CMS Updated Payment Rules for 2027

FINANCIAL STABILITY remains critical with a laser focus on preparing for fiscal year (FY) 2027 (Oct. 1, 2026) inpatient settings with calendar year (CY) 2027 following for all other sites of care. Geopolitical instability has impacted Medicaid, Medicare and the Affordable Care Act (ACA) negatively. Medicaid reduced volume and reimbursement rates, and increased uncompensated care, including millions with asthma. Medicare reduced reimbursement rates, and ACA reduced volume with increased uncompensated care. Pharmacy departments must understand they’re not immune to these implications and be acutely aware of financial environments. This article summarizes a few 2027 rules and how your practice can prepare for the upcoming changes. 

The outpatient prospective payment system (OPPS), ambulatory surgical center (ASC) and physician fee schedule (PFS) are the predominant fee schedules for services in outpatient arenas. Your system most likely is involved in a myriad of different sites of care, each with a Centers for Medicare and Medicaid Services (CMS) rule set governing conditions of participation and payment for goods and services. With similar time frames, private sector payers often follow the CMS lead on priorities being stressed. Paying attention to these proposed rules will provide insight into your strategic planning moving forward into a year reeling under budget cuts passed by Congress.

Key areas under OPPS/ASC payments are facility payments for incident-to-administered drugs and facility quality systems. PFS covers payment for professional services and quality systems, telehealth/digital health, physician administered drugs and the Inflation Reduction Act (IRA). Rule scope is broad, covering healthcare in all outpatient settings, including ASCs and physician office practices. Shifting between various sites of care best meets patient needs and achieves critical savings when costs are rapidly spiraling to new heights. Several other pieces of legislation under debate will significantly impact your practice from revenue streams, operations and clinical services standpoints. Prevailing themes reflect a deeper dive into prior authroizations, pharmacy benefit managers (PBMs), transparency and site-of-care changes, and significant changes to the 340B program. Financial survival strategies depend on working in sync with finance/revenue cycle teams to determine strategies for negotiating with commercial payers. 

Critical access hospitals; hospitals located in Maryland paid under Maryland’s All-Payer or Total Cost of Care Model; hospitals located outside the 50 states, the District of Columbia and Puerto Rico; Indian Health Service hospitals; and rural emergency hospitals are excluded.

Preparing For What’s Coming

Although there are many changes taking place, you can take steps now to prevent issues that might appear later in the process.

Electronic prior authorization (PA) improvements: Take action now to start submitting PA requests electronically in 2027. Start testing and don’t delay involvement in streamlining and improving PA systems. This involves participating in Fast Healthcare Interoperability Resources application programming interface (API) testing with your electronic health record (EHR) vendor and payer partners. EHR vendors implementing standardized electronic PA transactions will be ready Jan. 1, 2027, when certain health plans regulated by CMS must implement and maintain these APIs: Patient Access API, Provider Directory API, Provider Access API, Payer-to-Payer API and Prior Authorization API. Gaps need to be identified and workflows validated, all of which may entail changes to your EHR system. Functionality with technical readiness is crucial; think of all the PAs and sites of care affected!^1,2

Site of care: Whichever site is chosen — inpatient, outpatient or infusion center chemotherapy — there must be sufficient documentation to defend the choice and status. Subsequent claims, as well as actual payment, depend on enough complete, accurate, codeable data to tell the patient’s story. 

Action step: The pharmacy bears the responsibility for the continuous diagnostics and mitigation (CDM) build and subsequent link to periodic data matching in the computerized provider order entry within EHR with correct Healthcare Common Procedure Coding System (HCPCS) codes. Review your most expensive and most frequently used drugs, all status indicator “G” drugs and all new technology add-on payment (NTAP) drugs.

Miscellaneous codes: Sort your CDM by HCPCS code. Focus on codes C9399, J3490 and J3590. How many of these actually have specific assigned HCPCS codes? Fix these immediately to avoid payment denial.

Multiple drugs to a single code: Focus on any HCPCS codes with multiple drugs assigned to them. Delete unnecessary ones. 

National drug codes (NDC): Is the correct and current NDC assigned to the HCPCS code? If a different brand or generic from a different company is purchased, how quickly does the info get corrected in the CDM? Who does this?

The billing unit crosswalk: Doses of medication the patient receives must be converted into CMS-assigned billing units. Usually, this is automatic based on a commercial crosswalk or one built by your facility. Decimal place errors are the most frequent culprits resulting in underpayment or overpayment. The dose the patient got was correct, but the claim represented the dose incorrectly and paid for it incorrectly. A two decimal place error equals 1/100th of the payment with the claim showing the patient got 1/100th of the dose ordered. This is what is sent to the data pool used for AI creation.

Drug administration fees: These are payable in all sites except inpatient for all separately payable status indicator “G” and “K” drugs and for all “N” drugs paid for in bundled/packaged codes, not separately. Status indicator “N” drugs must be included on the claim for payment of lucrative drug administration fees. Their cost isn’t part of the cost of the bundle if revenue cycle fails to submit them.

Key FY 2027 Payment Rules and Models

Hospital inpatient prospective payment system final rule: This rule increases payments by 2.4 percent if your facility participates in the Hospital Inpatient Quality Reporting program and have meaningful users of EHRs. Disproportionate share hospitals providing uncompensated care will see reductions in payment. The expansion of the Comprehensive Care for Joint Replacement model has been delayed until 2028.³

NTAP drugs: Most NTAPs are medical technology breakthroughs followed by drugs and antibiotics eligible for additional payment if found to be new, disproportionately costly to the existing Medicare Severity Diagnosis-Related Group (MS-DRG), a substantial clinical improvement or follow alternative pathways for certain technologies with different criteria. For 2027, 41 technologies continue and 13 are discontinued having ended the two-to-three-year “newness” window and are now absorbed into standard MS-DRGs. Only three new ones were added. CMS didn’t consider any applications with qualified infectious disease product designation or the limited population for antibacterial and antifungal drugs pathways.⁴

NTAP action step: Ensure the revenue cycle team understands how to bill separately for NTAPs, including the requirements for payment such that they’re met and documented. Since there are very few separately payable inpatient items, you wouldn’t want these to be missed!

CY proposed outpatient settings and ASCs: Detailed tables are no longer in the published rules, but updates are provided as needed at CMS.gov. The CY 2027 CMS outpatient focus is on strengthening care quality, cutting drug costs and slashing out-of-pocket expenses.

“Medicare beneficiaries deserve a program that pays for the right care, in the right setting, at the right time,” said Mehmet Oz, MD, CMS administrator. “This proposed rule focuses squarely on patient affordability by strengthening our utilization management tools, aligning drug payments with actual acquisition costs, and removing site-of-care disparities that have unnecessarily driven up costs for millions of seniors. We are committed to ensuring that Medicare resources are directed toward clinically appropriate, affordable high-value care for every patient we serve.”⁵

Several other pieces of legislation being debated will significantly impact your pharmacy practice from revenue streams, operations and clinical services standpoints. Prevailing themes reflect a deeper dive into PAs, PBMs, transparency and site-of-care changes, as well as the 340B program.