Why It Matters

Hospitals and surgery centers paid by Medicare for outpatient care will receive revised 2027 payment rates, and patients receiving certain botulinum toxin injections will face expanded prior authorization requirements under a final rule the Department of Health and Human Services issued Nov. 6. ​

The expanded prior authorization requirements take effect July 1, 2027, for services provided on or after that date, when the Centers for Medicare & Medicaid Services (CMS) adds eight procedure codes to a category that has required prior authorization since July 1, 2020. CMS says the expansion is intended to control unnecessary increases in the volume of covered outpatient services.

The agency reports that claim volume for the added codes rose 42.8% overall from 2017 to 2024, while overall outpatient department claims volume fell 8.3%. The payment rate changes take effect Jan. 1, 2027.

The Big Picture

CMS says it received 122 public comments on the botulinum toxin expansion. Several commenters supported efforts to improve interoperability, streamline prior authorization and reduce administrative burden, and CMS thanked them. CMS also sought comments on the potential for unintended clinical consequences.

On the payment side, CMS says most commenters opposed its proposed 3% reduction to non-drug payments to recover a past 340B program payment cut. Many argued CMS lacks statutory authority to impose the budget-neutrality offset, and CMS finalized a 2% reduction instead, citing concerns about the financial burden. It declined to exempt safety-net, rural, or teaching hospitals.

  • Hospital rates: CMS says about 3,600 facilities paid under the hospital outpatient system will receive a 2.3% rate increase for 2027. The agency describes that as a 3.2% inpatient market basket increase reduced by a 0.9-percentage-point productivity adjustment.
  • Surgery centers: CMS says ambulatory surgical centers that meet quality reporting requirements will also receive a 2.3% increase. The hospital market basket update will remain in use for one additional year, through 2027.
  • 340B drugs: CMS sets payment for drugs acquired under the 340B program at the average sales price minus 28% for 2027. The previous payment rate was the average sales price plus 6%, restored in 2023.
  • 340B remedy offset: The annual reduction to non-drug payments rises from 0.5% to 2%, and CMS estimates it will reduce payments by $1.6 billion in 2027. The reduction continues until estimated offsets reach $7.769 billion, which CMS projects will occur in 2031. Hospitals that enrolled in Medicare on or after Jan. 2, 2018, are excluded.

Broader Context

CMS says the 340B payment change implements Executive Order 14273, "Lowering Drug Prices by Once Again Putting Americans First," and reflects findings from its drug acquisition cost survey.

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CMS says the additional botulinum toxin injection codes represent about $102 million in annual Medicare payments, with claims rising from approximately 43,500 in 2017 to 62,103 in 2024.

Currently, 42 CFR 419.83 lists botulinum toxin injections among five categories requiring prior authorization for service dates beginning July 1, 2020, with three more categories added in later years. The rule reorganizes paragraph (a) into a single list of eight categories that continues to include "Botulinum toxin injections."

The Bottom Line

CMS lists Jan. 4, 2027, as the deadline for submitting comments on the final rule. Comments may be submitted through the Regulations.gov comment page under file code CMS-1850-FC (91 FR 70284).

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