In the 2027 Outpatient Prospective Payment System (OPPS) proposed rule, the Centers for Medicare and Medicaid Services(CMS) is considering a change to reimbursement for 340B drugs in Medicare Part B, from average sales price (ASP)+6 % to ASP-33.4%. Avalere Health previously estimated the impact of a similar change to Medicare payments. Based on CMS’s survey findings on average hospital acquisition cost for 340B drugs, we refreshed the analysis to estimate how overall hospital payment would be impacted by using the survey-based rate. 

Avalere Health found that if the proposed reimbursement change were applied to CY 2025 claims and implemented in a budget-neutral manner (rather than the current ASP+6%), Part B payments would have increased for 78% of all hospitals.  The proposed change would benefit small and rural hospitals, with an estimated average payment increase of 7% for hospitals with fewer than 100 beds and a 3.4% average increase for rural hospitals. 

Background  

The 340B program allows eligible hospitals to purchase outpatient drugs at or below an established ceiling price.  Some hospitals negotiate further “sub-ceiling” discounts that vary by drug and facility. From CY 2018–2022, CMS reduced Part B reimbursement for separately payable, non-pass-through Part B drugs (excluding vaccines) to ASP-22.5%. 

In 2022, the Supreme Court ruled that CMS had unlawfully reduced reimbursement for 340B products and it could not vary payment rates for drugs and biologicals among groups of hospital without conducting a survey of hospital acquisition costs. Earlier this year, CMS conducted an Outpatient Drug Acquisition Cost Survey and detailed the findings in the CY 2027 OPPS proposed rule, noting that average acquisition cost for 340B drugs is ASP-33.4%.  

To understand the impact of the proposed policy, Avalere Health assessed the facility-level impact of the proposed reimbursement level of ASP-33.4% compared to the current reimbursement rate of ASP+6%. CMS proposes to implement the policy in a budget neutral manner, redistributing savings on 340B drug payments by increasing rates for non-drug services among all hospitals.  

Findings by Hospital Type 

Avalere Health reviewed CMS spending on 340B-acquired Medicare Part B drugs in CY 2025 to assess the impact on payments if CMS were to implement the proposed reimbursement change. By transitioning to a survey-based reimbursement of ASP-33.4%, CMS would have spent $5.1 billion less in CY 2025, which could be redirected to increase payments for non-drug services. In the assessment, Avalere Health distributed $5.1 billion among OPPS hospitals based on their share of total non-drug spending to approximate the budget neutrality approach CMS proposes to adjust the OPPS conversion factor. Additionally, the proposal would reduce beneficiary cost sharing liability on 340B-acquired drugs. CMS estimates that Medicare beneficiaries would save approximately $1.15 billion in 2027. 

Based on the analysis, Avalere Health estimates that the changes to 340B drug spending would increase net payments for 78% of OPPS hospitals, including 69% of rural, 87% of urban, 82% of rural referral centers, and all sole community hospitals, many of which would be exempt from the 340B-acquired drug reimbursement cuts. On average, rural facilities would experience a 3.4% reimbursement increase and urban facilities would receive a 7% bump. Furthermore, 54% of 340B hospitals would see an overall net increase in payment resulting from the change and the average reimbursement shift among all 340B hospitals would be 0.5% increase.  

Table 1. OPPS Payment Impact of Survey-Based Reimbursement by Hospital Type 

Findings by Hospital Size  

Avalere Health’s research indicates that small hospitals with fewer than 100 beds would experience a 7% increase. Hospitals with 100–500 beds would have a nearly 5% increase, and hospitals with more than 500 beds would face an average decrease of 1.4%. 

Table 2. OPPS Survey-Based Payment Impact to Providers by Beds 

What’s Next? 

The 340B program has continued to grow in recent years, meaning the savings from a survey-based reimbursement approach would substantially increase the conversion factor under OPPS. The facility-level impact of this proposal would depend on what share of a hospital’s revenue is derived from administering 340B drugs versus the non-drug services provided at the site. As stakeholders respond to the proposed rule, they should assess impacts to specific hospital types/categories and how 340B drug reimbursement based on average acquisition costs may impact individual products and specialists that administer them.  

To learn more about 340B drug payment policy, connect with us. 

Methodology 

Avalere Health used 100% Medicare Part B claims data accessed via the CMS Virtual Research Data Center (VRDC Data) for Medicare fee-for-service beneficiaries from 2025. Avalere Health annualized claims from the Medicare Outpatient File from Q1 to Q4 of CY 2024, isolating payment for 340B drugs using the “TB” modifier billed on separately payable drug claims. Claims from 2025 reflected payment at ASP+6%. Payment was then calculated to reflect an alternative survey-based approach of ASP-33.4%. Avalere Health applied exclusions based on the proposed rule, including exclusions for pass-through drug payments, vaccines, and exemptions for rural sole community hospitals (SCHs). The decrease in 340B-acquired drug spending was proportionally distributed among hospitals based on their share of total payments for non-drug services. Avalere Health determined hospital 340B participation based on participation at any point during CY 2025 using the Health Resources and Services Administration’s Office of Pharmacy Affairs Information System. Avalere Health also assessed total 340B drug spending in CY 2025 for beneficiaries identified with COVID-19 based on diagnosis or medication use and found that this cohort accounted for 5.1% of total 340B drug spend ($712M).

Funding for this research was provided by the Community Oncology Alliance. Avalere Health maintained full editorial control.