On November 4, 2026, the Centers for Medicare and Medicaid Services (CMS) released the calendar-year 2027 Hospital Outpatient Prospective Payment System (OPPS) final rule, CMS-1850-F. The fact sheet’s headline is a 2.3% payment update: a 3.2% market basket increase less a 0.9 percentage point productivity adjustment. July’s proposal was 2.4%, with a 0.8 point productivity adjustment.
That one-tenth of a point is the least important change in the rule for a workers’ compensation program. The number that reaches a comp fee schedule is the conversion factor, and CMS’s final rule claims accounting sets it at $99.970 for 2027. The 2026 factor was $91.415, per CMS’s 2026 final rule claims accounting. That is an increase of about 9.4%, roughly four times the headline update. Our coverage of the proposed rule focused on the 2.4% update and the imaging cut and did not size this. It should have.
Where the other seven points come from
The source is the 340B drug policy. CMS finalized payment for 340B-acquired drugs at average sales price (ASP) minus 28%, down from ASP plus 6%. The fact sheet estimates that this reduces Original Medicare drug payment by about $4.35 billion and beneficiary drug payments by about $1.1 billion in the first year. The statute requires budget neutrality, so CMS raises payment for non-drug items and services by an equivalent amount. In the claims accounting, that appears as a 1.0750 multiplier on the conversion factor, stacked on the 1.023 update. Small wage index, cost-of-living, and cancer hospital adjustments bring total budget neutrality to 1.0681.
A second 340B item pulls the other way for most hospitals. CMS raised the annual offset that recoups an earlier 340B remedy payment from 0.5% to 2% of the conversion factor for non-drug services, excluding hospitals that enrolled in Medicare after January 1, 2018. The claims accounting expresses this as a 0.9804 ratio. The Michigan Health and Hospital Association reports the resulting factor for those hospitals as $98.01, up 7.7% from $90.97.
What changed from proposed to final
| Item | Proposed (July) | Final (November) |
|---|---|---|
| Payment update | 2.4% | 2.3% |
| 340B drug payment | ASP minus 33.4% | ASP minus 28% |
| 340B budget neutrality adjustment | 8.44% | 7.5% |
| Remedy offset | 3% | 2% |
| Conversion factor | $102.004 | $99.970 |
| Conversion factor, offset hospitals | $99.015 | $98.01 |
The proposed figures are from the CMS proposed rule fact sheet and Forvis Mazars’ July summary. The final standard factor is about 2.0% below the proposed one. A smaller drug cut means a smaller offsetting increase everywhere else.
The site-neutral expansion did not change. CMS finalized paying imaging without contrast (certain bone density scans, x-rays, ultrasounds, CT scans, and MRIs) at excepted off-campus provider-based departments at the Physician Fee Schedule equivalent rate, which the American Hospital Association describes as 40% of the OPPS rate. Rural sole community hospitals are exempt. The first-year estimate is unchanged at about $260 million. CMS also finalized removing 637 services from the Inpatient-Only list.
The reserve mechanism
The lever is medical severity, specifically unit price on hospital outpatient services. NCCI’s Medicare fee schedule primer says facility costs are about 40% of countrywide workers’ compensation medical spend, and it sorts state outpatient schedules into three groups. Medicare-based states incorporate both the CMS base rate and relative weights. Partially Medicare-based states pair CMS weights with a state-specific base rate. The rest use neither.
That sorting decides who gets the 9.4%. The 340B adjustment lives in the conversion factor, not the weights. A fully Medicare-based state inherits it. A partially based state does not, unless its regulator chooses to follow.
Texas shows how direct the pass-through can be. An April 24, 2026 Division of Workers’ Compensation fee dispute decision recites the rule: participants apply Medicare payment policies in effect on the date of service, and the maximum allowable is the Medicare facility amount under the most recently adopted OPPS formula and factors, multiplied by 200 percent absent a contract. Nothing in that language waits for a state rulemaking.
For scale, the same NCCI primer shows the OPPS base rate rising between 1.7% and 2.5% a year from 2021 through 2024. A trend selection calibrated on that history has never seen a year like this one.
Illustration (hypothetical, not client data): if hospital outpatient is 15% of a program’s paid medical in a fully Medicare-based state, a 9.4% price change adds about 1.4 points to medical severity. The 2.3% headline would have implied about 0.35 points. Whether a given state’s schedule applies the 0.9804 offset ratio is a state-level question; the range is 7.7% to 9.4% either way.
The imaging cut is real but narrow. It applies only to excepted off-campus departments, and CMS sizes it at $260 million against roughly $5.45 billion moved into non-drug rates. On-campus imaging gets the higher conversion factor like everything else. The offsetting reduction sits in 340B drug payment, a line that a surgery-heavy comp outpatient bill has little of. That last point is our inference, not a CMS finding.
Where this shows up in your reserves
This is a calendar-year effect. In date-of-service states, every outpatient service from January 1, 2027 pays at the new level, whatever the accident year. On a paid medical triangle that is a diagonal effect, and it will distort paid development factors on the 2027 diagonal for older years, not only the 2027 accident year.
It also reaches case reserves. Future-medical estimates for a planned shoulder or knee surgery at a hospital outpatient department were set at 2026 prices. In a fully Medicare-based state they are light by something close to the conversion factor change on the facility component. This runs opposite to the physician fee schedule final rule, which cut the professional conversion factor 2.31%, so the two components of a single surgery now move in different directions. Inpatient facility prices follow a separate rule, covered in our inpatient final rule piece.
Our call
Expect a visible step-up in paid outpatient facility severity in the first half of 2027 in states that adopt Medicare’s base rate at the date of service, and nothing in fixed-dollar or charge-based states, where WCRI’s payment index shows prices follow other drivers. Because the adjustment is a level shift tied to a continuing drug payment policy, we would treat it as permanent in the trend base, not a one-year anomaly to be smoothed. Directionally, future-medical case reserves on open surgical claims in those states are more likely deficient than redundant going into 2027. See the case reserve strengthening explainer for how a deliberate adequacy change should be handled in the methods.
Decision-maker checklist
- Ask your actuary which exposure states adopt the Medicare OPPS conversion factor and which use a state base rate.
- Confirm whether the 2027 medical trend used the 2.3% update or the conversion factor change.
- If a July analysis used the proposed $102.004 factor, restate it to $99.970.
- Ask your third-party administrator whether surgical case reserves set in 2026 will be repriced.
- Review first-quarter 2027 paid outpatient severity by state and service date before the mid-year reserve update.
Sources
- CMS, Calendar Year 2027 Hospital OPPS and ASC Final Rule fact sheet (CMS-1850-F), November 4, 2026
- CMS, CY 2027 OPPS Final Rule Claims Accounting, November 2026
- CMS, CY 2026 OPPS Final Rule Claims Accounting
- CMS, Calendar Year 2027 Hospital OPPS and ASC Proposed Rule fact sheet (CMS-1850-P), July 2, 2026
- Forvis Mazars, CMS’ 2027 OPPS Rule: Key Takeaways for Healthcare Providers, July 15, 2026
- American Hospital Association, CMS finalizes increases to Medicare hospital outpatient department payment rates, November 4, 2026
- Michigan Health and Hospital Association, CMS Releases Medicare 2027 OPPS Final Rule, November 6, 2026
- NCCI, Medicare Fee Schedules and Workers Compensation in 2024, June 2024
- Texas Division of Workers’ Compensation, Medical Fee Dispute Resolution Findings and Decision, April 24, 2026