2027 OPPS final rule: Rebuild Each Hospital Entity's Outpatient Medicare Budget From the 340B Drug Line, the 2% Remedy Offset, and Site-Neutral Imaging Before January 1

The 2027 OPPS final rule raises the headline outpatient rate 2.3%, but it also cuts 340B drug payment from ASP plus 6% to ASP minus 28%, lifts the remedy offset to 2%, and moves imaging without contrast at excepted off-campus departments to a physician-office rate. Don't budget the headline. Rebuild each entity's Medicare outpatient revenue as five lines.

Why this matters now

The Centers for Medicare & Medicaid Services published its CY 2027 OPPS and ASC final rule fact sheet on 2026-11-04, for dates of service on or after January 1, 2027. The update for hospitals and surgery centers that meet quality reporting requirements is 2.3%, a 3.2% market basket increase less a 0.9 percentage point productivity adjustment. Payment for separately payable drugs acquired under the 340B program moves from average sales price plus 6% to ASP minus 28%. CMS says it set that rate from 340B ceiling price data supplied by HRSA rather than from the acquisition cost survey it ran earlier in the year, and it is softer than the ASP minus 33.4% proposed in July. CMS estimates $4.35 billion in first-year Medicare drug payment reductions and $1.1 billion less in beneficiary cost sharing. Because the statute requires budget neutrality, the savings come back as higher payments for non-drug services across all OPPS hospitals.

Two further policies change the shape of the revenue line, not just its level. The offset that recovers the $7.8 billion CMS says hospitals were overpaid for non-drug services while the 2018 to 2022 340B cuts were in place rises from a 0.5% conversion factor reduction to 2% beginning in 2027, and CMS expects the recovery to finish in 2031. Hospitals that enrolled in Medicare after January 1, 2018 are excluded. And imaging without contrast, meaning bone density scans, x-rays, ultrasounds, CT scans, and MRIs, furnished in excepted off-campus provider-based departments will be paid at the physician fee schedule equivalent rate, which the American Hospital Association summary of November 4 puts at about 40% of the OPPS rate, with rural sole community hospitals excepted. CMS estimates $260 million in first-year savings from that policy. The MLN Connects newsletter of 2026-11-05 confirmed the rule to providers, and HFMA reported on November 5 that the budget neutrality adjustment adds 7.5% to non-drug OPPS payments, or 5.5% net of the 2% recoupment.

Coverage from the hospital associations and the trade press explains each policy and records the reaction: safety-net hospitals call the drug cut an assault on 340B, and the Federation of American Hospitals welcomes the redistribution. What none of it does is show a finance team with a 340B hospital, a non-340B hospital, and a surgery center in the same group how to turn those policies into a 2027 budget a reviewer can reproduce from the group's own claims. That is this article.

The five lines that move 2027 outpatient Medicare revenue

A payment rule change is a transaction price change. Under ASC 606, Medicare outpatient revenue is recognized per encounter at the amount the hospital expects to collect from Medicare and the patient together, so the 2027 rule reprices every claim with a date of service from January 1 onward. The budget should carry it as five separate lines built from each entity's own 2026 claims, because each line responds to a different fact about the entity: its 340B status, its Medicare enrollment date, where its imaging sits, and what its surgeons do.

The drug line deserves the closest look because it is the one the headline hides. A payment of ASP minus 28% divided by a payment of ASP plus 6% is 0.72 over 1.06, or 0.679. That is a 32.1% cut on every separately payable 340B drug dollar. The acquisition cost of those drugs does not move, because the 340B ceiling price is set by statute and not by this rule, so the entire cut lands on the 340B margin that funds the rest of the hospital. The budget neutrality uplift on non-drug services is paid to every OPPS hospital, including the ones that never bought a 340B drug. A group with one of each kind of hospital will see them move in opposite directions.

One hospital group worked through, entity by entity

Call the group Lakeview Health: three entities, one finance team, a calendar year-end, and $98 million of 2026 Medicare outpatient allowed charges. The figures are illustrative. Lakeview Regional Medical Center is a 340B disproportionate share hospital that enrolled in Medicare in 2009 and owns an excepted off-campus imaging center it acquired in 2014. Lakeview North Community Hospital is not a 340B covered entity, enrolled in 1998, and has no off-campus departments. Lakeview Surgery Center is an ASC the group owns with its surgeons.

Step one: pull 2026 claims by entity, line, site, and status

The budget starts from the group's own claims, not from a national impact table. The query is every 2026 Medicare outpatient claim line by entity, HCPCS code, status indicator, the 340B drug modifiers, the off-campus department modifiers, place of service, date of service, and allowed amount. Regional's query returned $60 million: $15 million of separately payable 340B drugs, $3 million of imaging without contrast at the excepted off-campus imaging center, and $42 million of other non-drug services. North returned $30 million: $4 million of separately payable drugs at ASP plus 6% and $26 million of non-drug services. The surgery center returned $8 million. The sum tied to Medicare outpatient revenue in each entity's general ledger, net of the contractual adjustment, which is the first tie-out and the one most groups skip.

