While modest, price reform is certainly welcome and essential
Hospital prices generally have soared by 250% since 2000 – twice the rate for healthcare and three times inflation. Along with drug pricing, this is driving the overall increase in costs we are seeing each year. But some moves are occurring that suggest that site neutral payment reform will finally happen.
Back on May 4, I told you that hospital price reform may be mounting after a stunning Capitol Hill hearing where hospital executives seemingly said that they are willing to discuss reasonable changes to their long-standing opposition to site neural payments in Medicare.
Meanwhile, the Trump administration is busy laying the groundwork, if at a slow pace. Under Trump 47, it proposed various changes, only to have some of them reversed by the Biden administration. Now, Trump 47 has been busy passing regulations that press site neutral and other price reform policies.
In 2025, Trump’s health officials proposed and finalized site neutral payment reform that equalizes outpatient/ambulatory payments across places of service (physician, freestanding centers, and outpatient hospital) for drug administration as of 1/1/2026. This reduced some hospital rates by 40% to 60%. Trump also will retire the Medicare Inpatient Only list by 2029 and removed 285 procedures for CY 2026 (primarily musculoskeletal and orthopedic). In a complimentary move, it expanded 560 procedures eligible to be performed at Ambulatory Surgery Centers (ASCs).
In another move, the Trump administration proposed to reform the out-of-control 340B drug discount program, only to have to pull back the reforms after losses in court.
Now, in 2026, the Trump administration is continuing its efforts to reform the 340B drug discount program and expand site neutral payments in CY 2027. First, 340B hospitals would see its Medicare reimbursement for drugs drop by about 40% to keep hospitals from charging markups on discounted drugs. The Centers for Medicare and Medicaid Services (CMS) says it would save not only Medicare $4.6 billion but consumers $1.1 billion next year in cost-sharing because such costs are factored based on pre-discount pricing. That is $800 a year in co-payments on average. CMS would raise outpatient payments for non-drug services by an equivalent amount. CMS would also accelerate a recovery of $7.8 billion in extra non-drug payments hospitals received under the prior 340B policy from 2018 through 2022, with the full recovery by 2029.
Second, site-neutral payments would expand to imaging. CMS is proposing to pay physician office rates for imaging without contrast — such as X-rays and MRIs — delivered in excepted off-campus provider-based departments. This would reduce Medicare Part B spending by about $190 million, $70 million in lower beneficiary premiums, and $70 million in lower cost-sharing. Rural sole community hospitals would be exempt. In return, hospitals and ambulatory surgery centers would get a 2.4% rate hike next year.
Further, the inpatient-only list would continue to shrink, with the removal of 638 more services. Prior authorization will also apply to botulinum toxin injections, which have seen a 42.8% jump in claim volume from 2017 to 2024. This would save $17 million in net annual savings. The rule would also reweight the Hospital Star Ratings toward safety of care measures.
Now, despite hospital executives’ declarations on Capitol Hill in May, they oppose the proposed changes. As a former hospital board member of two hospitals, I am not insensitive to such concerns. But the Trump administration is carrying out the changes in a slow and methodical process, which helps stabilize finances and provide a reasonable glidepath toward real price reform.
#siteneutral #340b #hospitals #medicare
— Marc S. Ryan
