Medicare site-neutral payments could take another significant step forward under the Centers for Medicare & Medicaid Services’ proposed 2027 Hospital Outpatient Prospective Payment System rule. CMS is seeking to reduce payment differences between hospital-owned outpatient departments and lower-cost settings for selected imaging services while continuing to phase out restrictions that require certain procedures to remain inpatient. The proposed changes are designed to lower Medicare spending, reduce beneficiary cost-sharing and encourage care in clinically appropriate, lower-cost settings.
The proposal also includes a major change to reimbursement for drugs purchased through the 340B Drug Pricing Program, making the rule broader than a simple outpatient payment update.
Medicare Site-Neutral Payments Target Imaging
Medicare often pays different amounts for essentially the same outpatient service depending on where it is delivered.
Hospital outpatient departments can receive higher reimbursement than physician offices, even when services involve comparable equipment and clinical complexity. Niskanen Center argues that these site-of-service differences can encourage health systems to acquire independent physician practices and convert them into hospital-affiliated facilities that qualify for higher rates.
CMS’s 2027 proposal would extend site-neutral reimbursement to certain imaging services without contrast performed in excepted off-campus provider-based departments.
These services include common diagnostic procedures such as CT scans, MRI examinations and other imaging tests.
Medicare Site-Neutral Payments Could Cut Costs
CMS estimates that applying the policy to these imaging services would reduce Medicare Part B expenditures by approximately $260 million during the first year.
That estimate includes about $190 million in direct Part B savings and $70 million in lower premium costs. Beneficiaries could save another approximately $70 million through reduced cost-sharing because Medicare patients commonly pay 20% coinsurance for Part B services.
The underlying policy principle is straightforward: Medicare should not automatically pay more for a service simply because a hospital owns the facility where it is performed.
Hospital Ownership Can Increase Imaging Prices
Niskanen’s analysis of 2026 Medicare prices illustrates how large the differences can become.
A breast ultrasound cost approximately $120 when delivered through a hospital facility compared with $84 in a physician office. A bone-density scan was nearly three times more expensive in a hospital clinic, while one higher-complexity heart scan showed a price difference of $429.
Higher hospital prices can include facility fees reflecting broader health-system overhead.
Critics of site-neutral reimbursement argue that hospital outpatient departments frequently treat patients with more complex medical needs and therefore require higher payments.
CMS’s proposed imaging policy is narrower, however. It targets noncontrast imaging services that are generally less complex and exempts important rural providers, including rural sole community hospitals. Critical access hospitals are not paid through OPPS and therefore are outside this specific policy.
CMS Continues Inpatient-Only List Phaseout
The proposed rule would also continue a three-year phaseout of Medicare’s inpatient-only, or IPO, list.
The IPO list identifies procedures that Medicare traditionally reimburses only when performed in an inpatient hospital setting. Removing procedures gives clinicians greater flexibility to determine whether appropriately selected patients can receive treatment in outpatient departments or ambulatory surgery centers.
Medicare Site-Neutral Payments Support Outpatient Options
For 2027, CMS proposes removing another 637 procedures, representing roughly 37% of the original inpatient-only list.
The procedures span several clinical categories, including abdominal and biliary procedures, urological services and ear, nose, throat, head and neck procedures.
CMS also proposes adding most of these procedures to the Ambulatory Surgical Center Covered Procedures List. This would allow more eligible procedures to be delivered in ASCs when clinicians determine that the setting is appropriate.
The proposal does not require physicians to move these procedures out of hospitals. It expands the range of locations available for clinically appropriate patients.
Ambulatory Surgery Centers Could Gain Volume
Ambulatory surgery centers generally operate with lower overhead costs than hospital outpatient departments.
Moving suitable procedures into ASCs could therefore reduce spending while preserving physician choice over the safest location for individual patients.
CMS’s broader strategy reflects an effort to align Medicare payment with clinical needs rather than facility ownership.
The agency had already expanded site-neutral payments for certain drug-administration services through the 2026 OPPS final rule, building on earlier changes affecting clinic visits at off-campus hospital departments.
340B Drug Payments Face Major Change
The 2027 proposal also addresses the 340B Drug Pricing Program.
Under 340B, eligible healthcare organizations can purchase outpatient drugs at significant discounts. Medicare has generally reimbursed those products using standard payment formulas that may substantially exceed hospitals’ actual acquisition costs.
CMS now proposes paying certain 340B-acquired drugs at approximately average sales price minus 33.4%, based on hospital acquisition-cost survey data.
Drug Savings Come With Budget Neutrality
CMS estimates the change would reduce Original Medicare drug payments by approximately $4.55 billion and beneficiary drug payments by around $1.15 billion in its first year.
However, OPPS is subject to budget-neutrality requirements. CMS would therefore increase payments for non-drug outpatient services by an equivalent amount.
That means some beneficiaries could pay less for 340B drugs while facing somewhat higher cost-sharing for other outpatient services.
The 340B proposal is also likely to remain legally and politically contested because previous CMS attempts to reduce reimbursement faced successful court challenges.
Medicare Site-Neutral Payments Signal Broader Reform
CMS’s proposed 2027 outpatient rule reflects a broader effort to move appropriate care away from unnecessarily expensive settings.
Expanding site-neutral imaging payments could directly reduce Medicare spending and patient coinsurance. Removing hundreds of procedures from the inpatient-only list could provide clinicians with more flexibility to use ambulatory surgery centers. Changing 340B reimbursement could bring Medicare payments closer to hospitals’ actual drug-acquisition costs.
The reforms remain proposals rather than final policy, and their ultimate impact will depend on CMS’s final rule and how providers respond.
Still, Medicare site-neutral payments are becoming an increasingly important tool in federal efforts to reduce payment distortions, discourage consolidation driven primarily by reimbursement differences and make outpatient care more affordable for beneficiaries and taxpayers.
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