HRSA is piloting a 340B rebate model similar to one that it just fought against. As the agency dips its toes into the 340B debate, hospital groups express concerns about the potential for cash flow disruptions.
HRSA has dipped its toes into the debate over the 340B Drug Pricing Program, announcing it that it will test a rebate model through a voluntary pilot program. The announcement comes shortly after the federal government scored a legal win against drug companies that attempted to unilaterally implement a rebate model.
While HRSA is framing the pilot as an effort to ensure access to critical medications, hospital advocacy groups say it could signal a future shift away from the program’s traditional upfront discount model.
A Program Under Scrutiny
The 340B program has been the subject of increased scrutiny on multiple fronts. Drug companies have long accused hospitals of breaking program rules.
More recently, Senator Bill Cassidy (R-Louisiana) issued a report calling for stricter oversight, claiming there are "transparency and oversight concerns that prevent 340B discounts from translating to better access or lower costs for patients.”
However, the American Hospital Association (AHA) recently turned the tables on those claims. In a review of HRSA data, the AHA found that participating drug companies are more likely to violate 340B rules than hospitals and less likely to be audited.
“Policymakers should reject the baseless claims made by drug companies of widespread program abuse by 340B hospitals and urge HRSA to increase their audits of drug companies,” the AHA said in its report.
“Greater oversight of these drug companies is necessary to ensure the continued success of the 340B program for the millions of vulnerable patients and communities nationwide who rely on it,” the organization added.
The Legal Battle Over 340B Rebates
The conflict over the 340B program escalated last year when several drug companies, including Johnson & Johnson, Eli Lilly, and Novartis, attempted to unilaterally replace the 340B program's upfront discounts with their own back-end rebate models.
HRSA denied the request, but Johnson & Johnson filed a lawsuit challenging the government’s ability to reject the rebate model. In June, a judge ruled against the drug company.
“HRSA has the authority to ‘provide’ for discounts, rebates, or both,” the judge wrote.. “This conclusion defeats J&J’s claim that HRSA lacked the authority to require prior approval of J&J’s rebate model.”
Provider Concerns Over the HRSA Pilot
The voluntary pilot program will test a post-purchase rebate system for a limited set of drugs for sickle cell disease. Under the pilot, participating hospitals will purchase these drugs at a higher, negotiated price and then work with a third-party administrator to submit a rebate request to the drug manufacturer.
Despite the stated goal of ensuring access to care, hospital advocacy groups have expressed concern.
340B Health, an organization that represents hospitals participating in the program, suggested that a shift to a rebate model would require disproportionate share hospitals to front an average of $72 million to drug companies while waiting for rebates.
“While we recognize the agency’s intent to test a limited rebate model tied to Inflation Reduction Act (IRA) implementation, we remain deeply concerned about the financial and administrative burdens the rebate approach will place on 340B hospitals,” 340B Health President and CEO Maureen Testoni said in a statement.
As the pilot moves forward, revenue cycle leaders relying on 340B discounts should keep an eye out for indications of future changes to the program.
In a recent analysis of HRSA data, the American Hospital Association has turned the tables on drug companies and accused them of being far more likely to violate 340B Drug Pricing Program rules.
In the heated debate over the 340B Drug Pricing Program, hospitals have frequently been forced to play defense, facing frequent accusations of program abuse from drug companies and occasionally from lawmakers. While drug companies have consistenly called for stricted oversight of providers and changes to program rules, a recent analysis from the American Hospital Association suggests that drug companies are far less likely to play by the rules.
Check out the infographic below for key insights from the report, or read more here.
Patients increasingly demand greater transparency and clarity in healthcare pricing, and new regulations reflect those expectations. However, any revenue cycle leader can tell tell you that the reality is far more complex.
The demand for accurate, upfront price estimates is growing. Many believe that getting a price for a medical procedure should be as simple as getting a quote for a car repair. However, this expectation often clashes with the complex and unpredictable nature of healthcare delivery.
In this episode of HL Shorts, Mike Lorenz, Revenue Cycle Director at INTEGRIS Health, discusses this exact challenge. He explains that while the public's expectation for more accurate estimates is growing, unforeseen clinical events can arise during a procedure that make a fixed, upfront price difficult—a key difference that separates healthcare from nearly every other industry.
CMS has finalized a 2.6% payment increase for inpatient services, boosted DSH payments, established new interoperability rules for prior authorization, and confirmed the launch of a controversial mandatory bundled payment model.
CMS has released its 2026 Inpatient Prospective Payment System (IPPS) Final Rule, solidifying a 2.6% payment increase, which accounts for a 3.3% market basket update and a -0.7% productivity adjustment.
The final rate is a slight improvement over the 2.4% increase in the proposed rule, but CMS still plans to move forward with other policies that will likely be received as a mixed bag by revenue cycle leaders.
