically necessary injections, including treatment for chronic migraines, when a physician documents the need.
Why This Matters for Healthcare Organizations
For hospitals, the rule is a mixed picture. The 2.3% rate rise helps, but the faster 340B remedy collection and the lower drug payments will bite for hospitals that rely on 340B margins to fund other services. Finance teams should model both effects together, since the budget-neutral shift moves money from drug payments to non-drug services rather than simply cutting it.
Analysis: Payment Follows the Setting, Not the Building
The thread running through the rule is payment that follows the setting, not the building. CMS is paying less when a service can be done as well in a cheaper setting, and it is using the savings to cut what patients pay for drugs and imaging. The risk is in the transition: hospitals that built services around the old rates, especially 340B drug margins, have weeks to rework budgets for a rule that takes effect on 1 January.
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Sources and References
- Centers for Medicare & Medicaid Services — Medicare Outpatient Final Rule Expands Surgical Options, Lowers Out-of-Pocket Costs for 340B Drugs, 4 November 2026: https://www.cms.gov/newsroom/press-releases/medicare-outpatient-final-rule-expands-surgical-options-lowers-out-pocket-costs-340b-drugs
- Centers for Medicare & Medicaid Services — Calendar Year 2027 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Final Rule (CMS-1850-F), 4 November 2026: https://www.cms.gov/newsroom/fact-sheets/calendar-year-2027-hospital-outpatient-prospective-payment-system-opps-ambulatory-surgical-center-0
- Becker's ASC Review — CMS ups ASC pay 2.3%, expands site-neutral payments in 2027: 18 notes, 5 November 2026: https://www.beckersasc.com/asc-news/cms-ups-hospital-outpatient-pay-2-3-cuts-340b-rates-in-2027-15-notes/
- American Hospital Association, via EIN Presswire — CMS finalizes increases to Medicare hospital outpatient department payment rates, changes to site-neutral and 340B for 2027, 5 November 2026: https://www.einpresswire.com/article/954639160/cms-finalizes-increases-to-medicare-hospital-outpatient-department-payment-rates-changes-to-site-neutral-and-340b-for-2027
Reporting based on the sources above, accessed 5 November 2026. The CMS press release and fact sheet were read directly, and the Becker's ASC Review report and the American Hospital Association statement were read directly and cross-checked against them. MedClinicX did not conduct original reporting or interviews for this article. Corrections: contact us via https://medclinicx.com/contact