CMS Unveils Proposed Hospital Payment Increases Along With 340B Cuts, Site-Neutral Expansion – Home Health Systems Get a Bump

On July 1, the Centers for Medicare and Medicaid Services (CMS) issued proposed payment rules, including a provision that would substantially alter rates for the 340B drug discount program and implement site-neutral payments for certain imaging services beginning in 2027. The agency also proposed payment increases for Home Health Systems & ESRD PPS.

The 340B drug discount program has fallen into the crosshairs of the second Trump administration and these rules build on mounting attacks to the program. In a press release for the 2027 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) proposed rule, CMS said that the changes would “better reflect” what hospitals pay for medications after a CMS survey found that hospitals acquire the drugs at a cost lower than the average sales price, but Medicare payments exceed the 340B acquisition costs. The agency estimates aligning the costs will save the Medicare program $1.15 billion and $4.55 billion in drug expenditures.

In response, America’s Essential Hospitals released a statement urging the agency to reconsider and implied that a legal challenge to the rules would likely follow:

CMS is proposing unlawful cuts to Medicare outpatient drug payments that will disproportionately harm essential hospitals, using a flawed methodology that is based on data from less than a quarter of 340B-covered entities. The rule’s so-called site neutral policy is also yet another cut to Medicare payments that hospitals desperately need to stay open and serve their communities.

Overall, the 2027 OPPS and ASC rule proposes boosting payments for outpatient care by 2.4%, which is lower than the 2026 increase of 2.6%. The rule also includes a request for information (RFI) on strengthening the standardization of hospital price transparency data. The CMS fact sheet explains that the RFI seeks feedback on the machine-readable file requirement and potential approaches to enhance the comparability and usefulness of the consumer-friendly display requirement.

Lawmakers have also taken issue with the 340B program, following a series of litigation-thwarted reforms proposed by prior administrations. Senator Bill Cassidy (R-La.), chair of the Senate health committee, has introduced a bill to restrict the program. According to STAT, Cassidy has spent years investigating the program, including investigations into the company that contracts with the government to be the program’s vendor. The bill would implement restrictions on the program to allow drugmakers to give hospitals retroactive rebates instead of upfront discounts.

On site neutrality, the proposal would continue to phase out the inpatient-only list of services by removing 638 services from 12 clinical families. It also updates the intensive outpatient program and partial hospitalization program payment rates by using the 2025 claims data and the latest available cost information, Inside Health Policy explains. Expanding the site-neutral payment policy to imaging without contrast services solidifies a rate that is 40% less than the outpatient PPS rate.

Elsewhere, CMS proposed the prospective payment rule for home health systems (HH PPS), which includes an aggregate payment increase of 2.4%. The pay bump would mark the first true increase for home health since the 2022 rule, Home Health Care News reports. According to industry experts, the rule reflects a softening towards the sector by an otherwise aggressive administration. From Beau Sorensen, chief operating officer of First Choice Home Health & Hospice:

While it is not nearly enough after five years of cuts, getting any increase at all feels outstanding.… The inclusion of palliative care as a bona fide reason for home health services was one of the standout positives in the rule for me as well.

CMS also proposed an aggregate 2% pay increase for the End Stage Renal Disease Prospective Payment System (ESRD PPS). In the CMS fact sheet, the agency proposes replacing certain reporting measures and raises potential updates to the measure domains and weights used to calculate total performance scores.