DSH Payments and Quality Program Updates
Included in the final rule is a $2 billion increase in disproportionate share hospital (DSH) payments and a $192 million increase in new medical technology payments. Overall, hospital payments will increase by $5 billion in 2026 vs. 2025.
The rule also makes significant changes to quality reporting and value programs, removing the Health Equity Adjustment from the Hospital Value-based Purchasing program and eliminating four measures from the inpatient quality reporting program.
CMS also indicated it is moving forward with plans to incorporate Medicare Advantage patient data into calculations for the Hospital Readmission Reduction Program (HRRP). These changes will require close collaboration between revenue cycle and quality reporting teams to ensure accurate data collection across all patient populations.
Interoperability and Prior Authorization Rule Finalized
CMS has adopted three new certification criteria to support electronic prior authorization (PA) in the Health Data, Technology, and Interoperability: Electronic Prescribing, Real-time Prescription Benefit and Electronic Prior Authorization final rule, issued as a component of the IPPS final rule.
These criteria lay the groundwork for payers to meet a January 1, 2027 deadline for implementing standardized electronic PA processes using FHIR APIs. A new electronic PA measure will also go into effect for the MIPS Promoting Interoperability performance category in 2027.
TEAM Model Launch Confirmed
The final rule confirms that the mandatory Transforming Episode Accountability Model (TEAM) will launch on January 1, 2026. The model will issue bundled payments for certain surgical procedures to hospitals in selected regions. Revenue cycle leaders at impacted hospitals will need to prepare for the complexities associated with bundled payments.
The American Hospital Association (AHA) said suggested updates unveiled in the final rule are inadequate, particularly for hospitals in rural and underserved communities. The industry group also had specific criticism for the mandatory TEAM model.
"The AHA has long supported widespread adoption of meaningful, value-based and alternative payment models to deliver high-quality care at lower costs," AHA Senior Vice President of Public Policy Analysis and Development Ashley Thompson said in a statement.
"We remain worried that the Transforming Episode Accountability Model (TEAM) will not advance these objectives and puts at particular risk hospitals that are not of a large enough size or in a position to support the investments needed. This is why we continue to urge the agency to make TEAM voluntary."
A recent survey revealed that rising volumes of claim denials are the top threat to provider revenue cycles, while staffing for claims writing appeals is expected to be a challenge.
A rise in commercial claim denials is the number one threat to revenue cycles according to nearly half of respondents to a recent survey from HFMA and Knowtion Health. Responses suggest a challenging landscape ahead for revenue cycle leaders, who are facing a surge in payer requests for information and challenges in staffing for denials management roles. See some key figures from the survey in the infographic below, or read more here.
After passage of legislation that could see provider revenues fall by up to $1 trillion, the AHA is vowing to continue the fight. AHA President and CEO Rick Pollack discussed how the hospital industry advocate is preparing for upcoming legislative battles.
American Hospital Association President and CEO Rick Pollack called the recent passage of the One Big Beautiful Bill Act (OBBBA) "extremely disappointing," but vowed to continue fighting to mitigate the impact on providers and patients.
The Medicaid cuts included in the bill, along with the expiration of Affordable Care Act tax credits, could cause provider revenues to fall by as much as $1 trillion, according to an estimate from the Urban Institute and the Robert Wood Johnson Foundation.
"Despite months of clearly demonstrating the implications that these Medicaid proposals would have on the patients and communities we serve, particularly vulnerable populations, Congress enacted these significant cuts," Pollack said during a conversation with AHA Chair Tina Freese Decker. The result will be the displacement of 11.8 million people from healthcare coverage.
Small wins prevented further harm
While the outcome was not what the hospital industry had hoped for, Pollack emphasized that the AHA was successful in preventing an even worse scenario. The association established key priorities, including preventing the implementation of block grants or per capita caps and preserving the core structure of provider tax and state-directed payment programs.
AHA advocacy also resulted in some crucial concessions. The effective dates for the cuts to provider taxes and state-directed payments were delayed until 2028, and the reductions will be phased in over several years to avoid an abrupt financial shock for providers.
"One of the small wins, I think it's actually a big one, was preventing it from even being worse," Pollack said, noting that his team successfully killed a "very dangerous amendment" that would have further cut federal matching funds to states.
Looking ahead to the next legislative battle
With the bill now law, the AHA’s immediate focus is twofold: helping its members manage the new reality and preparing for the next round of legislative battles. The association is developing guidance to help hospitals understand the law’s implications and is working to share best practices on revenue cycle improvements and operational efficiencies to help providers absorb the financial impact.
Pollack expects the upcoming legislative fight over a government funding bill will serve as the vehicle for several other critical healthcare provisions, including the extension of telehealth waivers, the renewal of the hospital-at-home program, and the prevention of looming Medicaid Disproportionate Share Hospital cuts.
