The Proposal Overview
The administration of President Trump has set forth a new plan that aims to modify the way Medicare compensates for outpatient care. Officials claim this move could help cut costs for numerous older Americans. However, hospitals express concerns that such changes might jeopardize funding for providers that attend to low-income and at-risk patients.
The Centers for Medicare and Medicaid Services (CMS) rolled out the proposed rule, which seeks to slash Medicare payments for hospitals involved in the federal 340B drug discount program. It also plans to widen site-neutral payment policies for certain outpatient services. CMS has highlighted this proposal’s potential in making health care more cost-effective and in addressing payment differences that could elevate expenses for beneficiaries.
CMS Administrator Dr. Mehmet Oz emphasized the proposal’s focus on patient affordability by enhancing usage management tools, aligning drug payments with real acquisition costs, and eradicating site-of-care disparities that unnecessarily increase costs for a large number of seniors.
Significance of the Proposal
Health care costs continue to be a pressing concern for elderly Americans. Many Medicare recipients face heightened premiums, deductibles, and prescription drug expenses. Despite Dr. Oz’s assurance that the proposal aims to prioritize patient affordability, hospitals fear that the cuts could impair safety-net providers serving underserved communities.
“The proposed OPPS rule from CMS takes an axe to critical funding that supports essential hospitals without concern for how it will affect the patients they serve,” voiced Jennifer DeCubellis, president and CEO of America’s Essential Hospitals.
Details of the New Rule
If approved, the rule will come into effect in 2027, potentially influencing how much Medicare beneficiaries spend out of pocket for certain medications and outpatient procedures. Specifically, the rule suggests increasing pay for outpatient care by 2.4%, slightly below the previous year’s 2.6% rate update.
In the short term, some Medicare beneficiaries might witness a decrease in out-of-pocket expenditures since reimbursement would reflect the actual cost hospitals paid for the drug. However, there is a concern that, in the long run, hospitals might seek alternative ways to offset lost revenue.
Kevin Thompson, CEO of 9i Capital Group, remarked, “Whether nonprofit or for-profit, hospitals should not be profiting off the spread between steep government discounts and higher Medicare reimbursement.”
Cuts in 340B Drug Program Payments
CMS aims to cut Medicare reimbursement for medications procured through the 340B program. This initiative enables qualified hospitals to buy outpatient drugs at reduced prices. The program assists hospitals catering to substantial numbers of low-income and uninsured patients.
CMS suggests that Medicare will pay significantly less for drugs procured via the 340B program starting in 2027, potentially lowering both Medicare spending and beneficiary cost-sharing for those medicines.
Thompson added, “The long-term question is who ultimately absorbs the reduced reimbursement. If hospitals don’t absorb it, those costs could eventually show up elsewhere in the health care system through higher prices or fewer services.”
Expansion of Site-Neutral Payments
CMS also proposes extending site-neutral payment policies to certain imaging services in hospital outpatient departments. Medicare often reimburses hospitals more than physician offices for identical services. Under the proposal, some imaging procedures at hospital-owned outpatient locations would be compensated at doctor-office rates.
Current policies typically result in higher patient cost-sharing when billed through hospital outpatient departments, even when identical care is provided. Site-neutral payments intend to minimize these inconsistencies.
Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, noted, “The 20 percent coinsurance would be calculated from a payment closer to what 340B hospitals actually paid, rather than a much larger reimbursement amount.” This would apply to particular physician-administered Part B drugs at hospitals participating in the program.
Impact on Medicare Beneficiaries
The most prominent potential benefit for patients lies in reduced out-of-pocket costs. CMS claims reducing payments for 340B drugs could lower beneficiary cost-sharing associated with those drugs. Moreover, site-neutral payment reforms may contribute to cost reductions when patients receive treatment in hospital-owned outpatient environments.
If the rule gets approval, Medicare beneficiaries might experience:
- Lower cost-sharing for certain outpatient prescription drugs.
- Reduced expenses for some imaging services performed in outpatient settings.
- More consistent pricing between hospital outpatient departments and physician offices.
The extent of the impact largely depends on the services a patient utilizes and whether the proposed rule undergoes finalization without significant alterations.
Next Steps
This proposal is an element of CMS’s draft 2027 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center payment rule. It must undergo a public comment process before a definitive version is released. If approved, the changes will come into force next year.
Beene emphasized, “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.”