The Centers for Medicare and Medicaid Services proposed a rule Thursday that would cut Medicare payments to hospitals participating in the 340B drug discount program and expand site-neutral payment policies for certain imaging services starting in 2027. The proposal builds on the second Trump administration’s efforts to reform the 340B program and reduce payment disparities between hospital outpatient departments and physician offices. Medicare officials said the rule would control costs and steer money toward “clinically appropriate” care, but hospital groups immediately condemned the changes as harmful to safety-net providers.
Medicare proposes deeper cuts to 340B drug payments
The CMS wants to reimburse 340B hospitals at the average sales price of a drug minus 33.4%.
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Medicare estimates the proposed cut would reduce total drug spending by $5.7 billion in 2027 alone, including $1.15 billion in lower beneficiary drug payments during the first year. Because the policy must be budget-neutral, regulators want to increase outpatient payments for non-drug services by an equivalent amount. That shift would create an uplift for non-340B providers, including for-profit hospitals, which do not participate in the drug discount program and would be “major beneficiaries,” according to a TD Cowen research note.
Provider groups responded swiftly. “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,” Jennifer DeCubellis, president and CEO of the advocacy group America’s Essential Hospitals, said in a statement. CMS Administrator Dr. Mehmet Oz, in a press release, framed the rule differently: “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.”
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Site-neutral payments expand to imaging services
The proposed rule also broadens site-neutral payments by applying them to imaging services without contrast. “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,” the CMS said.
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The rule would also allow certain hospital accrediting organizations to assess compliance with the Emergency Medical Treatment and Labor Act, which requires hospitals that participate in Medicare to stabilize patients and provide appropriate medical screenings.
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The proposed rule includes a request for information on hospital price transparency, a longtime priority for the Trump administration.