Cassidy Proposes a Twelve-Section Rewrite of 340B and Wants Your Comments by August 28

The proposed CY 2027 outpatient payment rule would cut 340B drug reimbursement by nearly 40 percentage points, speed up an existing $7.8 billion clawback, and extend site-neutral payment to imaging. CMS will accept comments through August 31, 2026.

On July 2, 2026, CMS released its proposed Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center rule for calendar year 2027 (CMS-1850-P). The rule reaches roughly 3,500 hospitals and 6,400 surgery centers. If you run pharmacy, finance, or compliance at a 340B covered entity, three proposals deserve your attention now: a deep cut to 340B drug reimbursement, a faster clawback of past 340B-era payments, and a wider site-neutral payment policy.

The 340B cut: from ASP plus 6% to ASP minus 33.4%

Medicare pays for most separately payable Part B drugs at average sales price plus 6%. For 2027, CMS proposes paying for drugs acquired through the 340B program at the ASP minus 33.4%. That is a swing of nearly 40 percentage points on every eligible claim.

CMS grounds the proposal in a drug acquisition cost survey it ran from January 1 through April 7, 2026, under section 1833(t)(14)(D)(ii) of the Social Security Act and Executive Order 14273. The agency says the survey found wide gaps between what hospitals pay for drugs inside 340B and what they pay outside it. In some cases, CMS says, a beneficiary’s 20% cost-sharing amount exceeded what the hospital paid for the drug.

CMS estimates the change would cut Medicare drug payments by $4.55 billion and beneficiary drug payments by $1.15 billion in the first year. The statute requires budget neutrality, so the money stays within the OPPS: CMS would raise payments for non-drug services by an equivalent amount. The American Hospital Association calculates that offset at an 8.14% increase to the conversion factor. Hospitals outside the 340B program, including most for-profit systems, would come out ahead.

A faster clawback on top of the cut

CMS previously tried a version of this policy. From 2018 through 2022, it paid 340B drugs at ASP minus 22.5%. In 2022, a unanimous Supreme Court struck down that policy in American Hospital Association v. Becerra because CMS had not first surveyed hospital acquisition costs. The remedy rule that followed requires CMS to recoup $7.8 billion in non-drug payment increases made from 2018 through 2022 by applying a 0.5% annual cut to the conversion factor, which began this year.

The proposed rule would raise that annual offset from 0.5% to 3% starting in 2027, for hospitals enrolled in Medicare before January 1, 2018. At 3%, CMS completes the recoupment in 2029 rather than 2041.

This time CMS has the acquisition survey the Supreme Court said it lacked. That closes the specific legal gap, but hospital groups have signaled they will fight the policy, and TD Cowen analysts expect another court challenge anyway.

Site-neutral payment reaches imaging

CMS also proposes to pay excepted off-campus provider-based departments the Physician Fee Schedule equivalent rate, about 40% of the OPPS rate, for imaging without contrast. This extends the volume-control method that already applies to clinic visits and, as of 2026, drug administration services. Rural sole community hospitals would stay exempt.

CMS estimates $260 million in reduced Part B spending in the first year, including about $70 million less in beneficiary cost sharing.

What the industry is saying

CMS Administrator Dr. Mehmet Oz framed the rule as an affordability measure: “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.”

Hospitals see it differently. Ashley Thompson, the AHA’s senior vice president of public policy analysis and development, called the 340B proposal an “enormous cut” that “will make drugs less affordable for America’s most vulnerable patients.” Jennifer DeCubellis, president and CEO of America’s Essential Hospitals, said the rule “takes an axe to critical funding that supports essential hospitals without concern for how it will affect the patients they serve.”

What you should do before August 31

CMS will accept comments through August 31, 2026. Four steps between now and then:

• Model the exposure. Reprice your Medicare 340B drug mix at ASP minus 33.4% and compare it to your acquisition costs. The gap is your revenue at risk for 2027.

• Layer in the clawback. If your hospital enrolled in Medicare before 2018, add a 3% conversion factor cut on non-drug services through 2029 to the model.

• Check your imaging footprint. If you bill non-contrast imaging from excepted off-campus departments, price those services at the PFS-equivalent rate.

• Comment. Specific data on your patient mix, drug costs, and how 340B savings fund services carries more weight with CMS than general objections.

CMS typically finalizes the OPPS rule in early November. We will track the comment record and the final rule as they land.

The bottom line

The CY 2027 proposed rule is the most consequential 340B development since the Supreme Court’s 2022 decision in American Hospital Association v. Becerra. Between the drop to ASP minus 33.4% and the accelerated $7.8 billion clawback, covered entities face a compounding hit to outpatient drug margins that begins next year and does not close until 2029. Nothing here is final yet, and the comment window is your best chance to shape the outcome with evidence CMS cannot get anywhere else.

Don’t wait for November. Model your Medicare 340B exposure, quantify what the cuts mean for the services those savings underwrite, and file a comment before the August 31 deadline. Reach out to MedMatrix Rx with questions or for assistance.

Sources

• CMS fact sheet: CY 2027 OPPS/ASC Proposed Rule (CMS-1850-P), July 2, 2026. https://www.cms.gov/newsroom/fact-sheets/calendar-year-2027-hospital-outpatient-prospective-payment-system-opps-ambulatory-surgical-center

• AHA News: CMS proposes increases to Medicare hospital outpatient department payment rates, site-neutral and 340B changes, July 2, 2026. https://www.aha.org/news/headline/2026-07-02-cms-proposes-increases-medicare-hospital-outpatient-department-payment-rates-site-neutral-and-340b

• Healthcare Dive: Medicare slashes 340B payments, broadens site-neutral policies in proposed 2027 payment rule, July 2, 2026. https://www.healthcaredive.com/news/regulators-propose-slashing-340b-payments-broadening-site-neutral-policies-2027/824312/

• Proposed rule at the Federal Register. https://www.federalregister.gov/d/2026-13656