On the afternoon of July 2, 2026, CMS put out the calendar year 2027 proposed rule for the hospital outpatient prospective payment system and the ambulatory surgical center payment system, file number CMS-1850-P. It is scheduled for the Federal Register on July 7 and comments are due by August 31, 2026. It landed the day before a holiday weekend, which is normal for CMS and means most practice managers will not open it until next week.
We read these rules every summer and the same thing happens every time: someone at an independent practice asks whether it matters to them, since they do not run a hospital. The honest answer is that most of it does not. The rest touches the places where your patients get procedures, the prior authorizations your staff file for hospital-based services, and the payment gap between your office and the hospital-owned clinic down the street. That part is worth an hour.
This article is the hour. The physician fee schedule proposed rule, which sets your own conversion factor for 2027, has not been released yet. We will cover it the day it comes out.
Key takeaways
- CMS proposes a 2.4 percent payment update for hospital outpatient departments and ASCs. It applies to facility fees, not to the professional claim your physicians bill.
- Eight more botulinum toxin injection codes would need prior authorization when furnished in a hospital outpatient department. Neurology, physiatry, urology and pain practices that inject at the hospital should read that section.
- Year two of the inpatient-only list phase-out removes 638 services. Expect more site-of-service reviews from commercial and Medicare Advantage plans for those codes.
- Site-neutral payment would extend to imaging without contrast at excepted off-campus hospital departments. Good for independent imaging, neutral for your own rates.
- Comments close August 31, 2026. A short, specific comment from a practicing physician is worth filing.
The headline number: a 2.4 percent update
CMS proposes a 2.4 percent increase to OPPS and ASC payment rates for facilities that meet their quality reporting requirements. The arithmetic is a 3.2 percent hospital market basket estimate minus a 0.8 percentage point productivity adjustment. It is in line with recent years, and it applies to the facility fee, not to the professional fee your surgeon bills on the CMS-1500.
If you own or hold a share in an ASC, the 2.4 percent is your number too. CMS has used the hospital market basket for ASC updates for several years and proposes to continue that through the current review window. Model it against your case mix rather than reading the headline: a center heavy in orthopedics and a center heavy in GI will land in different places once the individual procedure weights are applied.
Botulinum toxin prior authorization expands
This is the item most likely to change a workflow in a neurology, physiatry, urology or pain practice. Since July 2021, hospital outpatient departments have needed prior authorization for a short list of botulinum toxin services, including chemodenervation for chronic migraine (CPT 64615) and the toxin products themselves (for example J0585 for onabotulinumtoxinA). CMS says it has seen unexplained volume growth in related procedures and proposes adding eight more botulinum toxin injection codes to the hospital outpatient prior authorization list for 2027.
The important word is "hospital." The OPPS prior authorization program applies to services furnished in a hospital outpatient department. If your physician injects in your own office, the program does not apply and nothing changes. If your physician injects at the hospital's procedure suite, the hospital is responsible for obtaining the authorization, but in practice the request cannot be completed without your clinical notes, and a non-affirmed facility claim is usually followed by a denied professional claim. We have watched this play out with the 2021 codes: the hospital submits late, the practice is not told, the patient is injected, and both claims fail.
Practices whose providers inject in both settings should sit down with the hospital's authorization team before this rule is final and agree on three things: who submits, who supplies the documentation and by when, and how the unique tracking number reaches both billing offices before the claim goes out. Put it in writing. A one-page agreement now is cheaper than a quarter of denied claims in 2027.
Site-neutral payment reaches imaging
CMS proposes to extend its volume-control method, the one already applied to clinic visits at excepted off-campus provider-based departments, to imaging without contrast furnished in those same departments. CMS estimates the change saves about $260 million in the first year, roughly $190 million in Part B spending and $70 million in beneficiary cost sharing. Rural sole community hospitals keep their exemption.
For an independent practice this is competitively good news and operationally neutral. Hospital-owned imaging in off-campus locations gets paid closer to the physician fee schedule rate, which narrows the gap between what Medicare pays for a plain film at your office and the same film at a hospital-badged clinic across the street. It does not change your own rates at all. We think the direction is correct, and we expect hospital associations to fight it hard in comments, as they did with the clinic visit policy.
The inpatient-only list keeps shrinking
CY 2027 is the second year of a three-year phase-out of the inpatient-only list. CMS proposes removing 638 services this year from clinical families including auditory, digestive, endocrine, female genital, hemic and lymphatic, integumentary, male genital, maternity, mediastinum, respiratory and urinary procedures. When a code leaves the IPO list it becomes payable in the hospital outpatient setting, and many codes eventually reach the ASC covered procedures list.
