Policy Briefing · CMS-1850-P · July 2, 2026

The answer first: on July 2, 2026, CMS issued the CY 2027 Hospital OPPS and ASC Proposed Rule (CMS-1850-P). It proposes a 2.4% payment update for both the OPPS and ASC payment systems, a 3.2% market basket minus a 0.8 percentage point productivity adjustment. It also continues the phase-out of the Inpatient Only list, expands site-neutral payment policies, restructures payment for 340B-acquired drugs, and adds new prior authorization requirements. Comments are due August 31, 2026. Finalized policies take effect January 1, 2027.

For ASC administrators the rule is two-sided. The Inpatient Only phase-out keeps opening surgical volume to the ASC setting, while site-neutral expansion squeezes hospital outpatient rates and the new prior authorization requirements add a workflow you must build before the first 2027 date of service, not after the first denials arrive.

Payment update2.4%Proposed for OPPS and ASC systems

The math3.2 − 0.8Market basket minus productivity, in percentage points

Comment deadlineAug 31Comments on CMS-1850-P due August 31, 2026

Effective dateJan 1Finalized policies effective January 1, 2027

How the 2.4% lands

The update is not a flat raise. It is a market basket estimate net of a productivity cut, and it applies to conversion factors, so what your center actually feels depends on the weights of your case mix.

Market basket

+3.2%

Productivity adj.

−0.8 pt

Net update

+2.4%

Before and after: what CMS-1850-P changes on January 1, 2027

Five policy areas move at once. Read each pair left to right: how the world works under current CY 2026 policy, then how it works if the proposal is finalized as written.

Before · CY 2026 today Current policy

Payment rates

OPPS and ASC conversion factors at their CY 2026 levels, set under last year's final rule.

Inpatient Only list

Procedures still on the IPO list are payable by Medicare only in the hospital inpatient setting, keeping that volume out of reach for ASCs.

Site-neutral payment

Site-neutral policies apply to a defined slice of hospital outpatient services, and many hospital outpatient department services still pay at full OPPS rates.

340B drug payment

340B-acquired drugs are paid under the current OPPS drug payment structure.

Prior authorization

Prior authorization applies to the existing set of hospital OPD services. Your scheduling and billing workflow is tuned to today's list.

After · CY 2027 as proposed CMS-1850-P, effective January 1, 2027

Payment rates

A 2.4% update for both OPPS and ASC systems, built as a 3.2% market basket minus a 0.8 point productivity adjustment.

RATE MOVEMENT

Inpatient Only list

The phase-out continues. More procedures leave inpatient-only status, and migrating procedures become candidates for the ASC covered procedures list. This is the volume opportunity in the rule.

ASC OPPORTUNITY

Site-neutral payment

Site-neutral policies expand, compressing hospital outpatient payment toward lower rates for more services. The hospital's rate advantage narrows, which reshapes where health systems steer cases and how payers benchmark contracts.

CONTRACT RESHAPER

340B drug payment

Payment for 340B-acquired drugs is restructured, changing hospital outpatient drug economics and, indirectly, the relative economics of drug-intensive cases across settings.

HOSPITAL ECONOMICS

Prior authorization

New prior authorization requirements take effect. Every added service needs an auth-check step at scheduling, a submission and tracking workflow, and a denial escalation path, all live before the first 2027 date of service.

NEW WORKFLOW REQUIRED

Why the split panel matters for ASC billing teams

The left and right columns pull in opposite directions, and that tension is the whole story of this rule. The Inpatient Only phase-out pushes surgical volume outward, toward hospital outpatient departments and toward ASCs. Site-neutral expansion then compresses what hospitals earn on that outpatient volume, which does two things at once: it makes the ASC setting comparatively more attractive to payers and health systems deciding where cases should land, and it drags down the OPPS benchmarks that many commercial ASC contracts reference. A center that wins new case types from the IPO migration but leaves its payer contracts pegged to shrinking hospital benchmarks can grow volume and still lose revenue per case.

The prior authorization expansion is the operational trap. Authorization failures do not show up as a policy debate, they show up as front-end denials in February. The centers that absorb new prior auth requirements cleanly are the ones that map affected services to their own case mix during the comment period, not after go-live.

The clock

Operator to-do list: six moves before January 1

1. Map the IPO migration to your ASC covered procedures list. Pull the procedures leaving inpatient-only status in the proposed rule and flag the ones your surgeons already perform, or could recruit for, in 2027.
2. Model the 2.4% update against your real case mix. Run your top-volume codes through the proposed rates. A blended 2.4% can land very unevenly across specialties.
3. Build the prior authorization workflow now. Identify which of your services fall under the new requirements, then stand up the auth check at scheduling, submission tracking, status follow-up, and a denial escalation path, tested before January 1.
4. Reprice your payer contracts against site-neutral compression. Any commercial contract benchmarked to OPPS or hospital outpatient rates inherits the squeeze. Know which agreements move before your payers tell you.
5. File a comment by August 31, 2026. Rate methodology, the covered procedures list, and prior authorization scope are all live questions. Facility-specific data in a comment letter carries weight.
6. Brief scheduling and front-desk teams early. The people who book cases are your first line of defense against 2027 auth-related denials. Train them on the new required-auth services before the calendar turns.

Sources

CY 2027 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule, CMS-1850-P, Centers for Medicare & Medicaid Services, issued July 2, 2026. Comments due August 31, 2026; policies effective January 1, 2027. All figures above are from the proposed rule and remain subject to change in the final rule.

Get ahead of the 2027 rule, not behind the denials

ASP-RCM Solutions builds exactly this for surgical facilities: case-mix modeling against proposed rates, ASC covered-procedures opportunity mapping from the IPO phase-out, payer contract analysis against site-neutral benchmarks, and prior authorization workflows that are tested before the effective date. If CMS-1850-P touches your 2027 revenue, we can quantify how, and stand up the operational fixes before January 1.

Talk to our ASC billing team