Step two: the drug line

Regional's $15 million of 340B drug payment becomes $15 million times 0.679, or $10.19 million, a reduction of $4.81 million. Its 2026 acquisition cost for those drugs was $9.0 million, so the 340B margin on Medicare patients falls from $6.0 million to $1.19 million, an 80% decline, with no change in what the pharmacy pays. North's $4 million of drug payment is unchanged, because non-340B hospitals stay at ASP plus 6%. The drug line is zero for North and the largest line on the page for Regional.

Step three: the conversion factor line

Both hospitals enrolled before January 1, 2018, so both carry the 2% remedy offset and both receive the 7.5% budget neutrality increase. Using the net 7.7% that MHA reports for the conversion factor, Regional's $42 million of other non-drug services rises by $3.23 million and North's $26 million rises by $2.00 million. A hospital that enrolled after January 1, 2018 does not carry the 2 percentage point reduction, so its factor rises by more; take that number from the rule's addenda rather than from any summary.

Step four: the imaging line

Regional's $3 million of imaging without contrast at the excepted off-campus center moves to the physician fee schedule equivalent rate. At roughly 40% of the OPPS rate the line falls to about $1.2 million, a reduction of $1.8 million. The register should compute this code by code against the 2027 rates, because the 40% is an approximation across the family and the 2027 OPPS base is itself higher, but the rounded figure is close enough for the bridge. North has no excepted off-campus departments, so its imaging line is zero. Imaging with contrast and imaging on campus are not touched by this policy at either hospital.

Step five: the volume scenario and the outlier check

The surgery center's $8 million rises by 2.3%, or $0.18 million, on price. The 637 services leaving the inpatient-only list and the more than 600 codes joining the ASC list are not a price change. They are a volume question: which cases the surgeons will move from Regional's inpatient and outpatient departments to the surgery center, and at what rate. That line sits at zero in the base budget with a scenario attached, owned by surgical leadership, not finance. The outlier threshold rising from $6,225 to $7,150 is a claim-level check on the small number of high-cost outpatient claims, held at zero with a note until the claims team has run it.

Step six: the bridge

Regional's 2027 Medicare outpatient revenue is $4.81 million lower on drugs, $3.23 million higher on the conversion factor, and $1.80 million lower on imaging, a net decline of $3.38 million, or 5.6% on $60 million. North is $2.00 million higher, a 6.7% increase on $30 million. The surgery center is $0.18 million higher, 2.3%. The group is $1.20 million lower, a 1.2% decline on $98 million, against a 2.3% headline update and a 7.7% conversion factor increase. The board sees five lines by entity and one honest group number, not a percentage copied from a fact sheet.

The cost side is a separate exercise. The department labor budget built from rate, hours, and mix is where staffing belongs, the laboratory fee schedule bridge carries the lab line, and the physician fee schedule bridge covers the employed physician entities. Medicare Advantage contracts keyed to a percentage of OPPS pick up all five lines automatically, so the payer mix review should carry the same bridge by contract.

Accounting controls for the 2027 OPPS final rule

Source data: the 2026 Medicare outpatient claim lines by entity, code, status indicator, modifier, site, date of service, and allowed amount; the general ledger Medicare outpatient revenue and contractual adjustment accounts by entity; each entity's 340B covered entity status and Medicare enrollment date; the list of excepted off-campus provider-based departments; the pharmacy's 340B acquisition cost by drug; the final rule fact sheet, the rule text, and the addenda carrying the conversion factor and per-code rates.

Calculation: a fixed sequence anyone can rerun. Tie the claim-line total to ledger revenue net of contractual adjustments. Multiply the separately payable 340B drug line by 0.679 for 340B entities and by one for everyone else. Apply the entity's conversion factor change to the remaining non-drug services, using the pre-2018 or post-2018 factor as the enrollment date dictates. Reprice imaging without contrast at excepted off-campus sites code by code at the physician fee schedule equivalent rate. Hold the volume and outlier lines at zero with scenarios attached. Revenue here is a flow: it changes for dates of service from January 1, 2027. The Medicare receivable at December 31, 2026 is a point-in-time balance priced at 2026 rates, and the 2027 change does not touch it. 340B drug inventory is a point-in-time asset carried at acquisition cost, and a lower Medicare payment is not a reason to write it down. The contractual adjustment is a debit against gross revenue; the budget neutrality uplift is a credit to revenue; the two are shown on separate lines and never netted into one. The lump-sum remedy payment received in 2024 was a one-time credit, and the 2% offset that recovers it is a lower rate on future revenue, not a liability to accrue.

Review: a second person reruns the claim-line query and lands on the same entity totals; the drug line equals 32.1% of the 2026 340B drug base for 340B entities and zero elsewhere; the conversion factor line equals the stated percentage of the non-drug base after the imaging codes are removed; the imaging line covers only imaging without contrast at excepted off-campus sites and excludes on-campus and contrast studies; no December 2026 date of service is repriced at 2027 rates in January billing; no inventory adjustment is booked for the drug cut; and the board package shows the five lines by entity with the volume scenario flagged as a decision, not an assumption.