"We’ve got to make sure that the government funding package, which is really the forcing event, includes these important issues and they're going to want to offset the cost of this," Pollack warned. "We’ve got to make sure that site neutral and 340B doesn't creep in as an offset."
For Pollack, the path forward relies on grassroots advocacy from hospital leaders. He stressed that when legislators don't hear from their constituents, they assume everything is OK.
"Grassroots is king. Grassroots is absolutely king," he said, urging leaders to continue telling the stories of how these cuts will impact the real people they serve.
To confront disappointing performance in its revenue cycle, leadership at Bon Secours Mercy Health made the decision to outsource. The deep, collaborative partnership has led to a significant turnaround.
Billie Jean Mounts arrived at Bon Secours Mercy Health (BSMH) shortly after the health system partnered with Ensemble Health Partners.
“Things were pretty well on fire at the time,” said Mounts, the health system’s current chief revenue officer, referring to the state of the revenue cycle prior to the partnership.
Aware that a change was necessary, BSMH leadership made the strategic decision to bring in a full-service revenue cycle partner.
That partnership not only quenched the fire but has since propelled BSMH to achieve top-tier performance, demonstrating how a deep, collaborative outsourcing relationship can drive significant and sustainable financial results.
First Step: Tackling System Complexity
An initial assessment by Ensemble revealed multiple broken processes, but the most significant challenge was a lack of standardization. BSMH was operating on more than 50 different instances of its Epic EHR system, creating a disparate and inefficient environment for data flow and claims management.
Consolidating these systems into a single instance was one of the first initiatives for the health system and its new partner. This undertaking standardized workflows and data infrastructure, creating the foundation for a more efficient and effective revenue cycle. With a foundation laid, the team could then begin to address the root causes of issues like claim denials.
Driving Measurable Results
The results of the turnaround were both rapid and dramatic. Before the partnership, cash collections as a percentage of net patient service revenue was only about 97%. Process improvements boosted that figure to above 100%.
The initial denial rate, which was around 3.6%, was another key focus. By leveraging data-driven insights and working to fix the root cause of denials, BSMH has driven that metric down to industry-leading performance, earning multiple HFMA MAP awards in the process.
A Partnership for Payer Accountability
A key element of BSMH’s success is the nature of its relationship with Ensemble, which extends beyond a simple transactional vendor agreement. It is, instead, a deep, shoulder-to-shoulder partnership focused on holding payers accountable.
As payers become more aggressive in their tactics for delaying payment, like excessive requests for medical records, it puts pressure on internal revenue cycle resources. To improve understanding between payers and the health system, sometimes it takes “sitting down side-by-side with the payer and going through claim by claim by claim,” according to Mounts. “It is painful.”
With a revenue cycle partner by their side, Mounts doesn’t need to do that grunt work. Instead, the partner provides the scale, technology, and analytical resources to identify payer issues and arm BSMH’s leadership with the information needed for high-level contract negotiations.
Many health systems may have their reasons to keep revenue cycle operations inhouse. However, for BSMH, the lesson is clear: in an increasingly complex healthcare landscape marred by payer pressure, a deep strategic partnership can provide the resources and expertise needed to not only fix a revenue cycle that is "on fire," but to transform it into one that is best in class.
UnitedHealth Group has confirmed it is under investigation by the DOJ. For healthcare leaders, the multiple probes into the payer could signal potential for a significant shift in payer-provider relationships ahead.
UnitedHealth Group confirmed in a recent regulatory filing that it is under investigation by the Department of Justice (DOJ), and that it is complying with criminal and civil requests.
In May, the Wall Street Journalreported that the DOJ criminal division had launched an investigation into the health insurance behemoth. A UnitedHealth statement issued at the time said the company was unaware of a criminal investigation.
"The WSJ's reporting is deeply irresponsible, as even it admits that the 'exact nature of the potential criminal allegations is unclear'," the statement read. "We stand by the integrity of our Medicare Advantage program."
Earlier reporting suggested the DOJ was investigating UnitedHealth for potential antitrust violations and that a separate civil fraud investigation was looking into potential upcoding at the company.
Does UnitedHealth give preferential treatment to its affiliated provider groups?
One component of the investigation into UnitedHealth is a broad antitrust probe examining the relationship between UnitedHealth's insurance business, UnitedHealthcare, and its health services subsidiary, Optum.
The question here is whether UnitedHealth is unfairly favoring Optum-owned and -affiliated provider groups, which includes tens of thousands of physicians nationwide. These accusations imply UnitedHealth is engaged in anti-competitive behavior that impacts independent providers and unaffiliated health systems.
Has UnitedHealth deceived the government by engaging in upcoding?
