The 11.6% Inside a 2.4% Outpatient Update
CMS summarized the CY 2027 outpatient proposed rule as a 2.4% update. The conversion factor moves from $91.415 to $102.004, because paying 340B drugs at ASP minus 33.4% pulls $4.85 billion out of drug payment and statute puts it back into everyone's non-drug rates. The agency's own impact model puts 13.4 points between for-profit and major teaching hospitals.
If you built a CY 2027 outpatient budget off the OPD fee schedule increase factor, the proposed rule broke it on July 7.
The headline is 2.4%. It is a real number, and it is calculated the way it always is: a 3.2% hospital inpatient market basket estimate less a 0.8 percentage point productivity adjustment.
The conversion factor says something else. CMS proposes to take it from $91.415 to $102.004, which is 11.6% (chart below).
That spread is a $4.85 billion transfer running through your rates, and which side of it you land on has nothing to do with the update factor.
Where the 11.6% comes from
CMS publishes the whole build. Multiply these together against last year's conversion factor and you get to $102.004:
- 1.024, the OPD fee schedule increase factor
- 1.0098, wage index budget neutrality
- 0.9951, the 5 percent annual cap on individual hospital wage index reductions plus the transitional low wage index exception
- 0.9993, the new Alaska and Hawaii cost-of-living adjustment
- 0.9994, the cancer hospital payment adjustment at a 0.88 target payment-to-cost ratio
- 1.0844, the 340B drug payment policy
- 1.0012, the change in the pass-through spending estimate
Six of those seven are housekeeping. The 340B line is the rule.
CMS proposes to pay for drugs acquired under the 340B Program at ASP minus 33.4%, replacing ASP plus 6%. The agency put the acquisition-cost math on the record: it estimates 340B acquisition cost sits roughly 33.4% below the mean ASP, and it considered ASP minus 28% (the volume-weighted ceiling-price calculation) as the alternative before landing on the deeper cut.
That pulls approximately $4.85 billion out of OPPS drug payment in CY 2027. Statute requires the adjustment to be budget neutral, so all of it goes back, redistributed to every hospital paid under the OPPS as an 8.44% increase to the conversion factor for non-drug items and services.
A hospital that acquires no 340B drugs gets an 8.44% raise on everything else it bills, for doing nothing.
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