Dallas-based Tenet Healthcare executives said they are still modeling how a proposed federal rule reshaping 340B drug reimbursement and hospital outpatient facility fees could affect the company’s ASCs, according to comments on the company’s July 24 second-quarter earnings call.
What CMS proposed
CMS plans to cut what Medicare pays hospitals for drugs bought through the 340B program and push site-neutral payment into a new category of outpatient services — two proposals that together would pull billions of dollars out of hospital outpatient revenue beginning in 2027, according to the 2027 Hospital Outpatient Prospective Payment System and ASC proposed rule issued July 2. The rule would affect roughly 3,500 hospitals and 6,400 ASCs.
The 340B rule carries a specific complexity. Separately, CMS wants to accelerate recovery of $7.8 billion in extra non-drug payments hospitals received under the prior 340B policy from 2018 through 2022. The agency is proposing to raise the annual offset to the Outpatient Prospective Payment System conversion factor from 0.5% to 3%, effective in 2027, excluding hospitals that enrolled in Medicare after Jan. 1, 2018. At that pace, CMS estimates the full recovery would be complete by 2029.
In a July 2 news release, CMS Administrator Mehmet Oz, MD, framed the package around patient affordability. “Medicare beneficiaries deserve a program that pays for the right care, in the right setting, at the right time,” he said. Hospital groups have opposed compressing the recovery timeline.
Tenet’s take
In the earnings call, Tenet CEO Saumya Sutaria, MD, said the proposed rule “had a few curveballs in it” and was structured differently than prior years’ proposals.
“The 340B reallocation could be material,” he said, while noting Tenet is still evaluating the legal basis for other elements of the proposal. He said the company is still synthesizing the rule’s moving pieces and plans to share financial modeling at a later date, pointing to fiscal year outlook conversations rather than immediate guidance changes.
The analyst question that prompted Dr. Sutaria’s comments was specific: how do changes to hospital outpatient reimbursement transmit to ASCs on pricing, volume and margin?
When hospital outpatient department reimbursement falls, whether through 340B cuts, site-neutral payment expansion or conversion factor offsets, procedures that were marginally economic in the hospital outpatient department setting may migrate faster to ASCs, accelerating the volume shift that is already underway.
“With the list of inpatient-only procedures going away and HOPD rates declining, I expect hospitals will be pressured into considering more partnerships with ASCs to maintain profitability. This alignment will restrict access,” Paul Lynch, MD, founder and CEO of Scottsdale, Ariz.-based US Pain Care, told Becker’s. “Our ASC was built on the premise that the same surgery can be done by the same surgeons more efficiently, less expensively and with better access at an ASC than at the hospital. If they truly wanted to improve access and affordability, the site-neutral payments would raise ASC rates to HOPD rates.”
Site-neutral payment would expand to imaging under the 2027 proposed rule, with CMS proposing to pay physician office rates for imaging without contrast delivered in excepted off-campus provider-based departments.
At the same time, health systems managing margin compression from the 340B and HOPD changes may have less capital available for ASC joint ventures and development, which could slow the health system-ASC partnership wave that has defined the past two years of ambulatory expansion.
USPI itself posted strong second-quarter numbers insulated from hospital reimbursement dynamics: 5% same-facility revenue growth, 9% EBITDA growth, and a 39% EBITDA margin. Tenet now projects USPI will generate $2.16 billion to $2.22 billion in adjusted EBITDA for full-year 2026. Whether the 340B and HOPD rule changes alter that trajectory is still being calculated.
The public comment period on the 2027 OPPS/ASC proposed rule is open. A final rule is expected around Nov. 1.
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