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Each year, the Centers for Medicare & Medicaid Services (CMS) releases proposed rules pertaining to the Hospital Outpatient Prospective Payment System (OPPS) which impact how Medicare pays hospitals for outpatient care.
The changes to the 2027 OPPS are substantial and, if implemented, will deeply impact safety net hospitals. Key changes include:
- Significant cuts to reimbursement for hospitals under the 340B drug program – Asante estimates this will have an impact of around $38.5 million per year, 95% of which relates to drugs used to treat cancer.
- Offsetting system-wide rate increase of 2.4% for outpatient services provided by hospitals – shifting revenue from safety net hospitals to less resource-constrained hospitals.
- Implementation of a rebate program, instead of point-of-sale discount, adding significant administrative burden and cash flow challenges for health care providers.
- Acceleration of a system-wide overpayment claw-back, which amounts to a 3% rate cut for non-drug related services, instead of the anticipated .5% cut.
These changes will have substantial financial consequences for Asante and further impact access to critical services that serve the Rogue Valley.
What is 340B and why are the impacts of cuts to this program?
The federal 340B Drug Pricing Program, which is managed by the Health Resources and Services Administration (HRSA), helps eligible safety-net hospitals purchase many outpatient drugs at discounted prices. Congress created the program so hospitals serving rural, low-income and medically underserved communities could stretch scarce federal resources and continue providing comprehensive care.
For many rural hospitals, 340B savings help offset Medicare and Medicaid reimbursement that often falls below the actual cost of providing care. Those savings are commonly reinvested in services such as oncology, behavioral health, pharmacy assistance, trauma care, charity care and rural outreach clinics.
CMS has proposed a significant change to Medicare reimbursement for drugs purchased through the 340B Drug Pricing Program. Under the agency’s 2027 Outpatient Prospective Payment System proposed rule, payments for 340B-acquired drugs would be reduced from the current rate of Average Sales Price (ASP) plus 6% to ASP minus 33.4%.
While CMS states that this proposal is intended to more closely align Medicare reimbursement with the prices 340B hospitals pay for these medications, the reality is that this is an attack on the safety net and represents a fundamental shift in how safety net hospitals are supported through the 340B program.
For safety net providers, 340B savings are not excess revenue – these funds are reinvested into essential patient services, care coordination, community health programs and access initiatives that would otherwise be difficult to sustain.
The financial consequences for hospitals that serve a disproportionate share of low-income, uninsured and medically complex patients would be substantial. CMS estimates the proposal would reduce Medicare drug payments by approximately $4.55 billion in the first year alone.
For Asante, the annual impact will be roughly $38.5 million per year – nearly 95% of which relates to cancer drugs. The 340B program plays a critical role in supporting the high cost of oncology medications and services provided through our cancer centers.
Savings generated through the program help ensure that patients across our region can access life-saving treatments close to home, regardless of their ability to pay. Deep reductions in 340B reimbursement could threaten the financial stability of these services, making it more difficult to maintain access to advanced cancer treatments, patient navigation, supportive care programs and outreach efforts that are essential to achieving the best possible outcomes for patients facing a cancer diagnosis.
Quick note on offsetting rate increases
Changes to OPPS are required to be budget neutral, so in order to balance the 340B cuts, CMS proposes an average payment increase by 2.4%.
While this sounds like a positive, the reality is that impacts all hospitals, not just 340B hospitals, meaning it’s a revenue to shift away from safety net hospitals – those with lower margins and who take care of their communities sickest patients – to those hospitals in wealthier areas that are less resource constrained.
On top of this, it’s worth noting that the 2.4% increase does not keep pace with rising costs for labor, pharmaceuticals and medical supplies, and the net impact will be that Medicare reimburses even less of the cost of care than it does currently.
340B Rebate Program
Prescription drugs are one of the fastest-growing hospital expenses. Many specialty medications used to treat cancer, autoimmune diseases and other serious conditions can cost thousands of dollars per dose. Hospitals must purchase these medications before they are administered to patients, making reliable reimbursement essential.
CMS has proposed replacing the current point-of-sale discount for many 340B drugs with a rebate model. Under this approach, hospitals would purchase drugs at a higher upfront cost and receive reimbursement later through manufacturer rebates after eligibility information is verified. Although the total discount may ultimately be similar, hospitals would temporarily finance those higher drug costs themselves.
That change creates cash flow challenges for hospitals that already operate on narrow margins. Rural health systems may need millions of additional dollars in working capital simply to purchase medications while waiting for rebate payments. Rural health systems will also face new administrative costs associated with tracking claims, submitting rebate requests, reconciling payments and resolving disputes.
For health systems like Asante, these financial pressures matter because outpatient drug reimbursement helps support services far beyond the pharmacy. Stable reimbursement contributes to maintaining cancer treatment programs, infusion centers, emergency care, behavioral health services and other essential programs that may not be financially sustainable on their own.
Next steps
As CMS reviews public comments before issuing the final 2027 rule, rural hospitals will be watching closely. The challenge for policymakers will be preserving accountability while ensuring that 340B hospitals like Asante continue to have the financial resources needed to purchase lifesaving medications and provide essential health care services in the communities that depend on them.
Asante plans to engage with policymakers and impacted stakeholders ahead of the August 31 comment deadline, and will follow up with more information for concerned stakeholders in the near future.
Sources: Centers for Medicare & Medicaid Services (2026), CY 2027 Hospital Outpatient Prospective Payment System Proposed Rule Fact Sheet; Health Resources and Services Administration (HRSA), 340B Drug Pricing Program.
