340B remedy offset rises from 0.5 percent to 2 percent of the OPPS conversion factor for CY 2027, running to an estimated CY 2031
Published November 8, 2026 · Coverage November 1–7, 2026, Pacific · Medium priority
CMS finalized an increase in the annual reduction to the Hospital Outpatient Prospective Payment System (OPPS) conversion factor for non-drug items and services, used to offset the estimated $7.8 billion in additional non-drug payments made to hospitals from CY 2018 through 2022 as a result of the prior 340B payment policy, from 0.5 percent to 2 percent starting in CY 2027. The rule limits the 0.5 percent reduction to CY 2026 and adds a new paragraph (13) for the 2.0 percent reduction, which continues until reductions reach $7.769 billion, estimated to occur in CY 2031. CMS estimates the offset reduces payments to affected providers by $1.6 billion in CY 2027.
Background
Under the 340B payment policy in effect from CY 2018 through September 27, 2022, lower payments to 340B hospitals for drugs were budget neutralized by corresponding increased payments to all hospitals for non-drug items and services from CY 2018 through CY 2022. To comply with a January 10, 2023 district court remand order, CMS issued the Final Remedy rule on November 8, 2023, made one-time lump sum payments to affected 340B hospitals in early 2024, and set a 0.5 percent annual reduction to the conversion factor for non-drug items and services beginning in CY 2026, which it then estimated would reach $7.8 billion in CY 2041.
Who this affects
OPPS hospitals subject to the 340B remedy offset under 42 CFR 419.32(b)(1)(iv)(B); excludes new providers with a CMS Certification Number (CCN) effective date of January 2, 2018, or later.
Why it matters
Affected hospitals take a larger annual reduction to the non-drug conversion factor over a shorter period: CMS estimates the offset will be complete in CY 2031. Inference: budgets and multi-year forecasts built on the 0.5 percent schedule need revision. Inference: Medicare Advantage contracts priced as a percentage of Original Medicare rates will carry the reduction unless contracts say otherwise; CMS says it does not set MA contract prices.
Recommended action
- Confirm whether the hospital is subject to the offset (CCN effective date before January 2, 2018) and model the 2 percent reduction through CY 2031
- Review MA contracts that reference Original Medicare OPPS rates
Scope and timing
- Authority status
- Final
- Responsible owner
- Finance / Reimbursement
- Publication date
- 2026-11-06
- Effective date
- 2027-01-01
- Other dates
- Offset continues until cumulative reductions reach $7.769 billion, estimated CY 2031
Not established
CMS had proposed a 3 percent annual reduction for CY 2027 (proposed reduced conversion factor about $99.015) and finalized 2 percent; a 2 percent reduction was proposed but not finalized for CY 2026. The $98.011 figure for remedy-offset providers appears only in a table image (Table 8) and equals the conversion factor for hospitals that fail Hospital Outpatient Quality Reporting requirements; the rule text gives no separate remedy figure. The rule cites $7.769 billion; the summary and fact sheet say $7.8 billion.
Sources
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