For surgical practices this changes the conversation with payers, not just with Medicare. Commercial plans and Medicare Advantage plans tend to follow the IPO list when they decide whether to approve an inpatient stay. Once a procedure is off the list, expect more site-of-service reviews, more requests to schedule at an ASC, and more denials of inpatient admissions for those codes. Your scheduler and your authorization staff need the list of removed codes for your specialty, and your surgeons need to know that "we have always done this inpatient" will stop being an argument the payer accepts.
340B, the elephant in the rule
The largest dollar item is a proposal to pay hospitals for drugs acquired through the 340B program at average sales price minus 33.4 percent, with no add-on. CMS estimates that reduces Original Medicare drug payments by about $4.55 billion in the first year and beneficiary payments by about $1.15 billion, and it proposes to redistribute the savings into higher payments for non-drug services. Separately, CMS proposes a 3 percent reduction to non-drug OPPS payments for CY 2027 through CY 2029 to recover the $7.8 billion 340B remedy, up from the 0.5 percent offset that began in 2026.
Honestly, most independent practices should skim this section and move on. It affects hospital pharmacies and infusion centers. The one place it may reach you is indirect: if a hospital-owned infusion center in your area closes or changes its referral patterns, your oncology, rheumatology or GI patients will feel it. Watch for that over the next year rather than modeling it now.
Smaller items worth a glance
| Proposal | Who feels it | Practice action |
|---|---|---|
| Remove the colonoscopy follow-up documentation quality measure from the hospital outpatient and ASC quality programs, beginning with the CY 2029 payment determination | Hospitals and ASCs performing colonoscopy | None now; note it if you own an ASC and report the measure |
| Request for information on making hospital price transparency data more consistent | Hospitals | None, although the data is useful in your own contract negotiations |
| Cost-of-living adjustment to the non-labor share of OPPS payments in Alaska and Hawaii, about $55 million | Facilities in those two states | None |
| Partial hospitalization and intensive outpatient rates updated using CY 2025 claims | Hospital and community mental health center programs | None unless you refer heavily to a program that may change hours |
| Accrediting organizations to assess administrative compliance with EMTALA | Hospitals | None |
How to read the rule in an hour
Do not read it front to back. Open the CMS fact sheet first; it is a few pages and covers everything above. Then open the rule text and search for the section on prior authorization, read the list of proposed botulinum toxin codes, and compare it with what your physicians inject. Search for "inpatient only" and pull the addendum with the 638 codes; filter it to your specialty's code ranges. If you own an ASC, open the covered procedures list changes and the payment addendum for your top thirty codes. Everything else can wait for the final rule in November.
A worked example of why the hour pays. A four-physician urology group we know does about 300 bladder injections a year for overactive bladder, split between the office and a hospital outpatient department. If the hospital codes land on the prior authorization list and the hospital's process fails one time in ten, that is thirty encounters a year where the facility claim and the professional claim are both at risk. Sorting out the workflow in August is a two-hour meeting. Appealing thirty denied encounters in 2027 is a month of a coordinator's time.
Questions we hear
We are an office-based practice with no hospital work. Can we ignore this rule entirely?
Almost. The one thing to keep is the inpatient-only list removals if you refer patients for surgery, because your referred patients will start hearing "outpatient" from their plans for procedures that used to be admissions. Otherwise, wait for the physician fee schedule rule.
Does the 2.4 percent update reach our professional fees in any way?
No. Physician payment is set in the physician fee schedule rule, which sets the conversion factor separately. OPPS and ASC rates only affect the facility side of a procedure. If your surgeons are compensated on a formula tied to facility revenue at an ASC you own, that is a different conversation with your accountant.
Is it worth commenting when the hospital associations will file hundreds of pages?
Yes, and for a different reason. The associations argue policy. A two-paragraph comment from a practicing neurologist describing what happened to migraine patients when the 2021 authorization list took effect is evidence. CMS summarizes and responds to comments by topic in the final rule, and specific clinical accounts get quoted.
What to do this month
- Ask your hospital partners which eight botulinum toxin codes are proposed for prior authorization and confirm in writing who will file the requests if the rule is finalized as proposed.
- Pull the list of 638 IPO removals for your specialty and give it to your scheduler and your denial management lead. Flag the codes you currently schedule as inpatient.
- If you own an ASC or a share of one, model the 2.4 percent update against your case mix and read the covered procedures list changes in the full rule.
- Decide by mid-August whether you will comment, and assign one physician to write it. The deadline is August 31, 2026.
- Put the physician fee schedule proposed rule on your calendar as the next thing to read. If you want help modeling either rule against your own payer mix, book a call with our team.