The other component of the investigation, which may have more significant implications for healthcare executives, is looking into allegations of upcoding – the practice of submitting diagnoses that are not supported by medical records to receive inflated risk-adjusted payments from the federal government.
UnitedHealth has been fighting allegations of upcoding for more than a decade. In 2011, Benjamin Poehling, a former UnitedHealth employee, launched a civil fraud case accusing the company of misrepresenting the medical conditions of beneficiaries. The DOJ took over the case in 2017, KFF Health Newsreported.
However, that case stalled earlier this year when a court-appointed special master in the case, Suzanne Segal, determined that DOJ had not submitted evidence sufficient enough to support its claim.
What it means for healthcare leaders
While investigations are focused on UnitedHealth, ripple effects will be felt through the broader healthcare industry. The company will likely ramp up its own internal audits and claim reviews to mitigate its legal and financial risk. Any policy changes at UnitedHealth, which accounted for 29% of all Medicare Advantage enrollment in 2024, will affect virtually all providers. These changes could manifest as even higher volumes of claim denials, lower tolerance for coding inconsistencies, and increased requests for information.
Additionally, heightened scrutiny on the payer could create a tense environment for contract negotiations, especially for providers competing with Optum-owned and -affiliated physician groups. As UnitedHealth navigates its significant legal and financial challenges, healthcare leaders should prepare for a rocky reimbursement landscape ahead.
A new PwC report projects the medical cost trend will remain high in 2026, driven by soaring drug spending and hospital expenses. As payers seek to strengthen utilization management, revenue cycle leaders should prepare for a tougher reimbursement landscape.
Health plans expect the growing medical cost trend to continue into next year, according to a recent report from PwC, with growth projections of 8.5% in the group market and 7.5% in the individual market for 2026.
The annual report identifies several inflationary forces driving medical costs higher, including spending on drugs and upward pressure on hospital expenses. The report could signal a turbulent year ahead with difficult payer negotiations and increased scrutiny on reimbursement on the horizon.
High-cost drugs are a primary driver
Pharmacy spending, particularly on high-cost specialty drugs like GLP-1s, is expected to be a significant driver behind high medical cost growth, according to the report. PwC expects 10% growth in this area.
This aligns with reports issued by payers earlier this year. For instance, Blue Cross Blue Shield of Massachusetts pointed to spending on GLP-1s when it announced an operating loss of about $400 million for the 2024 calendar year. Just five GLP-1 drugs accounted for more than $300 million of Blue Cross’ pharmacy spend in 2024.
"I don't see much changing in terms of the major drivers of rates — which are provider prices and drugs," Blue Cross CEO Sarah Iselin said at the time.
Payers and providers at a crossroads
Hospital costs are another significant driver behind projected medical cost growth. While year-end margins averaged 7% in 2019, that figure fell to 2.1% in 2024. And margins declined even further in the first quarter of 2025, according to the report. Much of this decrease can be placed on high labor costs and rising expenses for supplies.
Some outliers with double-digit margins have successfully passed rising costs onto commercial payers by increasing utilization and optimizing revenue cycles, according to the report. While PwC recommends payers strengthen utilization and payment integrity programs to combat the medical cost trend, this could be devastating for hospitals operating on razor-thin margins, which are also likely to be the ones most affected by impending Medicaid cuts.
Deflationary forces offer muted relief
While some forces are countering inflationary pressures, these are limited. For example, health plans have cited biosimilars as a leading cost deflator for the third year in a row, according to the report.
AI also holds the potential to contain rising medical costs should health plans effectively embed the technology into care management, pre-payment audits, and care coordination. However, because prices are contracted, they are often fixed for multiple years, and any productivity gains achieved through the implementation of AI are not likely to have a deflationary effect any time too soon.
In case there were doubts about it, the PwC report makes clear that the fundamental pressures driving medical costs higher will likely remain for the foreseeable future. Recommendations for payers include stronger controls and smarter use of data, including claims analysis, rate benchmarking and scenario modeling. Revenue cycle leaders will need to prepare for this with a proactive, data-driven approach of their own.
The 2026 OPPS proposed rule offers a modest 2.4% payment update, along with some major policy shifts. CMS is pushing for an expansion of site-neutral cuts, tougher price transparency enforcement, and an accelerated 340B "clawback," and elimiation of the inpatient only list.
The Centers for Medicare & Medicaid Services (CMS) has released its 2026 Hospital Outpatient Prospective Payment System (OPPS) proposed rule, which includes a 2.4% payment update for hospitals and ambulatory surgical centers (ASCs).
The rule also proposes a significant expansion of site-neutral payment policies, tougher enforcement for price transparency, and a controversial payment reduction related to the 340B program.
Check out the infographic below for more information, or read the full story here.