Decision: the system CFO or finance lead owns the budget method and the five-line bridge. Pharmacy and 340B compliance leadership own the drug acquisition data and whether any purchasing change is warranted, after reading the rule text rather than the fact sheet. Surgical leadership owns which cases move to the surgery center and when. The controller owns the tie-out, the date-of-service cutover, and the inventory position. Whether to restructure an off-campus imaging site is a strategic decision for the board, informed by the imaging line but not made by it.

Limits and common mistakes

The 2.3% update is not your number, and neither is the 7.7% conversion factor change. An entity's actual change is the sum of five lines, and for a 340B hospital the largest line is negative. Budget the lines.

The 40% imaging figure is an approximation. The physician fee schedule equivalent rate is set per code, and the 2027 OPPS base is higher than the 2026 base, so a code-level register will not match a flat 40% exactly. Use it for the bridge, then replace it with the code-level result.

Enrollment date and hospital type change the arithmetic. Hospitals that enrolled in Medicare after January 1, 2018 do not carry the 2% remedy offset. Rural sole community hospitals, PPS-exempt cancer hospitals, and children's hospitals keep ASP plus 6% on 340B drugs. A group with one of each cannot use one factor.

Don't net the drug cut against the uplift and report one percentage. The board needs to see that one entity lost 32.1% of its drug line while every entity gained 7.7% on everything else, because the two numbers have different causes and different owners.

The fact sheet does not carry the conversion factor or the per-code rates. The $90.97 and $98.01 figures come from the MHA summary of November 6, and the addenda to the rule are the authority. Load them before the budget is final.

Lakeview is illustrative. The rates, percentages, and savings estimates are from the CMS fact sheet of November 4, 2026 and the AHA, HFMA, and MHA summaries that followed it. The rule text will add detail the fact sheet does not carry, and the volume effects of the inpatient-only and ASC list changes depend on surgeons, not on CMS.

Frequently Asked Questions

How much does the 2027 OPPS final rule cut 340B drug payment?

Separately payable drugs acquired under the 340B program will be paid at average sales price minus 28% from January 1, 2027, down from ASP plus 6%. That is a 32.1% cut on the drug line, since 0.72 divided by 1.06 is 0.679. CMS had proposed ASP minus 33.4% and set the final rate from HRSA 340B ceiling price data. Non-340B hospitals, rural sole community hospitals, PPS-exempt cancer hospitals, and children's hospitals keep ASP plus 6%.

Why does a 340B hospital's budget fall when the OPPS update is 2.3%?

The 2.3% update applies to the conversion factor, and the savings from the drug cut are redistributed as a 7.5% budget neutrality increase on non-drug services, less the 2% remedy offset. A hospital enrolled before 2018 sees its conversion factor rise about 7.7%. A 340B hospital with a large separately payable drug line loses 32.1% of that line, which can outweigh the uplift. In the worked example the 340B hospital fell 5.6% while the non-340B hospital in the same group rose 6.7%.

What changed in the 340B remedy offset for 2027?

CMS is recovering an estimated $7.8 billion it says hospitals were overpaid for non-drug services while the 2018 to 2022 340B cuts were in place. The offset began in 2026 as a 0.5% reduction to the OPPS conversion factor and was expected to run about 16 years. For 2027 the reduction rises to 2%, and CMS expects the recovery to finish in 2031. Hospitals that enrolled in Medicare after January 1, 2018 are excluded.

Which imaging services move to the site-neutral rate in 2027?

Imaging without contrast, meaning bone density scans, x-rays, ultrasounds, CT scans, and MRIs, furnished in excepted off-campus provider-based departments will be paid at the physician fee schedule equivalent rate, roughly 40% of the OPPS rate. Rural sole community hospitals are excepted. CMS estimates $260 million in first-year savings. On-campus departments and imaging with contrast are not affected by this policy.

Does the 2027 rule change receivables or 340B inventory already on the balance sheet?

No. Outpatient revenue is priced by date of service, so the Medicare receivable at December 31, 2026 is a point-in-time balance at 2026 rates, and 340B drug inventory stays at acquisition cost because the ceiling price did not change. The new rates apply to dates of service from January 1, 2027. A reviewer should confirm that December encounters billed in January are not repriced and that no write-down of drug inventory is booked.

Once the budget is five lines per entity built from the group's own claims rather than one percentage copied from a headline, the OPPS rule stops being a surprise in February and becomes a dated, entity-level plan the board can question line by line. FinBoard reads every entity's QuickBooks file into one consolidated view, so a hospital group's finance team can see outpatient revenue, contractual adjustments, and drug cost by entity and department, carry the drug, conversion factor, and imaging lines as budget versus actual through 2027, and drill from any variance to the postings behind it. See how FinBoard puts every entity's outpatient revenue bridge on one page.