Two numbers from the CY2027 OPPS proposed rule, and they move in opposite directions on your income statement.

The first: CMS proposes to pay for 340B-acquired drugs at Average Sales Price minus 33.4%, an estimated $4.55 billion reduction in Original Medicare drug payment in year one, plus $1.15 billion less in beneficiary drug cost sharing. The second: CMS proposes to raise the annual prospective offset to the non-drug conversion factor from 0.5% to 3% (approximately 2.93 percentage points in the proposed conversion-factor calculation), effective CY2027.

Model either one alone and you will get the wrong answer.

Where 33.4% came from

This is not a policy judgment dressed as arithmetic. Section 1833(t)(14)(D)(ii) of the Social Security Act requires the Secretary to periodically survey hospital acquisition costs for specified covered outpatient drugs and use the results to set payment rates. Executive Order 14273, signed April 18, 2025, directed HHS to publish a plan to conduct that survey. From January 1 through April 7, 2026, CMS surveyed acquisition costs for every separately payable drug acquired by all hospitals paid under the OPPS.

CMS's characterization of the results is worth quoting in structure if not at length: the survey revealed significant disparities between 340B and non-340B acquisition costs, and in some instances the beneficiary's 20% coinsurance exceeded the total price the hospital paid for the drug. That sentence is the political engine of the entire proposal, and it is a far more durable foundation than the 2018 policy that produced American Hospital Association v. Becerra. The 2018 cut relied on a statutory subsection that permits adjustment absent survey data. This one relies on the subsection that requires survey data — and CMS now has the survey.

For a CFO, the practical implication is that CMS's legal footing is different from 2018 — but that the proposal will still face scrutiny, and modeling should include a litigation scenario.

The budget-neutrality mechanic is the whole story

The drug cut is statutorily required to be implemented in a budget-neutral manner. The $4.55 billion does not leave the OPPS. CMS proposes an 8.44% positive budget-neutrality adjustment to non-drug payment rates, redistributing the drug-payment reduction across all OPPS hospitals through higher non-drug service payments. The actual hospital-specific gain depends on each facility's non-drug OPPS payment base, wage index, quality-reporting status, and other rate adjustments — not a dollar-for-dollar recovery.

So the transfer runs from hospitals with heavy 340B separately payable drug volume to hospitals without it. A system whose OPPS revenue is disproportionately infusion and injectable drug administration loses on the drug line and recovers only a share of the redistribution, weighted by its non-drug volume. A community hospital with modest 340B drug spend and substantial non-drug outpatient volume — imaging, surgery, clinic visits — is a net recipient.

The screening metric that determines your approximate direction is the ratio of 340B separately payable drug payment to total non-drug OPPS payment — not your 340B savings in absolute dollars, and not your DSH percentage. The ratio. It is a planning screen, not the sole determinant of net impact, because the actual hospital-specific gain also depends on wage index, case mix, and other OPPS adjustments. Every 340B-covered entity should be able to produce it from its own claims data this month, and most cannot without a project.

Then layer the second proposal: a separate prospective reduction to non-drug payments for hospitals subject to the 340B remedy recovery. It is not the budget-neutrality adjustment that redistributes the new drug-payment reduction; it is the mechanism CMS proposes to recover the prior remedy over time.

Twelve years compressed into three

The November 2023 340B Remedy final rule (88 FR 77150) resolved AHA v. Becerra by making $9 billion in lump-sum payments and recovering the $7.8 billion in increased non-drug payments made from CY2018 through CY2022. The recovery mechanism was a 0.5% reduction to the non-drug conversion factor, effective January 1, 2026, excluding hospitals that enrolled in Medicare after January 1, 2018. At 0.5%, CMS estimated the $7.8 billion would be recovered in CY2041.

CMS proposed to accelerate that to 2% in the CY2026 rule and — this is the part worth remembering — did not finalize it, citing commenter feedback, while stating it anticipated finalizing a larger reduction beginning in CY2027. It implemented 0.5% for CY2026 as previously finalized.

Now the proposal is 3%, with the recovery completing in CY2029.

Hold the two estimates next to each other. A recovery scheduled to run sixteen years is proposed to run four. If your long-range plan carried the 340B remedy offset as a 50-basis-point drag on outpatient rates through the 2030s — which was the reasonable reading of the finalized policy as recently as last November — the proposal replaces it with a 600-basis-point-larger annual reduction that terminates three years into the forecast period. That is not a bigger version of the same assumption. It is a different shape: sharply worse near-term, materially better after CY2029, and it lands squarely inside most systems' current capital planning window.

Note the exclusion, because it is a real competitive asymmetry: hospitals that enrolled in Medicare after January 1, 2018 are carved out of the offset entirely. They did not receive the overpayments and they do not fund the recovery. A hospital enrolled in Medicare on or after January 1, 2018, would not be subject to the proposed 340B remedy offset, although it would remain subject to the ordinary OPPS payment methodology and other rate adjustments.

The net, and what to check

Set against both: the proposed CY2027 OPPS update factor is 2.4%, from a projected hospital market basket increase of 3.2% reduced by a 0.8 percentage point productivity adjustment. For hospitals subject to the remedy offset, the proposed conversion factor still rises — the 2.4% update factor and the 8.44% 340B budget-neutrality adjustment are partially offset by the approximately 2.93-percentage-point remedy reduction, and the hospital-specific net depends on the interaction of all three along with wage index and case mix.

Three things to have on paper before the final rule publishes in November. First, the ratio described above, from your own claims, at the CCN level rather than the system level, because 340B mix varies enormously across facilities inside one system. Second, a restated five-year outpatient rate assumption that models the offset terminating in CY2029 rather than running indefinitely — the back half of the plan improves, and few finance teams will notice that on their own. Third, your covered-entity contract pricing, since ASP−33.4% as a payment rate interacts with what you actually pay under the ceiling price, and the spread on individual products is where the survey found its most quotable findings.

Comments on CMS-1850-P are due August 31, 2026. CMS is expected to issue the final rule later in 2026, with the proposed policies scheduled to take effect January 1, 2027 if finalized.

The question for the November call is not what the cut costs you. It is whether anyone in your organization can currently produce, on demand, the one ratio that determines whether you are a net payer or a net recipient of a $4.55 billion redistribution.